- Ninety-five percent of coffee imports in the US and Europe arrive in containers.
- The containers are unloaded and returned to port with outbound cargo within 60 days.
- Due to the pandemic, the turnaround has increased to 100+ days with containers badly out of position.
- Port congestion compounds the shortage as ships lay at anchor during lengthy quarantines.
Meanwhile, a surge in e-commerce induced freight usually delivered by air sits portside awaiting transport at chartering rates that are double what tea traders paid a year ago. Warehouses are bursting at capacity as truckers idle for hours to load, says an article published in Stir.
Turnarounds and other costs
“It’s really the perfect storm,” supply chain and logistics expert Mirko Woitzik with Resilience360 said from Cologne, Germany. In China, only one container is returned for every three outbound containers. Turnaround is even longer in India where containers are in such short supply that shippers pay a surcharge on outbound loads.
In November, China’s exports surged 21% to meet holiday demand. As a result, the Port of Los Angeles set a record for processing 980,729 TEUs (20-foot equivalents). In China, there are simply no containers to spare. Container manufacturers are racing to meet the shortfall, but the total output is 300,000 containers per year, a small fraction of the 180 million in use.
Meanwhile, the cost of chartering a 40-foot container to the US East coast hit a record $4,928 in December, up 85% since June 1. Rates to Europe have increased by 142% since spring. Rates to ship tea from China to Singapore are up 300% since October. The Harpex Shipping Index (HSI) has more than doubled since July to 947 points, the highest since the great recession in September 2008.
Waiting in the rain
Neither coffee nor tea stores well in containers; each is sensitive to moisture. Since coffee and tea shipments originate in the humid central latitudes, condensation is significant on their trip to markets in the Northern Hemisphere. Less well known is the harm caused by desorption. Coffee beans are subject to loss in weight. The customarily accepted loss is 0.5%. Delays in ports such as UAE require that the coffee be stored in climate-controlled warehouses. Coffee and tea are easily tainted in proximity to strong-smelling goods. The chaotic logistics at ports where container storage is at a premium no longer permit the distancing of cargo.
The Pacific Merchant Shipping Association in December said that containers remained at terminals for nearly five days, incurring penalties. The association cited 18 ships waiting for nine berthing slots at the Port of Long Beach on Dec. 1.
Disruptions due to Covid
The routes that experienced the most disruptions were between the US and China. As trade expanded during the summer, a semblance of normalcy returned. Once the unprecedented disruptions to shipping due to the spread of Covid-19 and lockdowns ultimately subside, trading nations’ economic health will exert a more significant impact on prices.
In November, retail sales declined for the first time since April as the US experienced a downturn attributed to rising unemployment amid a health crisis. Consumer confidence fell as Covid-19 filled the entire nation’s hospitals and claimed more than 3,000 lives per day.
Widespread distribution of the Covid-19 vaccines will take at least six months, making it imperative that tea and coffee wholesalers anticipate delays, adjust pricing to cover higher costs, and carefully monitor inventory as the spring tea harvest arrives.
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Source: Stir
