Price Volatility Spillover in Ship Demolition Markets

Abstract

World ship demolition activities are mainly carried out in Bangladesh, China, India, Turkey and Pakistan. Conducting in so few countries leads to a high level of competition among countries, as well as being influenced by each other's prices. So, there is no natural situation for each other to follow their prices, and this can be reflected as a flow of information to the variances of the prices. When this information flow exists, volatility spreads can be observed between the prices. In this context, this study aims to determine the flow of information between the major countries operating in the demolition sector in the world by using the causality in variance method. The dataset covers the dates between 8th January 2013 and 24th December 2018 and consist of 309 observations on a weekly basis. According to the results, there are volatility spillovers from Turkish demolition prices to all other country prices except China in terms of both general cargo and tanker ships. In addition, there are volatility spillovers from Pakistani tanker demolition prices to Bangladeshi and Indian prices. These results reveal that the demolition business entities of other countries follow the Turkish prices in determining general and tanker demolition prices, and Pakistani prices only in determining tanker demolition prices. Thus, the volatilities in Turkish and Pakistani prices are reflected in the prices of the other demolition countries. On the other hand, Chinese has a special position since its prices are not affected by the other prices and do not affect the other prices.

Gemi Sahiplerinin Filo Kapasitesi Ayarlama Kararlarında Faiz Oranlarının Rolü

“…In addition, since demolition areas in the world are limited, the prices may be affected by each other. In another study, based on this research question, researchers tested the volatility spillover between demolition prices in these five countries (Açık and Başer, 2019). As a result of the analysis, it was found that there are volatility spillovers from Turkish demolition prices to almost all other countries' demolition prices.…”