Modeling Dynamics of Dry Bulk Freight Rates and Market Capitalization of Dry Bulk Shipping Companies

The majority of international trade is carried by sea. In shipping, the dry bulk sector handles the largest portion of international cargo transportation. Objective. This paper examines the influence of various economic indicators on the Baltic Exchange Dry Index (BDI), which is known as the leading indicator of the dry bulk freight market. Furthermore, the study also investigates the factors which predetermined dynamics of the stock market capitalization of five public-listed pure-play dry bulk shipping companies within the period of 2005–2023. Methods. By applying OLS (ordinary least squares) regressions on structural market data, the effects of prices of dry bulk commodities, oil, and money (interest rates) on the freight market are estimated. Similarly, the effects of prices of dry bulk cargoes and oil, the S&P 500 index, interest rates and freight rates on stock market capitalization of dry bulk shipping companies are assessed. The results suggest that interest rates are a useful predictor of changes in the dry bulk freight rates. As to stock market capitalization, each shipping company exhibited dependence on different factors, with the behavioral pattern of only two of them, Star Bulk and Golden Ocean, being similar. The models for these companies display a comparable power to explain variation in market capitalization and indicate a robust positive relationship with the S&P 500 index and price of aluminium. The prices of oil and iron ore influenced Genco’s market capitalization. The BDI and S&P 500 were the primary drivers of the market capitalization of Eagle bulk. Seanergy, holding the lowest market capitalization among companies under analysis, demonstrated dependence on the BDI only, which is consistent with expectations. The prices of other commodities did not demonstrate significance for modeling purposes. Above constitutes scientific novelty of the paper. Practical significance. The paper presents a modeling instrument which offers equivalent usefulness for both shipping industry participants and investors which consider adding shipping stocks to their portfolios.