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.

 

August closed with a 0.77% drop in the Valencia Container Freight Index (VCFI) over the previous month, taking a value of 1,058.53 points. From the data, it can be seen that export freight rates from Valenciaport showed an accumulated growth of 5.8% since January 2018 (base period of the index), while, considering only the evolution in the present year, the trend is inverse: prices showed an accumulated contraction of 3.63%.

The situation in August was marked by a fall in the price of a barrel of oil, which stood at 59.69 dollars a barrel, 6% less than in the previous month, thus returning to the levels of the beginning of the year. During August, the Organization of Petroleum Exporting Countries (OPEC) increased oil production after more than ten months of cuts. These cuts did not achieve their objective of pushing up oil prices, which are influenced by factors such as the fear of a global recession and the growth of supply from other producing powers (e.g. the United States), but also from Nigeria and Saudi Arabia, in contrast to OPEC’s common decision to continue with the cuts until 2020. All of this has served as proof of the instability and uncertainty currently surrounding the crude oil market.

On the other hand, the latest data on the “idle fleet” (ships on which work is being done to reduce polluting emissions) disseminated by Alphaliner (as at 19 August) put it at 145 units, representing 552,920 TEUs compared with 138 units and 486,778 TEUs in July. The movements of the previous month are observed and the installation of scrubbers (filters) on ships to comply with IMO emissions regulations (International Maritime Organization) put upward pressure on the idle fleet, as well as the chartering market. The new environmental regulation that comes into force in January 2020 will play a leading role in the maritime market at the end of the year, so it is foreseeable that these trends will continue in the coming months.

During the month of August, the main geographic areas that make up the VCFI have experienced a decline in export freight rates, specifically seven of them, while there have been increases in four areas. In the remaining two areas (Atlantic Europe and the Baltic Sea) prices have remained constant. Among the decreases of the month, we can highlight those experienced in the Far East (-3.62%), Eastern Mediterranean (-2.88%), Western Mediterranean (-2.39%), United States and Canada (-1.41%) and Pacific Latin America (-1.19%). The drop in freight rates to the United States and Canada points to a temporary adjustment as the market trend is very positive if we take into account the foreign trade data of the Valencian Community. In this sense and according to the Foreign Trade report prepared by the Ministry of Industry, Trade and Tourism during the first half of the year, exports from Valencia to North America grew by 43%, which is in line with the dynamism of the market in the port of Valencia.

Considering the areas with growth in freight rates, it is worth noting the increase in transport prices to the Middle East (5.91%) for the second consecutive month, which could represent a change in the downward trend initiated in March 2019. In terms of foreign trade, exports to the region grew by a modest 0.6%, well below the average sales to non-EU countries, which grew by 5.3% in the first half of the year.

VCFI Western Mediterranean

The VCFI regional sub-index referring to the Western Mediterranean showed similar behaviour in August to the previous month, experiencing a decrease of 2.39%. Thus, the VCFI for the Western Mediterranean stood at 955.31 points. Although at the beginning of the year there was a certain recovery in trade flows, in recent months a certain slowdown has begun to be detected which, added to the existing trade barriers in some of these markets, could set a contracting trend in the market.

VCFI Far East

The VCFI regional sub-index associated with the Far East fell by 3.6% in August compared to the previous month, standing at 814.23 points, close to the historic low of the series. Comparing the situation with that of a year ago, maritime transport prices to the Far East have fallen by around 15%. These data show a market with a clearly bearish situation in which the supply-demand adjustment pushes prices down. This is especially noticeable in shipments to Asia (as opposed to imports from Asia), due to the typical trade imbalance of these routes as shown by the evolution of Valenciaport’s traffic with China, the main country in the area, with which during 2019 imports are growing to levels above those of 2018 while for exports the traffic does not exceed the records of the previous year.