The regional sub-index of VCFI referring to the Western Mediterranean continues with the upward trend that began in March and experiences a slight rise of 0.70%.
For its part, the regional sub-index associated with the Far East experiences a decrease for the second consecutive month, being 0.69% in June compared to the previous month.
Valencia, July the 5th 2019. – The Valencia Containeraised Freight Index (VCFI) for the month of June changes the trend of the two previous months and contracts 1.51% compared to May, standing at 1,056.44 points and accumulating a growth of 5.64% from January 2018.
One of the factors correlated with freight performance is the price of oil. For the first time since December 2018, there has been a decrease in the price of the Brent barrel, from 71.32 dollars per barrel in May to 64.22 dollars in June. According to the latest report prepared by BBVA Research, geopolitical tensions generate a high level of uncertainty in the market, although they predict a reduction in the price of oil for the second half of 2019 associated with lower demand caused by the economic contraction.
Another factor that allows intuiting the behavior of freight rates is the evolution of the idle fleet. In this sense, it increased in mid-June to reach 351,325 TEUs, to decrease slightly at the end of June to stand at 336,241. As pointed out by Alphaliner, due to weak demand, expectations for the coming months are not very encouraging and the idle fleet is expected to increase. This is due to the programming by some shipping companies of void sailings and blanked sailings in July and August.
During this month, and unlike the previous one, the decrease experienced by the VCFI reflects the downward trend in most of its areas of study. Specifically, 8 of them suffer a decrease in their export freight levels from Valenciaport: Central America and the Caribbean (0.17%), Far East (0.69%), East Africa Africa (0.89%), Baltic countries (1.30%), Middle East (1.56%), Indian subcontinent (2.35%), United States and Canada (2.49%), highlighting the strong fall with the Eastern Mediterranean (6.90%) %). The freights with the Indian Subcontinent chain one more month of decline caused largely by the restructuring of the supply of maritime services, according to data from Alphaliner, which are aligned with the fall of exports from the Valencian Community to India , which have fallen by 6.5% in the first months of 2019. Especially, the strong fall in the Eastern Mediterranean draws attention, due in large part to the weakness of trade flows with the East, which presses down the freight rates with the intention of capturing more export cargo.
On the side of the areas that increase their freights in the month of June, we find Africa West Coast (0.60%), Western Mediterranean (0.70%), Atlantic Latin America (0.89%) and Pacific Latin America (1, 94%). The increase in the LATAM stands out, where the highest economic growth in Peru and Colombia, together with the positive expectations and an upward revision carried out by the International Monetary Fund and the World Bank show a greater dynamism in both countries that can push up freight rates.