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) recorded a monthly increase of 6.83% in February to stand at 1,678.60 points, the highest figure recorded since the start of the series in January 2018. The dynamic performance of maritime traffic from September 2020 is leading to a scarcity of empty containers on the market, making it difficult to reserve spaces on vessels, and the increase in freights. Rising fuel prices, a trend that began late last year, is also having an impact. In this scenario, all areas analysed by the VCFI, except one, have seen freights rise in the second month of the year.

With regard to global demand, January (latest data available) saw a return to growth, mainly due to the push in cargo at Chinese ports according to the RWI/ISL study compiled by the Leibniz Institute for Economic Research. For February however, coinciding with the Chinese New Year (from 11 to 17 February), analysts estimate a reduction in commercial activity, which will affect demand and supply of capacity on the maritime transport market, although to a lesser extent than previous years. What’s more, the World Trade Organization’s Good Trade Barometer indicates that, after the growth of international trade in the second half of 2020, the first quarter of this year will show signs of a slowdown in some components such as export orders and automobile sector products. Nevertheless, and according to the WTO report, maritime transport activity continues to grow from the start of the year. This surge in trade via maritime traffic from September 2020 is leading to a scarcity of empty container capacity on the market, making it difficult to reserve spaces on vessels, and placing further upward pressure freights.

In February the idle fleet remained at very low levels, 2.2% of the active vessel total at the start of the month, rising slightly to 2.4% around the middle of the month due to the Chinese New Year holiday. If we only take into account those vessels inactive for commercial reasons, the figure falls to 1.1% in mid-February, with the rest on account of repairs, maintenance, etc. according to data from Alphaliner. Despite these low levels, difficulties remain when it comes to contracting slots on vessels.

Another aspect of rising freights is the trend of rising oil prices which began in October 2020.  The price of European Brent in February was 62.28 dollars per barrel, 13.71% higher than in January. Bunkering values have performed similarly since the last quarter of 2002, rising ever-closer each month to the prices seen in late 2019.

In terms of geographic areas, all those analysed by the VCFI saw freights increase with the exception of Pacific Latin America, which fell -2.70%. The busiest areas were United State and Canada (+12.90%), Central America and the Caribbean (+6.95%), Africa West Coast (+3.43%) and Eastern Mediterranean (+3.06%). The case of the United States is worth highlighting. Congestion problems persist at some of the principal ports, causing a negative effect on supply chains. Some port market analysts point to collapses in some southern California ports, leading to delays of 7 to 10 days in unloading cargo. This combined with the lack of capacity and empty containers is placing upward pressure on freights with destinations in those ports.

VCFI Western Mediterranean

With regard to the Western Mediterranean Sub-Index, it saw an increase of 5.98% to stand at 1,218.86 points. That makes it three consecutive months of strong increases (11.68% in December 2020 and 3.05% in January 2021). This trend is influenced by the global context of lack of volume and empty containers, and the increase in export traffic from Valenciaport to Morocco and Algeria late last year.

VCFI Far East

February saw the growth rate of the Far East Sub-index slow somewhat to 2.18%, recording seven consecutive months of growth to stand at 2,943.25 points. The Chinese New Year and the effect it has on production chains and international trade seems to be the factor behind this moderate slowdown. The holiday usually leads to an increase in the global idle fleet, but the lack of capacity has seen vessels remain active. As Alphaliner also points out, some factories implemented “flexible” closure dates while others planned to remain open and continue to ship orders from China, making for an expected impact below that of previous years.