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Freight costs for container-based shipping of coffee have in the last year reached record highs over two to four times the rates before the Covid-19 pandemic started following multiple logistical problems that have caused massive backlogs of shipments (Photo by Maja Wallengren).
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The soaring cargo prices are expected to push shipping delays well into 2022 and comes at a time when roasters in both the US and European market already are facing challenges with delays ahead of the main roasting season starting in October (Photo by Maja Wallengren).
Freight costs for container-based shipping of coffee are soaring and there is little evidence that the sharp increase in cargo prices will ease any time soon. Prices are expected to stay near record highs for at least another 6-8 months and push delays to shipments from existing backlogs already going over a year back well into 2022, industry analysts and freight sources told STiR coffee and tea in early August.
Global average shipping rates for a forty-foot equivalent unit (FEU) had risen 221% to $4,910 by mid-April this year, compared to the same time in 2020 while Asia to US ocean rates are quoted at new record highs for the last few months, according to statistics from the London, UK-based Drewry World Container Index.
“The recent surge in dry container freight rates which have seen average container carrier unit revenues more than double over the same period,” said Philip Gray, of Drewry’s shipping research departments in an Aug. 9th market report.
Coffee importers in the US and Europe are already struggling with what have been a series of delays caused by multiple different logistics issues, starting with the disruption to the supply chain brought about by the beginning of the Covid-19 pandemic during the first quarter of 2020. The interruption to the regular flow of coffee shipments was aggravated by the Suez Canal blockage last March when the 20,000 20-foot equivalent (TEU) container ship Ever Given got stuck and for a week blocked hundreds of ships resulting in a series of new congestions to shipping schedules. A strike by many different segments of the population in Colombia in June further caused delay to coffee exports there and added to the backlogs for coffee importers.
The freight complications come at a particularly sensitive time for US and European coffee importers as they prepare to receive above-average monthly deliveries of fresh supplies ahead of the key October-November roasting season where up to 40% of many companies’ total annual volumes traditionally are roasted and packed for the holiday and winter season December-February, according to industry statistics.
“The spot rate for Asia cargoes to North Europe is now up 396% year-on-year, with rates to the Mediterranean up 317%,” said freight specialist Greg Miller. “In contrast, Drewry estimates that rates from Shanghai to New York and Los Angeles are up 133% and 153% year-on-year, respectively.” He added that the Asia to US Coast rate was quoted at an all-time high of $6,705 per FEU in April while the Asia-West Coast rate reached $5,052 per FEU.
Miller, in a special analysis for the shipping trade publication FreightWaves, said the global composite freight rate quoted at the Freightos Baltic Daily Index peaked at $4,260 per few earlier in the year, surging to four times the average rates quoted before the Covid pandemic started. Westbound trans-Atlantic trade rose almost 50% to $3,254 per FEU alone between late March and mid-April.
“Containers are going back to China empty and that’s pushing prices up,” said Morgan Murphy, an independent coffee analyst who has covered all parts of the coffee trade for close to 50 years and was in charge of the insight trade publication Complete Coffee Coverage.
As a direct impact of the combination of higher freight prices and the continuing backlog of shipments Jan-Jun green coffee imports to the US this year were down 4.7% to 12.296 million 60-kilogram bags, compared to 12.905 million bags in the first six months of 2020, said Murphy, citing United States Census Bureau figures. “A lot of the fall in import figures is because of the higher freight costs,” he told STiR.
The persisting high freight rates come on top of a late and smaller than expected 2021 harvest in the world’s largest grower and exporter Brazil, where production in the year ahead is now further compromised by the worst frost damage to hit Brazilian coffee regions in over 40 years. In an average marketing year the US accounts for about 20% of total Brazil exports and US trade officials have already complained of delays of up to two months for imports from Brazil, which is currently also reporting a 3-week delay to the current harvest.
While there is little sign that any of the many shipping delays will ease in time for the Oct-Nov roasting season in the U.S. and Europe, freight analysts do expect shipping rates to start coming down sometime next year.
“Dry container freight rates are expected to decline in 2022 as trade conditions normalize,” said Drewry’s Gray, but he did not offer any timeline for neither how soon prices will start to move lower, nor what levels are expected.