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  • Writer's pictureRyan Lynch

Maritime Asset Prices & Inflation - Causality?

In this weeks analysis we review the effect of maritime asset price relative to inflation over the last 20 years. At first glance one would see that there is a high correlative quality between crude tanker, product tanker and gas carrier prices to inflation (+~20%), while dry bulk seems to have limited linearity (+/-0%) between 2012 -2021. As most economist will know however, correlation does not imply causation, and we find these metrics to be spurious and misleading.

We instead produce an indexed causation analysis, which seeks to understand if inflation (CPI & PCE) have a causal and significant linkage forward to any maritime asset class. Our a priori assumptions have been confirmed where demand driven consumer inflation (including food and energy prices) is accretive to dry bulk asset prices, which are most closely connected to consumer demand cycles. Further we have discovered that our Dry Index (DI) is a significant leading indicator to our Product Tanker index (PI). We suspect this has much to do with builder "switching" and similar commoditization of markets which have a similar proximity to end-user commodity demand (rather than intermediate Crude and Gas Carriers).

While there was limited statistical significance for inflation effect alone on Crude, Gas or Product tanker price changes, this model has established a base line formulaic approach to understand elasticity effect, where additional variables may prove further supporting for causality models. One major step will be analyzing day rate (controlling for input prices), which will connect user demand to inflationary effect more closely. We suspect as LNG moves closer to the consumer via inevitable increased proportion in the power generation "stack" there will ensue a higher order of causality linkages.

MOIC 03 Jan
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