Investigating the causes of imbalance in supply and demand for commercial vessels

Document Type : Original Article

Author
Kasra Pourkermani
Associate Professor, Department of Maritime Transport, Faculty of Economics and Management, Khorramshahr University of Marine Science and Technology, Khorramshahr, Iran.
10.22034/road.2025.547798.2429
Abstract
In general, the shipping market cycle has four stages from recession to recovery, peak, and crash, with the uptrend lasting about 6 to 7 years and the downtrend lasting about 6 to 7 years. Therefore, the market price bubble is not sustainable and always ends in a recession. The value of the Baltic indices has fallen by around 90% since the second half of 2021. The economic cycle is common knowledge and a self-evident principle in the shipping industry, but many shipowners do not take it into account. The fear of shipowners, triggered by a highly volatile market, causes them to imitate the herd mentality or herd behavior and follow the market sentiment. The aim of this study is to measure the effects of herding behavior, which is influenced by market sentiment, in the shipping market. This research attempts to identify the reasons for herding behavior and to determine the volume of vessels ordered or purchased under the influence of herding behavior. It is estimated that 55% of all ships, or 33% of total tonnage, were purchased under the influence of herd behavior. The results show that ship investment under the influence of herd behavior was a very strong factor in creating market imbalances.
Keywords
Market rally
Baltic Exchange
recession
herding behavior
vessel
-Nguyen APN, Crane M, Conlon T, Bezbradica M. (2025). Herding unmasked: Insights into cryptocurrencies, stocks and US ETFs. PLoS One. 20:e0316332. doi.org/10.1371/journal.pone.0316332
-Celik Girgin S, Karlis T, Duru O. (2020). Valuation mismatch and shipping q indicator for shipping asset management. Marit Policy Manag­, 47:109–26. doi.org/10.1080/03088839.2019.1675196
-Ma S. Economics of Maritime Business. First Edition. | New York : Routledge, (2020). Series: Routledge Maritime Masters; 7: Routledge; doi.org/10.4324/9781315658124
-Mhd Ruslan SM, Mokhtar K. (2021). Stock market volatility on shipping stock prices: GARCH models approach. J Econ Asymmetries. 24:e00232. doi.org/10.1016/j.jeca.2021.e00232
-Kamal MR, Chowdhury MAF, Hosain MM. (2022). Stock market reactions of maritime shipping industry in the time of COVID-19 pandemic crisis: an empirical investigation. Marit Policy Manag. 49:1184–99. doi.org/10.1080/03088839.2021.1954255
-Bai X, Lam JSL, Jakher A. (2021). Shipping sentiment and the dry bulk shipping freight market: New evidence from newspaper coverage. Transp Res Part E Logist Transp Rev., 155:102490. doi.org/10.1016/j.tre.2021.102490
-Ehlert S. (2024). Industry investor sentiment in the global shipping industry. Marit Policy Manag, 51:74–97. doi.org/10.1080/03088839.2022.2087237
-Melas KD, Michail NA. (2024). Can commodity prices predict stock market returns? The case of dry bulk shipping companies. J Shipp Trade, 9:20. doi.org/10.1186/s41072-024-00178-9
-Michail NA, Melas KD. Sentiment-Augmented Supply and Demand Equations for the Dry Bulk Shipping Market. Economies, 9:171. doi.org/10.3390/economies9040171
-Park S, Kwon J, Kim T. (2021). An Analysis of the Dynamic Relationship between the Global Macroeconomy and Shipping and Shipbuilding Industries. Sustainability 13:13982. doi.org/10.3390/su132413982
-Longarela-Ares Á, Calvo-Silvosa A, Pérez-López J-B. (2020). The Influence of Economic Barriers and Drivers on Energy Efficiency Investments in Maritime Shipping, from the Perspective of the Principal-Agent Problem. Sustainability 12:7943. doi.org/10.3390/su12197943
-Sun Z, Zhang Y. (2022). Strategic Crisis Response of Shipping Industry in the Post COVID-19 Era: A Case of the Top 10 Shipping Lines. J Mar Sci Eng. 10:635.
