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<p>The stability of commodity and shipping markets is critical for global economic development. These markets exhibit inherent asymmetries in supply and demand elasticities, leading to complex interactive dynamics. This study moves beyond conventional linear transmission assumptions by employing a Structural Vector Autoregression (SVAR) model to decompose iron ore price shocks and integrates it with an R²-decomposed connectedness approach to disentangle contemporaneous from lagged spillover effects. Using monthly data from December 2010 to April 2024, we uncover the differential transmission mechanisms of heterogeneous iron ore price shocks to the shipping market. Our findings reveal that, owing to the low supply elasticity and high demand elasticity of iron ore, demand shocks exert a leading influence on supply shocks. Spillovers from the iron ore to the shipping market are heterogeneous: demand shocks serve as net transmitters, whereas supply shocks act as net receivers. Moreover, these spillover dynamics are time-varying. External shocks, such as the 2019 Brazilian dam collapse and the COVID-19 pandemic, can modify the underlying supply and demand elasticities and reshape cross-market spillover mechanisms.</p>

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Asymmetric elasticity transmission in iron ore-shipping markets: Evidence from heterogeneous shock decomposition

  • 期刊论文

  • 发表日期：

    2026年2月19日

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  • Cong Sui,
  • Meng Wan,
  • Wenjing Xu

摘要

The stability of commodity and shipping markets is critical for global economic development. These markets exhibit inherent asymmetries in supply and demand elasticities, leading to complex interactive dynamics. This study moves beyond conventional linear transmission assumptions by employing a Structural Vector Autoregression (SVAR) model to decompose iron ore price shocks and integrates it with an R²-decomposed connectedness approach to disentangle contemporaneous from lagged spillover effects. Using monthly data from December 2010 to April 2024, we uncover the differential transmission mechanisms of heterogeneous iron ore price shocks to the shipping market. Our findings reveal that, owing to the low supply elasticity and high demand elasticity of iron ore, demand shocks exert a leading influence on supply shocks. Spillovers from the iron ore to the shipping market are heterogeneous: demand shocks serve as net transmitters, whereas supply shocks act as net receivers. Moreover, these spillover dynamics are time-varying. External shocks, such as the 2019 Brazilian dam collapse and the COVID-19 pandemic, can modify the underlying supply and demand elasticities and reshape cross-market spillover mechanisms.