A theoretical model was applied to analyze tanker time charter rates consummated between 1967 and 1974. The model takes into consideration the long-run costs of the tanker industry, the risk premia for unemployment and underemployment of vessels, the loan value of the time charter agreement to the ship owner, the brokerage fee savings, and a propulsion efficiency premium. These variables are estimated using real data and thus the theoretical long-term rate is determined. It was found that the model can adequately predict actual time charter rates. Predictions were very accurate when the prevailing tanker spot market rates were low or normal; when spot market rates were high, predictions were not as accurate. Since actual time charter agreements are, in many cases, of short duration, the time charter rates are affected by the prevailing spot market rates. Therefore the spot market rate structure at any point in time has also to be accounted for to obtain better predictions from the theoretical model.

  • Corporate Authors:

    Massachusetts Institute of Technology

    Department of Ocean Engineering, 77 Massachusetts Avenue
    Cambridge, MA  United States  02139
  • Authors:
    • Polemis, S
  • Publication Date: 1976-6

Subject/Index Terms

Filing Info

  • Accession Number: 00142347
  • Record Type: Publication
  • Source Agency: Massachusetts Institute of Technology
  • Report/Paper Numbers: MS Thesis
  • Files: TRIS
  • Created Date: Nov 23 1976 12:00AM