Scrapping determinants in the tanker market : a vessel based logit model
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- Master Thesis 
Like many others, the crude oil tanker industry face the challenge of capital depreciation. Higher operational- and maintenance costs cause shipowners to scrap older vessels to ensure pro tability. However, in good markets, old vessels are kept in service, while in a market downturn, even young vessels are sent to scrapping. In our master thesis, we analyze the effect of vessel and market speci c factors on the probability of scrapping a tanker. The analysis is constructed to reveal differences between the VLCC, Suezmax and Aframax segments, and compare periods with different market conditions. Using logit models on our data set from 2014 to 2018, results show that vessel age, scrap price and freight rates are factors impacting the scrapping decision. Increased age and scrap price increase the probability of scrapping, while an increase in freight rates decrease the likelihood of demolition. These ndings are consistent for all three segments, but the results indicate that market volatility affect the largest vessels more. Finally, we nd that there are key differences between periods with different market conditions. When splitting the data in two; prior to and after September 2016, we nd that in the rst period with favourable conditions, only vessel age is signi cant in explaining scrapping activity. As the market declined, shipowners took age, scrap price and freight rate into account when scrapping. We also nd that age has a stronger impact in the market downturn, indicating that as the market busts, older vessels are scrapped first.