SCFI Up 15.47 to 3,679.58: Europe Rates +3% as SSE Adds 40ft Lane Indices

The Analysis

The Shanghai Containerized Freight Index closed at 3,679.58 on Friday 16 October, up 15.47 points from 3,664.11 a week earlier. That is 0.42%. Underneath it, Europe 20ft rates rose about 3% to $2,335 per TEU and Mediterranean 20ft rates rose more than 8% to $3,250, while US West Coast 40ft rates fell $59 to $7,525 per FEU and US East Coast rates fell $119 to $10,405. The CCFI, which also carries contract rates, added 0.5% to 1,922.64.

The exchange did something else the same day, and it is the part that changes how you read every number above: it started publishing 40ft lane indices for Europe, the Mediterranean and Latin America, and it cut the Europe 20ft weight inside the basket from 20% to 5%.

Let's do the math on that weight, because it decides whether the composite can still see your lane at all.

Start with the headline and strip it down. 15.47 points on a base of 3,664.11 is 0.42%. A move that small is noise in almost any other market, and what sits underneath it is not noise: the Mediterranean up more than 8%, Europe up about 3%, the US West Coast down 0.78%, the US East Coast down 1.13%. A composite that hides a plus 8 inside a plus 0.42 is doing exactly what composites do, which is averaging away the thing you needed to see. Treat the index as a headline service, not as a pricing input.

Then check the units, because this is the fastest way to get a number wrong. Europe and the Mediterranean are quoted per TEU, a 20ft box. The two US coasts are quoted per FEU, a 40ft box. So $2,335 and $7,525 were never comparable, and the ratio of roughly 3.2 that a careless reader computes between them means nothing. Most contracts in this market are written per 40ft. Until Friday the exchange published only 20ft series for Europe, the Med and Latin America, which means anybody benchmarking a 40ft quote against those numbers had been comparing a price against a different product. The four new 40ft lane indices fix that, and the exchange choosing this week to fix it is not a detail to skip past.

The lane spreads are where the decision actually sits. Mediterranean at $3,250 a TEU against Europe at $2,335 is a $915 premium, or 39.2%, and the Med rose more than twice as fast this week. US East Coast at $10,405 against US West Coast at $7,525 is a $2,880 premium, or 38.3%, and both coasts fell. Two premiums of nearly the same size, one widening and one narrowing. If you ship to both coasts, the week-on-week move is the least interesting number in the release; the $2,880 is the one that has been sitting in your budget all year and will still be there next year.

Both premiums moved, and the direction says more than the level. Reverse the US pair: $7,584 to the West Coast and $10,524 to the East Coast a week ago put that premium at $2,940, and this week it is $2,880, so it narrowed by $60. Reverse the European pair: about $2,267 to North Europe and about $3,000 to the Med a week ago put that premium near $733, and this week it is $915, so it widened by about $182. One premium compressing, the other expanding by three times as much, inside the same seven days. That is the entire release in two subtractions, and what it says is that the Mediterranean and North Europe are no longer the same trade.

Reverse the lane moves into money, since nobody pays a percentage. Europe up about 3% to $2,335 puts the week before near $2,267, roughly $68 a TEU. The Mediterranean up more than 8% to $3,250 puts the week before near $3,000, call it $240 to $255 a TEU. The two US numbers are already in dollars per 40ft: down $59 to the West Coast and down $119 to the East Coast. They are the only two figures in the release you can drop straight into a cost model without converting anything, and that asymmetry is the whole point. Half the index is quoted in a unit most people in this market do not buy.

The new 40ft series also gives you something the 20ft series never could: the ratio between the two box sizes, lane by lane. If your volume skews to 40ft, the number that matters is not the 20ft figure multiplied by a constant, it is the 40ft figure, and the two do not move together. When space is tight carriers defend the 40ft rate harder than the 20ft rate, because the big box is where the margin is, and a shipper running mostly 40ft pays that difference without ever seeing it in a 20ft index.

Run the new Europe and Med 40ft indices beside the 20ft ones from 23 October and watch the spread. If it widens while the headline sits still, your mix is getting dearer and no index will tell you so.The composite has a base problem too, and it is the reason every number here has been converted before it was used. A point move is only interpretable as a percentage of the level, and the level means nothing without the base date, which the release does not give.

