The historic Suez Canal blockage reveals the delicacy of the trade and transportation of goods in the world. The Ever Given, a 200,000-ton vessel transferring goods between Europe and Asia, became jammed at the end of March, holding roughly $10 billion worth of goods.
The Suez Canal is responsible for transporting nearly 12% of global trade. Although the route may be more known for transporting energy commodities rather than coffee, the blockage impacted the global price of coffee.
Roasters in Europe were already struggling to obtain coffee from Vietnam, the world’s leading Robusta exporter, due to the shortage of containers. As soon as availability improved, the Canal blockage occurred. A significant portion of the beans purchased from East Africa and Asia travel through the Canal, so the blockage caused a delay in these shipments. This led to a 2.8% surge in Robusta coffee futures due to the already pressing issue of low container availability in Vietnam. In turn, this could have a direct impact on other coffee-producing countries, as well as Arabica coffee producers. Only time will tell.
Not only that, but the disruption led to an additional holdback of containers, pushing US inventories to a six-year low. The containers were not only stuck atop ships in the Canal but will be backed up in ports such as Antwerp and Rotterdam.
Freight prices will continue to rise. Demand for containers has significantly increased, especially for ships delivering goods between Asia and the West Coast of the United States. Container prices have increased which has a direct impact on freight costs, as well. Booking a slot for delivery is equally difficult. This is leading to some freight costs nearly doubling within the past few months, such as freight maneuvering from Indonesia to the US.
Why is this happening? As COVID swept through the world, retailers were hesitant on purchasing goods from Asia and reduced demand for these shipments. The alteration in demand led to a backlog, only being picked up now, atop existing shipments. Currently, there is an overload of demand for goods from Asia which is one culpable component of the worldwide shipping delays.
Some ports along the West Coast are additionally working at limited capacity, with reduced staff and resources. Container ship delays are surpassing one week due to lack of ability to move shipments safely.
Decaf coffee, however, is another strenuous situation. The logistics predicament poses an additional strain on the movement of coffee from origin to decaffeination plant to our warehouses. It is thus being considered, to purchase coffee decaffeinated within the producing country to ease the difficulty of logistics.
Nearly 400 vessels were stranded in the Mediterranean and the Red Sea, once the ship was finally freed Monday, March 29th. The long-term impacts are unknown – but Mercanta is determined to ensure that our coffees arrive at the final destination terminal so that we can deliver high-quality coffee from all over the world to you. Although we have little impact on the global shipping system, we will maintain updates on the location of each shipment and information on arrivals.
As always – we are just a call or email away to ensure coffee gets delivered. We will try our best to make this happen as smoothly and efficiently as possible.