The Emergence of Marine Freight Rate Bubbles Following the COVID-19 Outbreak

This research analyzes the formation and growth of price bubbles in the marine freight industry by using the Supremum Augmented Dickey-Fuller (SADF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) econometric methods, utilizing data from the Baltic Dry Index (BDI). The study covers the timeframe from the 47th week of 2019 to the 51st week of 2023. Research indicates the presence of eight separate pricing bubbles in the marine industry worldwide during this period. Quarterly, the distribution of bubbles was as follows: one in Q1 2020, one in Q2 2021, two in Q4 2021, one in Q1 2022, and one each in Q1, Q3, and Q4 of 2023. Significantly, six of these bubbles appeared before the World Health Organization declared that COVID-19 no longer represented a worldwide public health emergency. The emergence of these first bubbles is intricately linked to pandemic-related events, including heightened demand for raw materials, interruptions from lockdowns, impacts of economic recovery, and shortages of vessels. The latter two bubbles, seen after COVID, may be ascribed to logistical constraints at Brazilian ports and heightened cargo quantities of coal, iron ore, and bauxite.