An analysis of the relation between the commodity prices and freight rates

International trade activities increased remarkably over the last decades thanks to the globalization. Considering that over the 80% of global trade by volume and over 70 % of global trade by value are carried by sea; freight rate which is defined as a cost charged by the carrier for the transportation of cargo from the origin to the final location becomes crucial under the area of maritime economics. Freight rates may vary with respect to the type of goods, distance, weight, size, methods, and directions of the cargo. Just like final and semi-final products; commodities are also carried by the vessels in international seas and ships are named with respect to the goods carried such as bulk-carrier, dry cargo ship and tankers. In this thesis we aim firstly to detect the main determinants of the freight rates as a cost of transportation from the microeconomics and macroeconomics point of view in the literature and using those determinants we aim to investigate, in specific, the dynamic relationship between the commodity prices and freight rates charged to carry those commodities by using time series analysis for the various types of vessels and commodities in specific routes. Hereby analyzing the strength of direction of the relationship and the lag between changes in the freight rates up to the changes in the commodity prices may be useful for the actors in international trade for future's projections.