The second-hand market for bulk carriers

Abstract

The thesis attempts to explain the resale prices of bulk carriers. The effects of the physical characteristics of ships on second-hand values, along with those of the prevailing freight rates in the market, and those of ship operating costs are theoretically discussed. The results of previous studies on the subject are presented. The main hypothesis tested in the study is that a ship's resale price is the present value of the expected future cashflow generated by its operation. The expected future freight rates required for the analysis are obtained by assuming adaptive and rational expectations among others. Market expectations on freight rates, as measured by the price of freight futures contracts exchanged in BIFFEX, are also tested. The developed model is applied on recent ship sales with very encouraging results.