Port congestion and the economics of LPG seaborne transportation

Abstract

ABSTRACT This paper investigates how port congestion affects maritime transportation freight rates for Liquefied Petroleum Gas seaborne trade in a System Dynamics model by capturing supply and demand dynamics from the actual shipment data derived from the Automatic Identification System. The methodology enables the analysis of causal effects among the multilayered elements in the supply and demand loop of Liquefied Petroleum Gas seaborne transportation at the micro level. We find evidence of causal effect of port congestion in its severity on freight rate when the market condition is tight. Moreover, the model provides trend forecasts for freight change directions. The findings have significant implications for practitioners and policy makers.