Date of Award

5-1985

Degree Type

Major Paper

Degree Name

Master of Arts in Marine Affairs

Abstract

This paper reviews the behavior of shipping freight rate by using the freight index as an proxy variable. A proxy variable is the one that is a substitute to the intended one because it is difficult to obtain. It was found that a seasonal pattern in the freight rate exists, but no specific estimated pattern of the seasonal variation was found. Generally, tramp freight rates rise above average level from February or March to June or July, and from September or October to December or January. The tanker freight rate, which differs from the tramp freight rate, has only one peak season; it rises above its average from September or October, reaches its peak in December, then falls below average in January or February until reaching its trough in April. Interestingly, when the tramp freight rate rises above its average, from February or March to June or July, the tanker freight rate falls below its average. This might suggest that the owners of the OBOs (Ore/Bulk/Oil Carriers) may take advantage of this phenomenon by switching their vessels between the two markets during that period.

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