Price formation of dry bulk carriers in the Chinese shipbuilding industry |
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Authors: | Liping Jiang Jørgen T Lauridsen |
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Institution: | 1. Department of Environmental and Business Economics , University of Southern Denmark , Niels Bohrs Vej 9, Esbjerg 6700 , Denmark lji@sam.sdu.dk;3. Institute of Public Health, Research Unit for Health Economics, University of Southern Denmark , J. B. Winsl?wsvej 9B, Odense 5000 , Denmark |
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Abstract: | In this paper, we present, for the first time, the price formation of Chinese dry bulk carriers based on the historical shipbuilding contract prices. Price determinants include generic market factors as well as Chinese elements. Principal component regression analysis is employed as the solution for the multicollinearity problem among explanatory variables. The result indicates that the time charter rate has the most significant positive impact on shipbuilding price; increases in three other factors, namely the cost of shipbuilding, the price-cost margin and the shipbuilding capacity utilisation, have positive influences in the descending order. Unlike the traditional perception of newbuilding price that shipbuilding cost has the most significant effect, we assert that the most important role the time charter rate plays is attributed mainly to the ‘China Factor’ in the bulk carrier sector. In addition, simulations are performed to investigate what would happen to the Chinese dry bulk carrier prices under changes in the time charter rate and shipbuilding cost. The findings are useful for Chinese shipyards, shipowners and emerging shipbuilders. |
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