VCFI continues to rise in February and grows by 6.83%
The Valencia Containerised Freight Index (VCFI) has registered in February an increase of 6.83% over the previous month and stands at 1,678.60 points, the highest figure since the start of the historical series in January 2018, according to Port of Valencia's release. The dynamism of maritime traffic since September 2020 is causing a shortage of empty containers in the market that makes it difficult to book spaces on vessels and increase freight rates. In addition, the fuel price growth that started at the end of last year is also influencing. At this juncture, all but one of the areas analyzed by the VCFI have increased freight rates in this second month of the year.
As far as global demand is concerned, in January (latest available data) it grew again, mainly due to the boost of cargo in Chinese ports, according to the RWI/ISL study prepared by the Leibniz Institute for Economic Research. However, in February, coinciding with the celebration of the Chinese New Year (from the 11th to the 17th), the analyses estimate that commercial activity will be reduced, which will affect the demand and supply of capacity in the shipping market, although to a lesser extent than in previous years. In addition, the World Trade Organization’s Good Trade report notes that shipping activity continues to grow since the beginning of this year. This push in seaborne trade since September 2020 is leading to capacity shortages and empty containers in the market making it difficult to book space on vessels and putting even more upward pressure on freight rates.
In February the idle fleet, if we take into account only those idle for commercial reasons, the figure will fall to 1.1% in mid-February, with the rest corresponding to repair operations, maintenance, etc., according to Alphaliner data. Despite these low levels, the problems of contracting slots on vessels continue.
Another aspect marking the rise in freight rates is the price of oil, which continues the upward trend that began in October 2020. Thus, the average price of European Brent in February was 62.28 dollars per barrel, 13.71% more than in January. A similar behavior has the value of bunkering (offshore ship refueling), which since the last quarter of 2020 is growing until it is getting closer and closer to the price levels of late 2019.
As regards geographical areas, in all the areas analyzed by the VCFI freight rates are growing except Latin America Pacific where they are down -2.70%. The most active areas were the United States and Canada (12.90%), Central America and the Caribbean (6.95%), Africa West Coast (3.43%) and Eastern Mediterranean (3.06%). It is worth highlighting the case of the United States, where congestion problems continue to be severe in some of its main ports, with negative effects on supply chains. Some port market analysts indicate that collapses in some ports in southern California are causing delays of between 7 and 10 days to unload goods. This, together with the lack of capacity and empty containers, is putting upward pressure on freight rates to these ports.
The Western Mediterranean sub-index rose again by 5.98% to 1,218.86 points. This brings the total number of consecutive months of strong increases to three (11.68% in December 2020 and 3.05% in January 2021). This evolution is influenced by the global context of lack of volume and empty containers, and by the increase in export traffics from Valenciaport with Morocco and Algeria since the end of last year.
Although the Far East sub-index moderated its growth rate to 2.18% in February, it has now risen for seven consecutive months to 2,943.25 points. The celebration of the Chinese New Year and its effects on production chains and international trade seem to be behind this moderation. Such celebration usually means an increase in the idle fleet in the global market, but the lack of capacity has caused the employment of vessels to remain active. In addition, according to Alphaliner, some factories have implemented “flexible” closure dates, while others plan to stay open and continue to take orders from China, so the effect is expected to be less than in previous years.
