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Logistics Executive Briefing
Drewry Market Insights

World Container Index: Correlations and methodology

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World Container Index: spot freight rate vs carrier profits

World Container Index: spot freight rate vs carrier profits

Average Transpac EB and Asia-Europe WB utilisation vs WCI ($/40ft)

Average Transpac EB and Asia-Europe WB utilisation vs WCI ($/40ft)

World Container Index: Tradelane Correlations 1Q13 to 4Q21

World Container Index: Tradelane Correlations 1Q13 to 4Q21

Source: Drewry Supply Chain Advisors

 

The table above shows the correlations in the period 1Q13-4Q21 between the 8 WCI indices - the WCI composite index, the 4 ex-Shanghai lane-specific indices and the 3 other lane-specific indices.

 

The table shows that the composite index and the 4 ex-Shanghai lane-specific indices are all very highly correlated (0.98 or higher coefficient of correlation).

  • For the purpose of risk management, this implies that buying or selling on these lanes has the same risk profile and that it is possible to hedge using the composite index to offset risk on any of the 4 ex-Shanghai lanes.
  • The correlation between the Rotterdam-to-Shanghai lane and the ex-Shanghai lanes is high (0.78) but also shows a basis risk. The same applies to the Los Angeles-to-Shanghai lanes correlation with the ex-Shanghai lanes.

For the transatlantic lanes, the correlation and risk profile varies by direction:

  • The Rotterdam-to-New York lane shows a very high correlation with the composite and the ex-Shanghai lanes (> 0.9). In other words, pricing developments in China determine pricing developments on this transatlantic lane.
  • By contract, there is a very low correlation (0.31 or lower) between the New York-to-Rotterdam lane and the composite index or the ex-Shanghai lanes. The New York-to-Rotterdam has a unique risk profile.

For analysis on the correlations between other lanes not covered here or for advice on hedging and rate forecasting, please contact supplychains@drewry.co.uk

 

METHODOLOGY: Drewry World Container Index

Drewry World Container Index reports actual spot container freight rates for major East West trade routes. The Index consists of 8 route-specific indices representing individual shipping routes and a composite index. All indices are reported in USD per 40ft Container.

 

Market assessments will be collected for the following routes:

  • Shanghai - Rotterdam
  • Rotterdam - Shanghai
  • Shanghai - Genoa
  • Shanghai - Los Angeles
  • Los Angeles - Shanghai
  • Shanghai - New York
  • New York - Rotterdam
  • Rotterdam - New York

World Container Index is a composite of the 8 route indices weighted for volume on each of the routes representative trade. Volume is expressed in Million TEU’s. 

World Container Index - a composite of eight routes

World Container Index - a composite of eight routes

Source: Drewry Routes database and Drewry Container Forecaster, March 2011.

 

Data by Panellist

Data for the index is collected from transport intermediaries (Freight Forwarders / NVOCC’s) based in Europe, North America and Asia. These organisations report the freight rates on which they are moving cargo with a number of major shipping lines.

 

The exact identities of the panellists are confidential, however a generic description of them and the regions where they are based can be found below:

Panellist No by region
  • Market assessments are reports of the value of agreed freight rates between major container lines and shippers or freight forwarders
  • Only freight rates that are agreed between participants and on which cargo is, or is expected to move will form the assessments. Rates from quotes, tariffs, estimates, bids or offers are not included
  • The rates making up a market assessment will have a validity of not less than 7 calendar days and not more than 1 calendar month from the date the assessment is reported
  • Agreed freight rates are to be reported per Forty Foot Equivalent Unit (FEU), equivalent to a 40ft-long 8ft6in-high ISO maritime container’s Full Container Load
  • Agreed freight rates are to be reported for cargo shipped under the category of Freight All Kinds (FAK). FAK for the uses of the World Container Index assessed by Drewry is defined as: Various kinds of goods that are commonly pooled and shipped together at one freight rate, including consolidated cargo. This pertains to any type of cargo that would usually be classified as FAK by the container shipping lines in question under their standard pricing terms but specifically does not include wastepaper or scrap metal.
  • Agreed freight rates are to be collected for cargo that is shipped in standard containers only and does not include transactions for cargo shipped in Open Top, Flat Rack, or any other kind of specialised container. Transactions for cargo shipped in Non-Operating Refrigerated Containers (NOR’s) are also not included.
  • Agreed freight rates are to be collected for dry cargo shipments only and are not to include prices agreed for shipments of refrigerated cargo.
  • The value of agreed freight rates is defined as the total ocean freight including bunker adjustment factor and all other applicable surcharges, plus terminal handling charges when it is common market practice to include them, but excluding any surcharges related to inland transportation.

 

In the event that the World Container Index assessed by Drewry is not able to collect sufficient data to meet the above minimums in any one week it will source data directly from Drewry Shipping Consultants Ltd. Drewry Shipping Consultants will use their expert opinion to provide a representative average rate for the previous 2 days based on reported agreed freight rates on similar routes and Drewry Shipping Consultants Ltd’s own experience.

 

Rates for the World Container Index assessed by Drewry are reported on a container yard (CY) to container yard basis and do not include any charges for intermodal (inland) transportation.

 

Surcharges

The surcharges included in the total ocean freight reported by the index are:

  • Bunker adjustment factor
  • Emergency bunker adjustment factor, if any
  • Currency Adjustment Factor
  • Peak Season Surcharge
  • Equipment management fee/surcharge
  • Port additional/port dues
  • Emergency risk surcharge
  • Port security charge
  • Carrier security charge
  • Submission of cargo declaration fee /US automated manifest fee
  • Suez Canal transit fee/surcharge
  • Panama Canal surcharge
  • Gulf of Aden surcharge
  • Port congestion surcharge

The surcharges which are not included in the total ocean freight/the index are:

  • Documentation/bill of lading fee
  • Booking fee
  • Customs clearance fee

The terminal handling charges (THCs) are included or excluded in the total ocean freight reported by the index are as follows:

Table Route Include Exclude

Panellists provide up to 4 market assessments each per week for each route on which they submit data. As described in the Market Assessment section above, each market assessment is for a rate which that panellist has agreed with a major carrier. These market assessments are then calculated into the minor indices using the following method.

 

On a per route basis:

  • The median of all rates submitted is calculated
  • Any rate more than 30% above or below this median is discarded
  • The remaining rates are sorted into reports for the specific carriers monitored
  • The mathematical average rate for each carrier monitored is reported
  • The mathematical average of all individual carrier mathematical averages is calculated – this is the final WCI rate for that route for that week

 

Process overview

Process overview

Source: Drewry Supply Chain Advisors

 

N.B. Only the final World Container Index (assessed by Drewry) rate is published. The World Container Index (assessed by Drewry) does not report the rates of individual panellists or individual shipping lines. The process ensures that a single market assessment is indistinguishable in the final World Container Index rate published.

 

 

Ocean Freight Cost Benchmarking

We have been aggregating, mining and publishing ocean freight rate intelligence since 2006. Find out about our full range of spot and contract ocean freight rate benchmarking services, including membership of our Benchmarking Club (exclusive to shippers/BCOs).

 

Compare your rates and save

 

 

For further information on our range of ocean freight cost benchmarking and procurement support services, please contact us at:

 

E supplychains@drewry.co.uk

T +44 (0)20 7538 0191

 

Drewry Supply Chain Advisors, 35-41 Folgate Street, London E1 6BX, United Kingdom

 

Container Industry Statistics

World Container Index

East-West composite ($/40ft)

Bunker Prices

Rotterdam ($/tonne)

Global Port Throughput

Jan 2019 = 100

Idle Capacity

('000 teu)