Dry bulk shipping and the evolution of maritime transport costs, 1850–2020

Abstract

We provide evidence on the dynamic effects of fuel price shocks, shipping demand shocks and shipping supply shocks on real dry bulk freight rates in the long run. We first analyse a new dataset on dry bulk freight rates for the period from 1850 to 2020, finding that they followed a downward but undulating path with a cumulative decline of 79%. Next, we turn to understanding the drivers of booms and busts in the dry bulk shipping industry, finding that shipping demand shocks strongly dominate all others as drivers of real dry bulk freight rates in the long run. Furthermore, while shipping demand shocks have increased in importance over time, shipping supply shocks in particular have become less relevant.

Supply chain disruptions and containerized agricultural exports from California ports

“…For example, we find that California producers of tree nuts, who heavily invested in foreign market access during the last decade (Asci & Devadoss, 2021; Ribera & Paggi, 2020), bore the brunt of the economic damages of port congestion and container shortages, losing about $450 million in foreign sales between May and November 2021. These findings underscore the heterogeneous consequences of the demand surge for imports from Asia and the round trip effect on international trade (Jacks & Pendakur, 2010; Jacks & Stuermer, 2021; Wong, 2022). Our results also reveal that foreign market dependence can be detrimental in the case of substantial infrastructure constraints (Clark et al, 2004; de Soyres et al, 2020; Ganapati et al, 2021).…”

Shipping costs and inflation

“…First, the series offers a long comparable time series starting in January 1985 at daily frequency and covers 100 percent of the bulk dry cargo in transit on the world’s oceans. Second, as argued by Jacks and Stuermer (2021) , dry bulk markets are decentralized spot markets and dry bulk ship rates are likely to reflect real-time conditions in the supply of and demand for their services. On the other hand, the index does not incorporate information about goods that are shipped in containers or on liquid fuels that are transported by tankers.…”

Fathoming Shipping Costs: An Exploration of Recent Literature, Data, and Patterns

“…When explaining the long-run trend in real dry-bulk freight rates, the authors appeal to Harley (1988), Mohammed and Williamson (2004), and Tenold (2019 who suggested the long-run productivity gains as the major contributing factors. 12 Instead, for the short-run variation, Jacks and Stuermer (2021) found the demand shocks to account for approximately 50% of short-run boom/bust historical freight rate variation. Importantly, these innovations resulted in a significant increase in trade, GDP, and welfare of countries involved in maritime trade (Pascali, 2017;Fajgelbaum and Redding, 2021).…”

“…Over time, the freight rates are affected by the demand volatility and uncertainty and by the sluggish response in supply due to time to build and convex operating costs (Kalouptsidi, 2014). 11 To construct the trend of dry-bulk freight rates, we utilize Jacks and Stuermer (2021) data and estimates, who draw on a bevy of historical sources to construct an impressive 170 year-long time series (see Appendix A in their paper for specifics). We present the resulting trend in Figure 8.…”