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Investment and charter under market and regulatory uncertainty

  • This dissertation investigates capacity and technology choice decisions in maritime container shipping under demand and regulatory uncertainty. In an introductory overview, we discuss the industry and the challenges that complicate investment decisions in shipping: e. g., the multitude of decisions, market volatility, excess capacities and the trend of new environmental regulation. Real option valuation methods can account for strategic options and the uncertainties in capacity decisions in shipping. To assess the impact of chartering on maritime investment, we analyze investment and charter options individually in a continuous-time model. We combine both in a discrete-time approach taking into account key features of the industry: investment with time to build, divestment, chartering, an endogenous charter rate, layup, and demand uncertainty. While we find demand volatility to increase optimal capacities if only investment with time to build is possible, chartering reduces this effect. It adds value to the overall project, should be mainly applied to compensate unexpected capacity shortages and needs to be considered in decision-making. Uncertainty about future eco-regulation is a further challenge for the industry. In an approximate dynamic programming model extension, we account for a stochastic introduction of operating cost-increasing regulation to assess optimal capacity choice under regulatory uncertainty. Regulation can allow for grandfathering, affecting only newly acquired vessels. We find uncertainty about future regulation with grandfathering to induce heavy up-front investment to secure a low cost base even in regulated markets. Such uncertainty may increase excess capacities and industry emissions. Uncertainty without grandfathering, however, reduces overall investment and emissions. In this case, the market may contract as investors resort to chartering until uncertainty is resolved. To also assess technology choice in light of uncertain future regulation, we develop a two-phase regime-switching model. We derive analytical solutions and study the effects of regulatory uncertainty on technology choice in a numerical extension that relaxes restrictive assumptions. We find that such uncertainty can increase optimal capacities and that a single-technology strategy is preferable over a fleet of mixed technologies in most cases. We further extend the model and compare the effectiveness of two different regimes—an emissions cap and an emissions tax. Results suggest that an emissions cap is more effective at reducing overall emissions while a tax causes lower regulation cost. The regime choice also determines the optimal technological fleet composition. The main implication is that chartering and regulatory uncertainty have a strong effect on optimal investment in shipping and should be considered in project valuation. Further, regulatory uncertainty can lead to unintended investment behavior that undermines regulatory goals. Lastly, regulatory regimes are not equally effective/efficient in reducing the environmental footprint of shipping and constitute varying incentives for investing in eco-friendly technology.

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Metadaten
Author:Christian A. H. Haehl
URN:urn:nbn:de:hbz:992-opus4-7510
Subtitle (English):real options-based studies in international container shipping
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Referee:Stefan Spinler, Arnd HuchzermeierORCiD
Document Type:Doctoral Thesis
Language:English
Date of Publication (online):2019/11/20
Publishing Institution:WHU - Otto Beisheim School of Management
Granting Institution:WHU - Otto Beisheim School of Management
Date of final exam:2017/11/16
Release Date:2019/11/20
Tag:Charterung; Containerverkehr; Investition; Marktunsicherheit; Regulierungsunsicherheit
Charter; Container shipping; Investment; Market uncertainty; Regulatory uncertainty
Page Number:117
Institutes:WHU Supply Chain Management Group / Kühne Foundation Endowed Chair of Logistics Management
Licence (German):Copyright this PhD thesis