Microeconomic determinants of dry bulk shipping freight rates and contract times

While the literature has established macroeconomic determinants of shipping freight (charter) rates, there has been no systematic investigation of the microeconomic determinants of shipping freight rates. Therefore, the purpose of this paper is to investigate microeconomic determinants of freight rates in the dry bulk shipping market, using a large sample of individual dry bulk charter contracts from January 2003 to July 2009. Differences in freight rates across major dry bulk shipping routes, the geographical distribution of shipping activities around the world, and the duration of the laycan period of shipping contracts are also investigated. Estimated results suggest that the laycan period and dry bulk freight rates are interrelated and determined simultaneously. Furthermore, vessel deadweight, age and voyage routes are important determinants of dry bulk shipping freight rates, while determinants of the laycan period of chartered vessels include vessel age, freight rate level, and freight rate volatility.