Abstract
This paper focuses on the monthly relationship between the bunker adjustment factor (BAF) and bunker price and between the freight rate and charter rate on the Europe/Far East container trade. It investigates whether a causality relationship can be found between these variables in order to know whether tariffs are mainly driven by cost considerations, as claimed by shipping lines during the last 5 years. Results from VAR and VECR models suggest that a Granger causality does exist. This paper calls for a new way to look at pricing elements in liner shipping and more particularly for shipping conferences, that should focus more for instance on justified/unjustified BAF or rate restoration announcements rather than on a general debate on exemption/abolishment of collective pricing.
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Notes
Drewry Monthly Report, Various issues June 1999–April 2005, Drewry Shipping Consultant.
The same could apply to THC, container imbalanced etc.
See http://www.harperpetersen.com/ for more details on index calculation.
The same research could have been done considering all surcharges announced by the FEFC.
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Appendices
Appendix 1. Reported rate restoration by FEFC in Eastbound and Westbound Europe/Far East trade
Appendix 2. Reported BAF by FEFC in Europe/Far East trade
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Cariou, P., Wolff, FC. An Analysis of Bunker Adjustment Factors and Freight Rates in the Europe/Far East Market (2000–2004). Marit Econ Logist 8, 187–201 (2006). https://doi.org/10.1057/palgrave.mel.9100156
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DOI: https://doi.org/10.1057/palgrave.mel.9100156