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 August stands at 3,513.54 points while showing a slower pace of growth rate than previous months, having risen to 2.51%. That makes it thirteen months of an upward trend in freights exported from Valenciaport, with accumulated growth of 251.74% since the start of the series in 2018. In this context, we saw freights grow in most areas, except for the Baltic countries and Atlantic Europe, which remained constant.

The supply and demand dynamics of maritime trade remain a key factor in explaining the growth performance of freights over recent months. On the demand side, we must highlight the latest data published by the Good Trade Barometer of the World Trade Organization (WTO), which reached its highest rate since publication began in 2016, evidence of the dynamism of international trade. As a direct result of high demand for goods to transport, the volume of TEUs handled by the principal ports in the world rose in August, as shown by the RWI/ISL-Container Throughput Index drafted by the Institute of Shipping Economics and Logistics (ILS), which gathers data from 91 ports representing 60% of total container traffic.

According to data from Alphaliner, the inactive fleet for purely commercial reasons remains at minimal levels in comparison to the same period in previous years. There were 48 idle vessels with 174,588 TEUs, representing 0.7% of the total active fleet, an almost imperceptible increase on the level of the idle fleet in late July, which was 161,821 TEUs, also representing 0.7% of the current active fleet. In this regard, we must highlight the fact that the low rate of commercial inactivity is mostly explained by operational reasons and is therefore a temporary phenomenon.

In terms of fuel prices, we have seen some uneven trends, the price per barrel of European Brent crude fell 6.07% in August compared to the previous month, from $75.17 in July to $70.16 in August. In terms of bunkering prices – refuelling vessels at sea – at the principal 20 ports in the world, according to data provided by Ship&Bunker, the average price of IFO 380 (Intermediate Fuel Oil) rose from $448 in July to $449.50 in August, an increase of 0.34%. On the contrary, VLSFO (Very Low Sulphur Fuel Oil) fell 3.13% from $559.50 per tonne in July to $542 in August.

Turning to our analysis by area, it is worth noting that, despite the fact that August saw slower growth in freights for the most part, upward pressure remains the dominant trend everywhere. Particularly worthy of note was the growth in Africa East Coast (10.05%), the Indian Subcontinent (8.77%) and Pacific Latin America (5.68%). As has been indicated, congestion is beginning to rear its head at many ports, and rather than being an issue at specific ports is becoming a global trend. Given the fact that the shipping market is running at levels of use close to 100% for close to a year now, supply chains are overburdened and even minor operational problems such as small accidents and mishaps, can get out of control and have enormous repercussions. In the United States, vessels are accumulating at the California ports of Los Angeles and Long Beach and, to a lesser extent, Oakland. In fact, the last week of August, saw the number of container ships waiting in San Pedro Bay reach 28, while seven vessels were waiting in San Francisco Bay for berth in Oakland. In Europe, the situation is less evident but many of the principal transhipment ports are also congested due to the strong load demand, reduced manpower due to summer holidays and COVID-19 restrictions and longer times at port for containers all combining to take a toll on the general performance of terminals.

VCFI Western Mediterranean

The Western Mediterranean sub-index saw intense growth of 4.30% to stand at 2,063.51 points. This figure puts accumulated growth since January 2018 at 106.35%.

Once again, we see that freights with this geographic area have been influenced by the general trend and by congestion problems, with slots for vessels hard to come by. However, it is also worth noting that, despite the fact that the trend has softened in recent months, the level of exports from Valenciaport to Morocco is higher than in previous years.

VCFI Far East

Turning to the Far East sub-index, August saw the upward trend continue but this time growth slowed, at a rate of 1.37%. The index stands at 3,755.64 points, with accumulated growth of 275.56% since the start of the series

One of the factors that can explain this new increase in the price of freights is port congestion. On the export side, the ports of the Yangtze estuary, the Hangzhou Bay in Shanghai and Ningbo-Zhoushan are those most affected by congestion while the port of Yantian also has numerous vessels awaiting berth. Almost worse than the current levels of delay at Chinese ports are the widespread fears of another major closure in China, which would lead to total chaos in already overloaded supply chains. In line with this, the prolonged COVID-19 closure in Vietnam has seen an accumulation of import pressure at the port of Ho Chi Minh City due to the closure of factories.