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 for the month of August stood at 4,919.77 points, representing a monthly increase of 1.10% and a cumulative growth of 391.98% since the start of the series in January 2018. The wide geographical coverage of the VCFI, which contains the export prices of 42 ports located in 13 geographical areas, results in very disparate behaviour among their components. In this sense, while zones such as the Indian Subcontinent and the West African Coast have significantly increased, by 7.96% and 6.01% respectively, freight rates from other areas more connected to the major container routes have shown a decline. To this effect, the zones of the Far East (-2.81%) and Pacific Latin America (-2.55%) stand out, among others.

Against a backdrop marked by uncertainty linked to the war in Ukraine, rising inflationary pressures and the tightening of monetary policy in some economies, after months of upward pressure, the energy market  has been slightly relieved by fears of recession which have almost certainly dampened the outlook for demand. Thus, there was a decrease of 10.03% in the average price per barrel of Brent crude oil, with an average price in August of $100.70, compared to $111.93 in July. Similarly, shipping fuel has generally fluctuated downward. According to data from Ship&Bunker, the price of bunkering (refuelling ships at sea) at the 20 main ports in the world, represented by the price of VLSFO (Very Low Sulphur Fuel Oil) have decreased by 9.9% to settle at $823.5 in August, compared to $914.5 in July.

In terms of capacity on offer, Alphaliner’s data show that the count of the inactive containership fleet has increased compared to the previous month, with a total of 57 idle vessels (270,591 TEU) in mid-August, representing 3.4 per cent of the total fleet.

Global port congestion levels have remained unchanged during August. Along the same lines, with regard to US ports, the congestion on the East Coast continues to be critical compared to the West Coast. On the other hand, the increase in congestion in the ports of south China due to the typhoons in mid-August had eased by the end of the month. The increase in congestion in Northern Europe in August was linked to the port strike in the United Kingdom and low water levels in the Rhine. Along with this, North American ports continued be the most critical point of congestion, with 38% of world congestion, followed by ports in North Asia and those of Northern Europe, with 21% and 15% of world congestion respectively. In the case of the port of Valencia, the effects of the opening of the Chinese ports after the closure in previous weeks has also been reflected in higher levels of congestion.

From a demand perspective, a fall-off in the demand for at a global level is observed. Proof of this is the recent reading of the Goods Trade Barometer by the World Trade Organization (WTO), which points towards a stagnation in the world trade growth. It is therefore growing at a slower pace than in the first quarter of the year and will almost certainly remain weak in the second half of the year, both weighed down by the conflict in Ukraine and encouraged by the lifting of the COVID-19 blocks in China.

Along the same lines, and, with respect to the volume of port traffic, according to RWI/ISL Container Throughput Index estimations for the last available month a certain stagnation is also observed. In this sense, and after a strong recovery in recent months, Chinese ports show a slight weakening in container traffic activity. Similarly, the North Range index, an indicator of economic development in Northern Europe and Germany, registered a decline in said areas.

VCFI Western Mediterranean

Turning to the Western Mediterranean sub-index, we can see a reduction of 1.32% on the previous month, to stand at 2,455.11 points, and accumulated growth of 145.51% since the start of the series in 2018.

The underlying effect of the decision taken by the Algerian government to suspend the trade agreement signed with Spain two decades ago continues to stand out, giving rise to an important retraction, intensified according to the latest data observed, in trade flows with this country from Valenciaport. The decrease in traffic towards Morocco also stands out, whilst traffic with Tunisia has slightly increased.

VCFI Far East

Turning to the Far East sub-index, we can see a reduction of 2.81% on the previous month, to stand at 3,644.41 points, and accumulated growth of 264.44% since the start of the series in 2018.

A reduction in the export flow between Valenciaport and China, its main trade partner, stands out, in line with the above-mentioned trends related to the contraction in port traffic volumes of the Asian giant. In addition, as mentioned above, overall congestion at China’s major ports continues to decrease, resulting in minimal waiting times at these ports. This is undoubtedly contributing to a progressive and gradual downward pressure on freight price levels.

This is increasingly leading to a balance between supply and demand, where the gap between global demand and the size or capacity of the world fleet is narrowing, moving ever closer to pre-pandemic levels. As noted by Sea Intelligence, this trend towards normalisation is driven by both the retraction in demand levels and the easing of shipping supply, as evidenced by gradual improvements in schedule reliability and a significant decrease in delays, which are now below the 7-day mark, an improvement on the 2021 figure..