Security shocks and newbuilding prices: Evidence from three shipping segments

This paper investigates the impact of geopolitical security risks on shipbuilding prices across three major segments of the global shipping industry: bulk carriers, oil tankers, and LNG carriers. Using monthly data from 1996 to 2024, we apply a threshold autoregressive (TAR/MTAR) methodology that captures asymmetric price responses to changing geopolitical conditions. Grounded in the political economy of security, our analysis reveals that geopolitical shocks act as systemic risks that shape price dynamics and investment conditions in sectors of strategic importance. We find that: (a) In the long run, the impact of a positive (adverse) geopolitical shock on newbuilding prices is direct, thus transmitted through the supply side (cost push inflation); (b) adverse geopolitical shocks contribute to shorter and less volatile shipbuilding cycles, which is a striking finding as it suggests an unintended positive consequence of geopolitical uncertainty; (c) the LNG segment exhibits the highest price flexibility, allowing for quicker absorption of cost-push inflation. These results offer new insights for industrial policy and maritime security strategy.