doi.org/10.3390/jmse10050635
-Nomikos NK, Tsouknidis DA. Disentangling demand and supply shocks in the shipping freight market: their impact on shipping investments. Marit Policy Manag, 50:563–81. doi.org/10.1080/03088839.2021.2017041
-Marobhe MI. (2022). Investors’ reactions to COVID-19 related announcements: evidence from the cargo shipping industry. Rev Behav Financ, 14:833–53. doi.org/10.1108/RBF-04-2021-0071
-Melas KD, Panayides PM, Tsouknidis DA. (2022). Dynamic volatility spillovers and investor sentiment components across freight-shipping markets. Marit Econ Logist, 24:368–94.
doi.org/10.1057/s41278-021-00209-3
-Rivarolo M, Rattazzi D, Lamberti T, Magistri L. (2020). Clean energy production by PEM fuel cells on tourist ships: A time-dependent analysis. Int J Hydrogen Energy; 45:25747–57. doi.org/10.1016/j.ijhydene.2019.12.086
-Goulielmos AM. (2021). Why the Perfect Timing Achieved by the Managers of Shipping Companies is so Important? Mod Econ, 12:597–622. doi.org/10.4236/me.2021.123031
-Feng M, Shaw S-L, Peng G, Fang Z. (2020). Time efficiency assessment of ship movements in maritime ports: A case study of two ports based on AIS data. J Transp Geogr, 86:102741. doi.org/10.1016/j.jtrangeo.2020.102741
-Syriopoulos T, Roumpis E, Tsatsaronis M. (2023). Hedging Strategies in Carbon Emission Price Dynamics: Implications for Shipping Markets. Energies, 16:6396.
doi.org/10.3390/en16176396
-Akgul EF, Cetin IB. (2021). An investigation on behavioral biases in ship investments of small-sized shipping companies. Marit Bus Rev; 6:377–91. doi.org/10.1108/MABR-08-2020-0049
-Perčić M, Vladimir N, Fan A. (2020). Life-cycle cost assessment of alternative marine fuels to reduce the carbon footprint in short-sea shipping: A case study of Croatia. Appl Energy­, 279:115848. doi.org/10.1016/j.apenergy.2020.115848
-Younis I, Longsheng C, Basheer MF, Joyo AS. (2020). Stock market comovements among Asian emerging economies: A wavelet-based approach. PLoS One, 15:e0240472
doi.org/10.1371/journal.pone.0240472
-ROLL R. R2. J. (1988). Finance, 43:541–66. doi.org/10.1111/j.1540-6261.1988.tb04591.x
-Schiehll E, Kolahgar S. (2021). Financial materiality in the informativeness of sustainability reporting. Bus Strateg Environ, 30:840–55. doi.org/10.1002/bse.2657
-Goulielmos AM. (2020). An Anatomy of Cycles in Shipping Industry, 1946-2020. Mod Econ 11:1671–95. doi.org/10.4236/me.2020.1110116
-Ilyas M, Jin Z, Ullah I, Almujibah H. (2024). A fuzzy logic-based risk assessment framework for the crude oil transportation supply chain. Ocean Eng 311:118997. doi.org/10.1016/j.oceaneng.2024.118997
-Fan L, Gu B, Yin J. (2021). Investment incentive analysis for second-hand vessels. Transp Policy 106:215–25. doi.org/10.1016/j.tranpol.2021.04.001
-Fan L, Li Z, Xie J, Yin J. (2023). Container ship investment Decisions―Newbuilding vs second-hand vessels. Transp Policy, 143:1–9. doi.org/10.1016/j.tranpol.2023.09.005
-Michail NA. (2020). World economic growth and seaborne trade volume: Quantifying the relationship. Transp Res Interdiscip Perspect, 4:100108. doi.org/10.1016/j.trip.2020.100108
-Piotroski JD, Roulstone DT. (2004). The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices. Account Rev., 79:1119–51.  doi.org/10.2308/accr.2004.79.4.1119
-Papapostolou NC, Pouliasis PK, Kyriakou I. Herd (2017). behavior in the drybulk market: an empirical analysis of the decision to invest in new and retire existing fleet capacity. Transp Res Part E Logist Transp Rev., 104:36–51. doi.org/10.1016/j.tre.2017.05.007