European coffee roasters have seen a sharp increase in expenses as a result of Houthi rebel attacks on ships in the Red Sea, although merchants and industry analysts say it is doubtful that these costs will be passed on to customers anytime soon.

On the Asia-Europe route, container freight charges have increased by about 150%. Moreover, several bean deliveries to Europe from leading robusta suppliers, such Vietnam and Indonesia, have experienced delays of up to three weeks due to ships making a diversion around the Cape of Good Hope.

Because of the circumstances, roasters are looking for alternatives from countries like Brazil and Uganda. As a result, brokers claim to have observed an increase in local prices, which translates to additional expenses for roasters.

However, given of the fierce price rivalry in supermarkets, merchants and industry analysts stated they did not anticipate roasters to pass these costs down to customers in the foreseeable future.

Since the Suez Canal connects the Red Sea to the Mediterranean, forming the shortest maritime route between Europe and Asia, many international companies are looking for alternatives to shipping through the Red Sea. The canal is used by almost 12% of all marine traffic worldwide.

“We are seeing a drop in new orders (from Europe) as buyers are bearing the (higher) shipping cost. We are very concerned. Normally, coffee exports peak during this time of the year,” said an executive at one of Vietnam’s largest coffee exporters, speaking on condition of anonymity.

He added that each year, almost 60% of his coffee heads travel to Europe.

Although merchants stated that the risk persisted, they did not see the significant decline in global container availability that was observed during the peak of the COVID-19 pandemic.

A trader headquartered in Europe minimised the long-term upside risk that the disruptions in Red Sea shipping would represent to benchmark worldwide robusta prices.

“It supports (nearby) prices, but in the mid to longer run, it’s just hiccups, the coffee is actually there, it will arrive,” he said.

(Adapted from Reuters.com)

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