In recent months, global trade has encountered significant challenges on crucial shipping routes.
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Attacks in the Red Sea region have disrupted traffic through the Suez Canal, leading to the diversion of ships around the Cape of Good Hope. Global shipping companies have redirected away from the Red Sea, modifying the shipping routes between the huge global markets of Asia and Europe. By which means, freight rates and insurance premiums for shipping have surged, raising the costs of goods. In addition to global crop issues, coffee prices are approaching record highs, so the prolonged tensions in the Red Sea could further put pressure on the coffee trade, impacting both pricing and timelines.
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As of lately, EU ships have been escorting cargo ships, however the unease surrounding the Red Sea has required the use of more vessels that take longer routes to ensure the smooth sailing of global maritime trade. Many container shipping companies have been led to add 10-14 days to the voyages between Asia and Europe. Data from the PortWatch platform indicates that the beginning months of this year show a 50% decrease in trade through the Suez Canal and a 74% increase in traffic around the Cape of Good Hope, compared to last year. Consequently, port calls to sub-Saharan Africa declined by 6.7%, while the European Union and the Middle East/Central Asia experienced declines of 5.3%.
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These disruptions have the potential to temporarily disrupt supply chains, escalate shipping costs, and impact inflation. Additionally, they may complicate the recording of imports/exports, making it challenging to assess trends in global trade. Recently, the EU High Representative Josep Borell has expressed hope to control this situation and that it will not spread to a wider geographical area. Meanwhile, the commander of a European Union naval mission in the Red Sea wants to significantly increase its size to better defend the zone.
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Nonetheless, to mitigate such challenges, we are applying several strategies:
- Planning reserve inventory, optimising stocks of raw materials or finished products to ensure continuity of supply for customers, despite delivery delays.
- Working with roasters to plan for their longer term requirements
- Regularly monitoring market conditions and transport route availability for prompt responses and logistical strategy adjustments.
- Negotiation of contracts and delivery terms.
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