Logistical Challenges Continue to Impact Coffee Sector
CoffeeNetwork (New York) – Logistical challenges seem to be impacted the global coffee trade in all corners of the world.
Fortunately, the long-feared strike in the US East Coast ports, ended after just three days of strike, and the members of the International Longshoremen's Association (ILA) went back to work in the ports on October 4th. However, Sea Intelligence has noted in a recent report that his may not be the end of it, as the strike concluded with a tentative agreement, and a deadline set for reaching a final agreement by January 15th.
As the strike was quite short-lived, the impact was much less than the worst fears, but nonetheless, the 3-day strike did cause vessels to queue, which will have a negative impact on the availability of capacity in origin regions. In the most optimistic view, the impact is limited to the three days of striking, but realistically, as it will take some time to clear the backlog of vessels and containers, the impact is likely to be closer to a week of capacity loss, according to the report.
According to Sea Intelligence analysis, in the scenario that the strike lasted 3 days, there could be a 17% drop in capacity offered from Asia to the US East Coast. However, if you take into account getting the backlog cleared, the impact could be closer to 1 week, which would mean closer to a 40% capacity loss. Similarly, for North Europe to US East Coast, exporters should prepare for a capacity reduction of -14% in week 44, rising to -30% if the clearing the congestion takes a full week. On Mediterranean to US East Coast, a 3-day impact leads to a -10% capacity loss in week 43, increasing to -25% for a week-long impact.
Delays also continue due to volatility in the Red Sea. After various attacks, most of the main shippers have diverted, and are rerouting around the Cape of Good Hope, adding considerable transit time. Due to the safety risks, data showed that revenues from the Suez Canal is don approximately 65% and the number of vessels transiting the canal are about 50% less year on year, resulting in a nearly 70% fall in cargo volume.
Despite the rather bleak outlook for global logistics, there are some reassuring factors. German-based cargo company AAL recently announced that they will reopen the route to Saudi Arabica and India via the Red Sea. Could this be an indication that other cargo companies will follow and reinstate the route?
Additionally, shipping costs continue to fall from the COVID-induced record highs. Drewry’s World Container Index decreased 4% to $3,349 per 40ft container this week, 68% below the previous pandemic peak of $10,377 in September 2021, but it is 136% more than the average 2019 (pre-pandemic) rate of $1,420.
The average composite index for the year-to-date is $4,079 per 40ft container, which is $1,248 higher than the 10-year average rate of $2,831 (inflated by the exceptional 2020-22 Covid period).
Freight rates from Rotterdam to Shanghai decreased 8% or $47 to $543 per 40ft container. Similarly, rates from Shanghai to Rotterdam dropped 6% or $224 to $3,591 per feu. Likewise, rates from Shanghai to Los Angeles fell 5% or $239 to $5,019 per 40ft box. Also, rates from Shanghai to New York declined 3% or $161 to $5,761 per feu. Similarly, rates from Shanghai to Genoa shrank 2% or $64 to $3,784 per 40ft box. Conversely, rates from New York to Rotterdam and Rotterdam to New York increased 1% to $730 and $2,083 per 40ft box respectively. Meanwhile, rates from Los Angeles to Shanghai remained stable. The ILA port strike, which began on October 1, 2024, ended after three days on October 4, 2024, as stated above. Following the tentative deal, Drewry expects rates ex-China to continue to decrease marginally in the coming weeks.
Alexis Rubinstein
