Comparative feasibility analysis of the Sales and Purchase market of new-building and second-hand crude carriers

The newbuilding and second-hand markets of crude carriers are the most significant markets in shipping. Their activities are affected by various factors and shipowners have to decide whether to buy newbuilding or second-hand vessels. These decisions are based on the examination of the current market’s situation and are usually subject to alterations. Modelling the factors, that affect the newbuilding and second-hand prices will help us conclude to the best option, according to the results. This thesis focuses on the research of the factors that affect the newbuilding and second-hand prices for VLCC-ULCC, Suezmax and Aframax tankers. Our study begins with the introduction to the topic and a brief analysis of the shipping industry follows. An academic literature review of relevant studies is demonstrated, which help us define the appropriate variables for our models. On the remainder, we choose the variables according to the available data in time series and construct the models for newbuilding and second-hand prices. Our models are being tested for stationarity and cointegration with the Augmented Dickey Fuller and the Johansen Cointegration tests respectively. All variables are stationary to their first differences and cointegration equations exist. Least squares regression method is being applied, and the statistically significant variables of every vessel type on both markets are being demonstrated. We test for the best ARMA model, and ARCH tests are applied in order to define whether or not there is ARCH effect in our models. If they depict ARCH effect, we estimate the ARCH, GARCH and E-GARCH models and conclude that newbuilding prices for VLCC-ULCC and Suezmax tankers, as well as second-hand prices for VLCC-ULCC crude carriers are vulnerable to external shocks and previous asymmetric effects. A comparison based on their lowest AIC is done and the conclusion is that E-GARCH is the most suitable model in all three cases. For these categories we estimate the VAR model, and the significant variables of previous periods that affect the dependent variables of every model are being defined. For the rest categories that do not illustrate ARCH effect, VEC model is estimated. Short run and long run causality arises from our variables to newbuilding prices for Aframax tankers and second-hand prices for Suezmax and Aframax crude carriers. However, according to the diagnostic tests, the VEC model for second-hand prices of Suezmax tankers is not valid. This analysis can be used from shipowners and investors as a good tool in order to decide whether they want to invest in newbuilding or second-hand crude carriers. In addition, buyers of second-hand ships can forecast the second-hand prices of the crude tankers and detect the appropriate time to buy the vessels.