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 and negative shocks caused both negative and positive shocks. The divided sample results revealed that positive shocks in the iron ore prices were causes of the positive shocks in the freight rates in the pre-crisis period, while negative shocks in the ore prices were causes of the negative shocks in freight rates, and negative shocks were the causes positive shocks in the post-crisis period. These results suggested that the impact of commodity prices on the freight market before and after the crisis might vary.

Keywords

• Asymmetric causality
• Commodity price
• Freight rate
• Global economic crisis

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