Spain: The Valencia Containerised Freight Index (VCFI) closed 2021 at an all-time high

Source: Valenciaport

The Valencia Containerised Freight Index (VCFI), -the indicator that measures the trend and evolution of export costs of container transport in the Mediterranean with the rest of the world, which takes Valenciaport as a reference as the fourth container port in Europe and first in the Mediterranean-, closed the 2021 financial year with an all-time high of 4,063 points, which represents a tripling of the value since the beginning of the historical series in January 2018. A situation that is reflected in the three benchmark sub-indices: Western Mediterranean, which grew by 112%; Far East, with an increase of 112%; and the United States and Canada, with a rise of 456%.

The VCFI, like other indices, has been conditioned by the high demand for port traffic, the price of maritime fuel, congestion in some areas, disruptions in supply chains and the complex international environment. Moreover, in the case of Valenciaport, the dynamism of the Spanish economy, and especially the export sector in its hinterland, also had an influence. These are some of the conclusions of the VCFI’s Annual Report, which foresees a year of uncertainty for 2022, marked by the conflict in Ukraine, high inflation and the process of normalisation of supply chains.

Thus, the international maritime market has reached unprecedented levels of tension during 2021, completing a horizon of challenges that exploded in the wake of the health crisis caused by COVID-19. After a period of restraint in freight levels for most of 2018 and 2019, the trend was cut short by the effects of COVID-19. The pandemic marked two distinct periods of evolution: a first half of the year with a slowdown, and in some cases a standstill in international trade and activity, and the second half of the year with strong growth in freight rates, largely driven by the growth in trade and its effects on ports and the shipping market.

This growing trend in maritime freight rates at the end of 2021 is consolidated in 2021 and the VCFI closes the year with 4,063 points, representing a cumulative growth of 306% since the beginning of the historical series. This figure is well above both the values achieved in 2019 and 2018, with year-end values of 10.13% and 9.85%, respectively. The upward trend of the index is particularly pronounced in the first part of the year, also affected by the effects of the blockage of the Suez Canal.

Global analysis

According to the VCFI Annual Report, 2021 has been marked by the growth of trade and, consequently, of the demand for goods to be transported, which has led to an increase in the volume of global port traffic during most of the year. This increase in container traffic in terms of regional distribution has been uneven, as demand has been mainly concentrated in the North American area. In this line, and according to Alphaliner, when distinguishing by commercial routes, a notable increase in the evolution of traffic from the Far East to Europe and the USA can be observed.

The evolution of the market has also been influenced by port congestion in many of the world’s major ports. On the one hand, it is worth noting the collapses in Chinese ports where problems started to worsen from May 2021 and peaked in late summer due to closures due to COVID-19 outbreaks. Similarly, congestion levels increased in import destination ports, especially in the United States in the ports of Los Angeles and Long Beach, and in the case of Europe, the most affected ports were Antwerp, Fos-sur-Mer, Le Havre, Genoa or Piraeus, while Spanish ports maintained fewer operational problems.

Another aspect to understand the evolution of freight rates has been the price of fuel. Thus, according to the data offered by Ship&Bunker concerning the cost of bunkering (refuelling of ships at sea) in the 20 main ports of the world, the average price of IFO 380 fuel (Intermediate Fuel Oil) stood at $481.25 compared with $337.50 in December of the previous year, which represents an increase of 42.59%. Similarly, and even more intensely, VLSFO (Very Low Sulphur Fuel Oil) has increased by 50.47%, from $421 in the month of December 2020 to $633.50 in the month of December 2021.

Regional analysis

The VCFI Annual Report also points out that the dynamism shown by the Spanish economy this year and the export sector in Valenciaport’s hinterland have influenced the activity of the Valencian docks. Thus, the traffics were above 85 million tonnes in 2021, which represents a growth of 5.42% compared to 2020. For its part, containerised cargo also grew, reaching 5.6 million TEU, 3.25% more than the previous year and which has made Valencia the fourth European port in terms of container movement, behind Rotterdam, Antwerp and Hamburg. Within Valenciaport’s traffic mix, the evolution of traffic associated with foreign trade requires special attention, i.e. the evolution of the loading and unloading of full containers, which closed the year with very significant growth rates (13.89% and 17.38%, respectively). Thus, TEUs unloaded in 2021 stood at 837,584 while in the case of cargo, the number of TEUs exceeded one million (1,081,103).

When analysing freight rates by area for the different sub-indices, a generalised upward trend is observed for the three main areas. In the case of the Far East, the VCFI accumulates a growth since the beginning of the series in January 2018 of 274.30%, reaching 3,742.98 points at the end of 2021, with an upward trend throughout the year with some peak months in which decreases were observed. Some of the causes of this increase were the high levels of congestion, which led to a heavy surcharge on freight shipments to China. It is also worth highlighting the growth in full TEU export traffic from Valenciaport to China, the main trading partner of the Valencian enclave in this area and for full container traffic as a whole from Valenciaport, which throughout 2021 increased by 14.37% compared to the previous year, reaching a total of 612,497 TEUs handled (both loading and unloading), and leading to greater pressure on transport prices.

The US/Canada area has seen freight rates intensify during 2021, after moderate growth for most of 2020. At the end of 2021, cumulative growth since the start of the series in January 2018 was posted at 457.93%, reaching 5,579.27 points. North America has been one of the areas hardest hit by the global problems of congestion, lack of equipment and maximum stress on supply chains, resulting in pressure on freight rates. In addition, it should also be noted that the United States has been the main country in the movement of cargo containers from Valenciaport, where a total of 145,953 TEUs have been shipped during the year 2021.

As far as the Western Mediterranean is concerned, the year closed with an accumulated growth of 111.73% since the start of the series in 2018 and reaching 2,117.25 points. In terms of demand, exports from Valenciaport to this area increased by 9.19% in 2021 compared to the previous year. This strong growth is mainly due to exports to Morocco, which increased by 26.96%, while exports to Algeria fell by -23.48%.

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