THE DEVELOPMENT OF FORECASTING MODEL FOR DRY BULK SHIPPING BASED ON MARKET BENCHMARKING ON BALTIC DRY INDEX

Abstract

The purpose of this research is to develop a forecasting model for freight rate determination in dry bulk shipping based on benchmarking from Baltic Dry Index. The economies of China, India, and Southeast Asia have experienced rapid industrial development, resulting in a large increase in the yearly growth rate of demand for dry bulk commodities. As a result, the freight rate environment was strengthened, and freight rates reached all-time highs. Dry bulk vessels are used in both the spot and long-term charter markets. Spot prices are generally higher than time charter rates. While bigger earnings can be achieved in good markets with higher spot rates, time charters provide a more consistent income stream over a longer period and lessen short-term market volatility. Depending on how a company interprets market trends and its overall corporate strategy, the mix of spot and period employment varies. The Baltic Exchange's Baltic Dry Index (BDI) measures the overall performance of the dry bulk sector and represents the rate development of Capesize, Panamax, and Supramax vessels. On a daily Time-Charter Equivalent (TCE) basis, the industry examines freight rate evolution in both spot market and time charter rates which indicates rates paid to shipping companies each day net of voyage associated expenses that are typically incurred by charterers.