The Reflection of Ship Demolition Prices to Construction Costs in Turkey

The ship demolition sector is one of the major suppliers of the steel market, even though its share in the total scrap market is very small. As the sector is a supplier of the steel market, it is inevitable that the price changes will be reflected in the construction sector, which is one of the largest steel customers. In this context, it is aimed in this study to determine whether the changes in demolition prices of Turkey, which is one of the main ship demolition locations in the world, have an effect on the construction costs in the country. In order to investigate possible relationships, Turkish demolition prices and Construction Cost Index (CCI) variables are used. The dataset covers the dates between January 2015 and December 2018, and consists of 48 monthly observations. Asymmetric causality test is used to determine the causal relationship between the variables by separating the shocks they contain as positive and negative. The econometric relationship is analyzed with both the USD currency price offered by Turkish demolition businesses and the corresponding TL currency prices in order to diversify the results. According to the results, causality relation from positive shocks in USD based demolition prices to the positive shocks in construction costs index is determined. In addition, there are causalities from positive shocks in TL based demolition prices to the positive shocks in construction cost index, and from negative shocks in demolition prices to the negative shocks in the index. This situation shows that the foreign exchange rates also play an important role in shaping the costs of the construction sector.


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