Shipping companies transporting coffee in containers increased freight rates on some routes due to attacks in the Red Sea forcing ships to make a detour without Suez, the International Coffee Organization (ICO) said on Wednesday. Now everyone is afraid of a new increase in retail prices for coffee.
Yemen’s Houthi rebels have already carried out several attacks in the Red Sea on commercial ships they claim are linked to or heading to Israel in a show of solidarity with Palestinians in Gaza. The Houthis announced on Wednesday that they had targeted a container ship operated by CMA CGM, just days after another attack on a Maersk ship.
The ICO report said the situation in the region has forced some shipping companies to change their routes to reduce risks. “So for coffee from Southeast Asia and East Africa heading to Europe, the unintended consequences include increased freight costs as some shipping lines have introduced surcharges to account for longer transit times.”says the ICO.
Problems in the Red Sea could have further implications for coffee, cocoa and cotton markets, as these agricultural products are typically transported in containers. Europeans buy most of their coffee from Asian countries such as Vietnam, the world’s second largest producer, Yemen and Indonesia. High-quality coffee also comes to Europe from Ethiopia and Kenya in East Africa, all of which so far goes through the Suez Canal.
The route around Africa could take 25% longer than using the Suez Canal shortcut between Asia and Europe, according to logistics company Flexport. Such trips cost approximately 25% more and will result in higher prices for consumers on everything.
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