Due to Red Sea attacks, global freight rates are now the highest on record.
Sinkings have increased during Red Sea skirmishes, indicating that the crisis is far from over.
Tea exports are currently at their peak following the spring harvest. India's peak is from April through June, Sri Lanka's is from May through August, and Kenya's is from January to June. Ethiopia and coffee-growing regions north of the equator have one main harvesting period from October to February. Coffees will typically ship from each origin about 3-4 months after the harvest begins.
A surge in global freight rates, reaching $5,901 per 40-ft container in July 2024, the highest on record, has put a significant financial strain on tea exports and other goods since October 2023.
Demand for tea in Europe is slack, which has helped avoid a serious shortage of tea imports, but the added cost of landing tea from Africa, South Asia, and the Far East cannot be ignored. One German-based retailer told Tea Biz that they are shipping tea by rail from China, which is faster and cheaper than shipping tea around Africa.
When MSC announced they were suspending service from Djibouti, it caused a panic for the clients of Ethio-Catalyst and ZEM Coffee.
A spokesperson describes the situation. "We were shipping multiple containers to ports including Rotterdam, Oakland, Montreal, and Newark when we learned service was suspended. Even if the situation resolved quickly, between looking for a new shipping line, considering unloading and stuffing boxes once they were finally released by a new line, and re-doing all shipment documentation there is a minimum of three weeks delay, up to two months in some instances depending on the situation. For all parties this causes additional financial charges and problems with backers, delay and chance of customers replacing their product with another provider, and frustration/miscommunications all around."
Since the beginning of the year, the Drewry composite container index has averaged $3,579 per 40-ft container, $831 higher than the 10-year average. Containers are in short supply and out of place because ships are not transporting empties. The cost of shipping tea from China to the US ports has also increased by 69% from April through May 24.
The Houthis have launched 50 missile and drone attacks since October, killing four. In the latest, the Yemen-based Iran-backed militants used explosive-laden drone boats to slow or disable large vessels that are targeted by ballistic missiles. A “double tap” on June 19 destroyed the Tudor, a bulk carrier. Two more successful missile attacks followed, disabling another bulk carrier. The Houthis sank their first ship in March.
Insurance costs have increased due to higher risk and because ships spend more days at sea. Lloyd’s of London reports a £1.1 billion expense associated with underwriting unrecoverable planes and cargoes in Ukraine since the onset of the war. Only 4% of war claims have been processed.
Egyptian authorities say revenue plummeted by several hundred million dollars due to the Red Sea skirmishes.
According to Egypt’s Minister of Finance, traffic through the Suez Canal declined by 64% in May to $334 million, and revenue is more than 50% lower year over year. According to the International Monetary Fund, losses in late 2023 amounted to $150 million.
Only 1,111 ships traversed the canal in May, compared to 2,396 in May 2023. Tonnage is down 68.5% to 45 million tons. About 15% of trade by volume transits the canal annually. The canal is the shortest maritime route between Europe and Asia.
According to the IMF, traffic volume transiting the Cape of Good Hope has surged 74% above 2023 totals. A drought that limits the capacity of ships transiting the Panama Canal, where trade volume is down 32% compared to 2023, complicates the situation.