Impact of Commodity Price on Freight Market Considering the 2008 Crisis: An Investigation of Iron Ore Price and Capesize Shipping Rates

Abstract

This study investigated the asymmetric causality from iron ore price to freight market through Capesize rates by considering the possible impact of the 2008 global economic crisis. The study used a monthly data set of 233 observations covering the period between January 2000 and June 2019. According to the structural break tests, a break was detected in June 2008 and the analyses were performed for two separate periods as pre-crisis and post-crisis in addition to the whole period. The results for the whole period revealed that positive shocks in iron ore price caused negative shocks in freight rate and negative shocks caused both negative and positive shocks. In the pre-crisis period, positive shocks in the iron ore prices caused positive shocks in the freight rates. In the post-crisis period, negative shocks in the ore prices caused both negative and positive shocks in freight rates. These results suggested that the impact of commodity prices on the freight market before and after the crisis might vary.