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.

 

The Valencia Containerised 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 the behaviour of freight rates 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.  As noted in the last report prepared by the BBVA Research, the 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 a lower demand caused by the economic contraction.

The evolution of the idle fleet is another factor that makes it possible to intuit the behaviour of freight rates. 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 Alphaliner points out, 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 scheduling 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 levels of export freight from Valenciaport: Central America and the Caribbean (0.17%), Far East (0.69%), East Coast Africa (0.89%), the Baltic States (1.30%), Middle East (1.56%), the Indian subcontinent (2.35%), United States and Canada (2.49%), highlighting the sharp drop with the Eastern Mediterranean (6.90%). Freight rates with the Indian subcontinent are once more in decline caused, largely due to the restructuring of the supply of maritime services, according to data from Alphaliner, which are aligned with the fall in exports from Valencian Community to India, which have fallen by 6.5% in the early months of 2019. Particularly striking is the sharp fall in the Eastern Mediterranean, largely due to the weakness of trade flows with the East, which pushes freight rates down with the intention of attracting more export cargo.

As for the areas which increased their freight rates in June, we find West Coast Africa (0.60%), Western Mediterranean (0.70%), Atlantic Latin America (0.89%) and Pacific Latin America (1.94%). Of note is the rise in the latter, where the higher economic growth of Peru and Colombia, together with the positive expectations and upward revision made by the International Monetary Fund and the World Bank show a greater dynamism in both countries which can push up freight rates.

VCFI Western Mediterranean

The regional sub-index of the VCFI referring to the Western Mediterranean continues with the upward trend that began in March and which experienced a slight rise of 0.70% with respect to the previous month. This is mainly due to the upturn in demand, where trade flows with these markets are maintained at a steady rate of growth, with Algeria being the country with the greatest commercial dynamism in the area.

VCFI Far East

For its part, the regional sub-index of the VCFI associated with the Far East is experiencing a decrease for the second consecutive month, being 0.69% in June compared to the previous month. In this case, the weak export demand and the trade imbalance characteristic of this route causes freight rates to be at low levels and is expected to continue this downward trend in the coming months.