Coffee Industry Continues to Struggle with Shipping Challenges

CoffeeNetwork (New York) – According to the latest report from Brazil’s Coffee Exporters Association, CeCafe, Brazil continues to face challenges with exporting coffee, including skyrocketing freight costs, cancellations in bookings, difficulty with shipping schedules and competition for containers and space in ships, especially with the United States and Asia.

“Brazilian coffee is still in dispute to conquer space on ships and be shipped at the right time. The delays that have generated unprecedented operational struggles for exporters and, above all, a financial burden resulting from the lack of planned cash flow for this unimaginable scenario. It is worth remembering that this occurs simultaneously with a market reality in which prices reach the highest levels recorded in recent years and the harvest of the Brazilian crop is around 80%”, said the president of Cecafé, Nicolas Rueda.

In light of this scenario, the Board held, on July 29, virtually, the global event “Assessing post-pandemic bottlenecks in international trade logistics”, in partnership with the Swiss Coffee Trade Association (SCTA) and the National Coffee Assocation (NCA), bringing together global logistics experts to analyze future prospects for coffee shipments.

During this virtual event, Kona Haque, Head of Research, ED&F Man, said that “rising import demand has strained logistics and that the pandemic continues affecting supply chains.”

What we have been witnessing is the perfect storm of container market issues:

• COVID outbreak brings congestion to South Vietnam ports
• Yantian port congestion
• Suez Canal
• Flooding to European railway networks
• British Columbia fire causing thousands of rail cars stuck on Vancouver line

Lower vaccinations rate in some of the main coffee producers like India, Brazil and Vietnam mean those exporters become mobility impaired; with a lack of crew, access to staff and personnel, port handling/congestion. “Stay at home orders have a huge impact not just on demand, but also on the supply chain,” she said.  

Daniel Richards with Maritime Strategies International highlighted how the Suez Canal disrupted ships being able to get back to China to resume their rotations, added to the shipping container shortage.

“The US is the root of the issue in container markets,” he said. “There was a huge increase of containerized goods during the lockdown in the US. This surge of import volumes has been put through US ports, causing congestion and contributing to the shortage to container boxes worldwide.”

He noted that in the short term, capacity is maxed out, “congestion must ease for remedial measures to have impact,” he said. “Production of new build container boxes in China is now approaching record levels and more empties are coming into the market.”

Overall, it was concluded that there isn’t a fundamental shortage, but rather, the problem is the fleet of equipment and vessels isn’t being used as efficiently due to port closures, increase custom clearance times, and personnel shortages.

“Until congestion is reduced in major ports worldwide, the problems aren’t going away. But once the congestion improves, there isn’t an actual shortage,” said Richards.

How long is the issue expected to last? The international shipping industry expects substantial improvement in first quarter 2022 after Christmas and Chinese New Year. This year’s Christmas season will start early, as buyers want to ensure timely delivery. Carriers will be skipping some ports to make up time.

How is this impacting coffee? We have seen a consolidation of ocean carriers, which has led to a capacity reduction. Vessels are relatively small from South America to North America, the route of most of the world’s coffee, and deploying larger vessels wasn’t justified financially. Additionally, coffee containers are heavy, so consequently, carriers demanded a premium of 300-400% or more to make room for coffee.  A shortage of truck drivers and warehouse space in the US plus a surge in imports during pandemic heightened the already existing situation.

Plus, maritime containers are manufactured in China, so when China is on lockdown, there are no containers. It is estimated that there are 51 available vessels in the whole world with no capacity available at this moment in time. New vessels being built but won’t become available until 2023-2024.

Alexis Rubinstein