So 0.42% is comparable across time and 15.47 points is comparable across nothing. If your tracker stores points instead of percentages, or stores a rate without the date it was assessed, you have built a file nobody can audit. Add two columns, assessment date and unit, and half the arguments inside a freight team disappear on their own.

Now the number nobody wrote about. The Europe 20ft weight in the composite went from 20% to 5%. That is a cut of 15 percentage points, a 75% reduction in the weight carried by the leg that just rose 3%, filed in the same release as the rise. Run the sensitivity. A leg carrying weight w that moves by r moves the composite by w times r. At 20% weight, a 3% Europe move contributes 0.60% to the composite, which on a level of 3,679.58 is about 22 points. At 5% weight it contributes 0.15%, about 5.5 points. The composite has just been made four times less sensitive to the lane that is going up.

Push that one step further, because it is sharper than it sounds. The whole index rose 15.47 points this week. At the old 20% weight, the Europe leg on its own would have added roughly 22 points, which is more than the entire index actually gained. At 5% it adds about 5.5 points, so about a third of the move now comes from a leg carrying a twentieth of the weight. A 5.5-point move on an index near 3,680 prints as flat in most people's heads. Your Europe freight bill does not print as flat. The instrument people use to watch this lane has been turned down in the same week the lane started making noise.

One honest caveat, because we do arithmetic rather than guesswork. The release does not say whether Friday's 3,679.58 already carries the 5% weight or whether the reweighting starts with the next print. Read the methodology note before you use the number, and if the exchange does not say, ask. The two cases read differently. If the 5% is already in, this week's 0.42% was achieved with Europe contributing almost nothing and the other legs did the work. If it starts next week, the 23 October print will be quieter than the lanes underneath it. Either way the conclusion is the same: stop reading the composite for Europe.

The CCFI gives you the other half, and it is the half that matters if you hold a contract. It rose 0.5% to 1,922.64, and unlike the SCFI it tracks contract rates as well as spot. Spot on the SCFI rose 0.42% while the contract-inclusive index rose 0.5%, so on this week's numbers the two are moving at about the same speed, which is not much comfort to anybody who signed in July: the contract did not come down with the market over the summer and it is not shielding you now that Europe has turned. The more useful reading is the gap between them. The Med leg of the spot index moved more than 8% and the contract-inclusive index moved half a percent, so whatever your contract says, it is not yet carrying this week. That lag is your window, and it shuts on the reset date.

Why now, and the release gives one hard clue and one soft one. The hard clue is the unit: the exchange began publishing 40ft indices for Europe, the Med and Latin America on the same day the European lanes rose. Index providers do not add a series in the week it stops mattering, and the reason a 40ft series is needed now is that the Europe and Med quotes people actually sign are 40ft quotes. The soft clue is direction. Europe up about 3% and the Med up more than 8% after a long soft patch, with both US coasts down, is a European recovery and not a global one, and it is happening while the composite weight on Europe is being cut to 5%. Read only the composite and you would conclude that nothing happened on Friday.

The Latin America 40ft index will matter to fewer readers and it matters enormously to the ones it does. That trade has been repricing on filings rather than on index moves, and a published 40ft series gives anybody shipping there a reference in the unit they actually buy, on a lane that gets very little coverage. If you have LatAm volume, put it in the tracker this week next to Europe and the Med.

Who pays what, in money. A Mediterranean shipper on spot takes more than 8% in a single week, which on 50 twenty-foot boxes a month is about $12,000 to $12,500 a month, or roughly $24,000 to $25,000 across November and December. A North Europe shipper takes about 3%, about $68 a TEU, which on the same 50 boxes is about $3,400 a month. A US shipper takes a reduction of $59 or $119 per 40ft, which on 30 boxes a month is $1,770 or $3,570 back. Three lanes, three different signs, three different magnitudes, and one composite reporting 0.42% for all of them together.

One more arithmetic point on the Mediterranean, since it is the loudest number in the release. A move of more than 8% in a single week on a lane that had been soft means the quotes expiring now are being replaced by quotes built on $3,250 instead of $3,000, and any validity you are holding from earlier in the month is already stale. Go through every open quotation you have for Med cargo and read the expiry date. A rate agreed on 2 October with a 14-day validity runs out around 16 October, which is Friday. That is not a coincidence anybody should wait out.

