Attacks on shipping vessels on the Red Sea cause delays for coffee shipments

Attacks on shipping vessels on the Red Sea cause delays for coffee shipments

January 15 - 2024

Coffee Geography Magazine

The concern for shipping vessels on the Red Sea is growing as almost half of the shipments have been diverted around the Cape of Good Hope in January. Attacks by Houthi rebels off the coasts of Yemen along the trade route have led to firms pausing shipments, raising the possibility of a shock to the world economy 

The flow of coffee from Vietnam through the Red Sea to the European Markets is heavily affected by the disruption which caused the Robusta futures to rise on ICE on Monday. The Iran-backed rebels have significantly stepped up a campaign of attacks against commercial vessels in the Bab-el-Mandeb strait between the Arabian Peninsula and the Horn of Africa since late November.

red sea

Helicopters launched from US navy warships were used to repel an attack by militants on a ship owned by Maersk over the weekend, leading the Danish shipping line to continue to pause all cargo movement through the area until further notice. Germany’s Hapag-Lloyd has also said its container ships would continue to avoid the route, which is a central artery for global trade on the passage from Asia to Europe via the Suez canal and the Mediterranean.

The Suez canal handles about 12% of global trade and is accessed by vessels travelling from Asia via the 30km wide Bab-el-Mandeb strait. About half of freight shipped through the canal is made up of containerized goods. 

Container rates on most effected Asia-Europe route are more than tripled while the global average doubled where the mounting surcharges complicate the market. Dealers also noted speculators had been raising a net long position in robusta coffee. 

"Robusta imports from key regions into Europe are becoming costly and slower amid Red Sea tensions," Rabobank said in a note on Monday.