Risk of Coffee Supply Chain Disruption Due to the Red Sea Crisis – What Should Roasters Do?
Just in early 2024, a fierce conflict took place in the Red Sea, a small gulf in the Indian Ocean located between Africa and Asia that connects to the sea. These airstrikes and merciless confrontations have directly separated the coasts of Egypt, Sudan, and Eritrea from the coasts of Saudi Arabia and Yemen. The World Bank warns that a prolonged war could cause energy prices to rise, high inflation, and harm world trade cargo ship traffic was disrupted, causing major problems for global trade and supply chains. In particular, the coffee supply chain is at risk of disruption and price fluctuations in the long term. So what do roasters need to do about this situation? Let’s find out with XLIII Coffee!
How does the Red Sea crisis impact the coffee supply chain?
According to the latest information from the UK’s The Guardian magazine, in early October 2023, Israel’s war in Gaza led to a series of conflicts in the Red Sea. Specifically, on January 12, 2024, the United States and its allies conducted airstrikes on Houthi (a political and military organization in Yemen). In response to Israeli attacks in Gaza, the Houthis have begun attacking commercial shipping vessels passing through the Red Sea region.
After an overview of the situation, some of the world’s leading economists fear that a prolonged war will worsen the global economic crisis. It can cause increased inflation, costs and commodity prices to skyrocket while disrupting the supply of important industries such as energy and coffee. As reported by the Atlantic Council, the impact of the war has caused seven of the world’s ten largest shipping companies to suspend operations. Some other companies had to divert shipping routes to avoid conflicts.
The Red Sea is an important trade route
However, the Red Sea is one of the most valuable trade routes in the world. The new route makes transportation time 2-3 weeks longer, and circulation capacity drops sharply. Transportation prices are also pushed up due to surcharges, risks, and sudden increases in energy prices. For example, after the Israeli war in Gaza, a container costing $1,500 in November increased to $4,000 in December. Not to mention, the number of shipping companies decreased, and the risk of conflict caused other issues, including disruptions to key shipping routes, eroding coffee supply networks, and increasing the likelihood of supply disruptions. If the Red Sea crisis persists, the coffee supply chain will become increasingly disrupted, and the cost per batch of coffee will spike to unexpected levels.
Conflicts taking place in the Red Sea seriously affect shipping ships
Be prepared to respond to risks in the coffee supply chain
Ryan Delany, an analyst at the Coffee Trade Academy, said that the scale of the Red Sea crisis is smaller than the scale of the global Covid-19 pandemic. Therefore, the coffee industry in general, and roasters in particular, can still try to adapt and respond better to challenges from conflicts. Specifically, roasters and green coffee buyers need to carefully prepare for the fact that shipments will often be late, and costs will increase.
According to experts, roasters should regularly contact their suppliers to update and review new import dates. Inventory must always be checked, and consumption estimated to calculate the appropriate quantity and time of new goods. In addition, roasters need to calculate costs to balance profit margins and value for customers and manufacturers. At the same time, we must always maintain transparency about periods and provide accurate updates on retrieval and prices for customers.
Roasters must always update the situation and prepare for situations
In the current complex context, price fluctuations and disruption of the coffee supply chain are inevitable. Roasters and green coffee buyers need to strive to maintain the ability to adapt and respond to fluctuations. In particular, XLIII Coffee always strives to closely follow the situation and ensure transparency while optimizing the balance of benefits between customers and manufacturers. If you love specialty coffees from around the world, visit XLIII Coffee!
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