Interaction between commodity prices and freight rates: Content analysis of the dry bulk market reports

Most of the commodities used as raw materials for final products in the world economy are transported by sea by dry bulk cargo ships. Due to the derived demand structure, the demand for commodities directly affects the demand for shipping. One of the biggest indicators of the demand for commodities is their prices. The purpose of this study is to investigate how the relationship between commodity price and freight rate, which has been examined and verified by many studies in the empirical literature, is interpreted in the maritime industry. In this direction, the industry reports published by Fearnleys, one of the leading institutions of the maritime industry, are analyzed using interpretive content analysis method. Investigated market reports cover the period 23 February 2005 to 13 November 2019 and consist of a 752-week market summary report. The sections related to the dry bulk market and summarizing the Capesize, Panamax and Handymax markets are examined in the reports. According to the results, the relationship between the commodity price and freight rates in the sector reports is interpreted with the assumption that the commodity price reflects the demand for itself. In addition, the cargo shift between ship types arises according to the freight levels. Therefore, information and volatilities from commodity prices affect not only the freight of the specialized ship, but also the other freight markets.