Contractual Obligations and Vessel Speed: Empirical Evidence from the Capesize Drybulk Market

The fuel consumption and emissions of ship operation is determined by the vessel speed, loading condition and external environment in which they sail. Vessel speed is subject to certain contractual constraints, notably the requirement that a vessel presents herself for loading within an agreed time window. The objective of this paper is to investigate how such contractual constraints and risk aversion affect empirical vessel speeds. We use ship tracking data from the Automated Identification System (AIS) combined with fixture data to identify the pre- and post-contract speeds as well as variations in sailing speeds throughout the ballast voyage. Our results support the notion that vessels are ordered to change their speed at the point of contracting if it is necessary to meet contractual obligations, and that most are conservative in their adjustment. Our findings are important for the assessment of emission elasticities with regards to market conditions and regulatory changes.