The determinants of vessel capacity utilization: The case of Brazilian iron ore exports

Roar Adland, Haiying Jia and Siri Strandenes

Transportation Research Part A: Policy and Practice, 2018, vol. 110, issue C, 191-201

Abstract: The objective of this paper is to determine the drivers behind the utilization of a vessel’s cargo-carrying capacity on individual voyages. Based on maritime economic theory we propose that a vessel’s capacity utilization - defined as the ratio of cargo size divided by DWT - should be positively correlated with freight rates, as poor market conditions will force vessels to compete for lower-than-optimal stem sizes. Furthermore, we propose that capacity utilization is dependent on the distance sailed, the fuel price and the value of the cargo. Using a unique data set sourced from port agent lineup reports and covering nearly 10,000 individual shipments of iron ore from Brazil between 2009 and 2014 we estimate a multiple regression model consisting of macroeconomic, route-specific and vessel-specific determinants. Our empirical results suggest that vessel-specific determinants (DWT) dominate the impact of general market conditions, with smaller vessels typically having lower capacity utilization. The impact of freight market conditions conforms to our a priori expectations. Our findings and modeling approach contributes to maritime environmental policymaking by enabling more accurate bottom-up estimation of emissions. The research is also crucial for improved modeling of real vessel earnings and tonne-mile demand based on observations of global ship movements from AIS data.

Keywords: Bulk shipping; Capacity utilization; Trade flows (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.tra.2016.11.023

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