Timing. The index comes out weekly on Fridays, so the next print is 23 October and the one after that 30 October. Spot moves hit your next booking rather than arriving on a lag, so a Mediterranean shipper who does nothing sees the new level in quotes that come back this week. Contract rates follow whatever reset cycle your agreement carries, quarterly in most cases, which means a Q1 renewal negotiated in December will be priced off the Europe and Med levels the composite is no longer showing. The blind spot has a price and the bill arrives on the renewal date.

The thing nobody wrote. It is the weight, and it is worth saying flatly: the exchange cut the Europe 20ft weight by three quarters in the same release that reports Europe rising, and every summary of this index led with the 15.47 points. From here the composite can absorb a 3% Europe rise week after week and the headline will barely twitch. Anyone running a freight dashboard off the composite has lost the instrument on the one lane that is turning. Switch the reference series this week: pin the new 40ft Europe and Med lane indices, not the composite, and write the change into whatever file your team actually opens on Monday mornings.

What would flip this. If the Mediterranean's more-than-8% move is a single-week artifact, a couple of tight sailings plus a surcharge filing, it decays and $3,250 comes back toward $3,000 inside three weeks, and the buyer who fixed November at $3,250 overpaid by roughly $250 a TEU. If Europe follows the Med up, the composite will not tell you, which is the point made above, and you will learn it from your invoice instead. The condition that decides it is the $915 premium: if it compresses toward $700 the two lanes are reconverging and this week was noise; if it widens past $1,000 the Med has its own problem and you budget it as a separate lane with its own trigger, because it stopped behaving like North Europe some time ago.

Let's do the arithmetic on the blind spot, since that is what makes it concrete. Assume 50 twenty-foot boxes a month Shanghai to North Europe at $2,335, which is $116,750 a month. Another 3% on that lane is about $70 a TEU, or $3,500 a month, and about $10,500 across November, December and January if it keeps going. Under the old 20% weight that would have shown up as roughly 22 points on the composite, a move nobody would describe as flat. Under the 5% weight it shows up as about 5.5 points. Same cargo, same invoice, one quarter of the signal at a fifth of the weight. And if your escalation rule is written as 'call the forwarder when the index moves more than 20 points', you have just switched it off.

So the lines. Mediterranean at $3,400 per TEU is the trigger, 4.6% above where it sits now: above that on the 23 October print, fix the next quarter's volume rather than riding it. North Europe at $2,450 per TEU, 4.9% above $2,335, is the other one. Below $3,000 on the Med, the more-than-8% move has already been given back and you re-quote instead of committing. Those are three numbers to write on one page, and none of them is the composite.

Alternatives and traps. The new 40ft series is public and free, so there is no reason to keep converting 20ft figures by a ratio somebody in your office invented. A 20ft-to-40ft conversion is where a lot of freight budgets quietly break, because the ratio is not a constant and it moves with the lane and with the season. Routing European cargo through the Med to chase a better number makes no sense this week at a $915 premium. Pulling US arrivals forward achieves nothing, since both coasts fell and the gain is $59 or $119 a box against the cost of holding the stock. And the trap: do not rebuild your tracker on the composite. Rebuild it on the lane indices, in the unit you actually buy, and note the weight change in the file so whoever reads it in eighteen months understands why the series looks calmer than the market was.

Ownership, since a methodology change is exactly the kind of thing that slips through a shared inbox. Whoever maintains the freight tracker re-points it to the new 40ft Europe and Med lane indices before the 23 October print and records the 20% to 5% change in the notes. Procurement re-quotes Mediterranean volume against $3,250 this week and asks for the base and surcharge split in writing. Commercial owners with Q1 renewals in December take the 40ft lane level, not the composite, into the negotiation file. Finance re-baselines the Q1 freight assumption onto the new series so the variance report compares like with like. Four owners, one deadline: before Friday.

An index rose 15.47 points, the lane underneath it rose more than 8%, and the exchange cut that lane's weight by three quarters on the same day. That is maintenance rather than conspiracy, but maintenance scheduled into the week the lane turns is still worth a look. Numbers are only as good as the weight behind them and the unit they are quoted in. Pin the 40ft lane series, find out whether Friday's print already carries the new weight, and if the Mediterranean comes back above $3,400 a TEU on 23 October, that is the one to lock.

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— By Vivian Zhao