The VCFI is the index created by the Port Authority of Valencia to reflect the evolution of the market rates for the export of full containers by sea from Valenciaport. VCFI stands for Valencia Containerised Freight Index. This index will serve shippers as a tool to predict the evolution of freight rates within their markets of interest, which is a key determinant of the cost of their export operations. On the other hand, it will also be useful for operators that offer such services, providing a benchmark for the evolution of their own freight rates and those on the market.

 

Participating companies

 

Methodology

Conceptually, the VCFI is a quantitative index that enables the objective measurement and comparison of the data relating to sea freight rates from the port of Valencia.  This index has been created based on information obtained from primary data sources, formed by twelve top level panelists that operate in the port of Valencia, including freight forwarders and shipping companies. On a monthly basis, the panelists send the freight rate data of the month ending at the request of the Valenciaport Foundation. The composite index is calculated after receiving and checking the individual monthly data on the export freight rates for each of the ports, obtaining the average freight rates for each port, which will be entered into the composite index with its corresponding weighting. Taking into account that the freight rates of certain sea routes are negotiated in dollars, the exchange rates published monthly by the European Central Bank will be used for conversion to the euro. The rate provided by the panelists includes the ocean freight spot rate and the following surcharges:

  • Bunker Adjustment Factor (BAF)/ Fuel Adjustment Factor (FAF)/ Low Sulphur Surcharge (LSS)
  • Emergency Bunker Surcharge(EBS)/ Emergency Bunker Additional (EBA)
  • Currency Adjustment Factor(CAF)/ Yen Appreciation Surcharge (YAS)
  • Peak Season Surcharge(PSS)
  • War Risk Surcharge(WRS)
  • Port Congestion Surcharge (PCS)
  • Suez Canal transit Fee/Surcharge (SCS)/ Suez Canal Fee (SCF)/ Panama Transit Fee (PTF)/ Panama Canal Charge (PCC).
Comment of the month

The VCFI (Valencia Containerised Freight Index) closed 2018 by reaching a value of 1,098.46 points, an increase of 0.94% compared with the previous month. The Valencia Containerised Freight Index (VCFI) is an index number with basis of 1000 in January 2018 that shows the evolution of all-in maritime spot freight rates in the container export market with maritime cargo from Valenciaport with the main destinations.

In December the downward trend in the price of oil that began in the previous month continued, which stood at 56 dollars per barrel in terms of monthly average. This trend change in the evolution of crude oil prices was mainly determined by supply factors, therefore the behaviour of these factors will be key in determining the evolution of the price of oil per barrel in 2019, which starts with a cutback in crude oil production by the OPEC by 1.2 million barrels per day between January and June 2019. Demand factors should also not be excluded because, although it is anticipated that 2018 will end with more moderate growth rates, but still significant at the global level, the downside risks increase for the coming months.

On the other hand, 2018 was characterised by a significant increase in the idle fleet of container ships that, according to Alphaliner, rose from 416,000 TEUs at the end of 2017 to 628,000 TEUs in December 2018. Behind this increase there is, on the one hand, the evolution of the balance between new constructions and ship dismantling and, on the other, the reduction of capacity used by shipping companies in the second half of the year on critical trade routes, attempting to push up freight rates on those routes, which stood at low levels during the first part of the year. This resulted in an upward pressure on the VCFI in the second half of the year, as well as on other similar indexes.

Breaking down the VCFI by the geographical areas subject to analysis, in December there was an increase in freight rates to the two areas with the greatest weight in the index: the Far East and the United States and Canada. In the case of the Far East this price increase is modest and does not prevent it from being the area of the VCFI in which prices dropped the most in 2018. At the opposite end is the United States and Canada, a destination that has experienced a sustained growth in freight rates throughout the year as it is the area with which the cost of transport has risen the most. In addition, during December there were increases in Valencia’s export freight rates with ports in Africa West Coast, Western and Eastern Mediterranean and Baltic Countries.

On the other hand, and while Atlantic Europe remains stable, the rest of the areas (Africa East Coast, Central America and the Caribbean, Atlantic Latin America and Pacific Latin America, the Middle East and Indian Subcontinent) experienced price reductions for maritime transport with respect to November. In these areas, only the Middle East experienced a drop in annual terms; at the opposite end, of particular note are the cases of Atlantic Latin America and Central America, where the fall in December may be considered to be a one-off because both areas experienced a sustained increase in freight rates in 2018.