Energy dynamics in the global supertanker market: An empirical analysis of newbuilding very large crude oil carriers

Abstract

Ordering new ships is an essential issue for managers in the shipping industry. Investments in supertankers involve substantial capital, and the payback period is lengthy. The complexity and uncertainty of the shipping market have posed higher requirements on ship investment behavior. The prices of newbuilding supertankers are significantly influenced by the fluctuation of the shipping market, with numerous potential factors and complex interrelationships. To quantitatively investigate the volatility mechanisms of the supertanker market, this study focuses on the prices of newbuilding Very Large Crude Carriers (VLCC). Several representative economic indicators are introduced, and the variable selection principles of ridge regression analysis are utilized to screen factors with low relevance and multicollinearity. Through the econometric model, the relationships between factors and the prices of newbuilding VLCCs are revealed, thereby determining the key factors. Results indicate that the importance of interrelated factors is ranked as follows: the ratio of new ship orders and fleet size, steel plate prices, second-hand ship prices, international exchange rates, and one-year time charter rates. This empirical study also provides certain theoretical and practical guidance for shipowners in making reasonable investment decisions regarding the newbuilding supertanker market.