Suez Canal Crisis: Here’s Why Your Instant Coffee May Get Costlier

Around 12 per cent of global trade passed through the Suez, and the canal is crucial because of its supply in energy markets than agricultural commodities such as coffee.

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The blockage in one of the world's busiest waterways Suez Canal has not only hindered shipments of crude oil and liquefied natural gas, but it has impacted containers of robusta coffee – the type used to make Nescafe.

How it will impact the prices of coffee?

Did you know that beans from East Africa and Asia, which houses two of the world’s top robusta producers, flow to Europe via the Suez? On Tuesday, the massive container ship Ever Given got stuck in the key trade route blocking passage for ships hauling almost $10 billion of goods through the Egyptian waterway, as per Bloomberg. Although efforts are on, dislodging the 200,000-ton vessel may take days or even weeks amid the increase in the logjam of ships around the canal being doubled.

The traders will find it difficult to supply their clients in Europe. Around 12 percent of global trade passed through the Suez, and the canal is crucial because of its supply in energy markets than agricultural commodities such as coffee. The delay in supply will make it difficult for traders to support two to three weeks of delays.  

Following the blockage, the coffee roasters on the continent are struggling to get robusta coffee from Vietnam, the world’s largest producer. Apart from this, the shortage of shipping containers has also hampered the global food trade.

In view of this problem, some of Europe’s coffee roasters started looking for supplies from East Africa to bridge the shortfall of robusta beans from Vietnam. This has led to the surge in demand for beans from Uganda or the milder-tasting arabica beans from other East African nations. But even those beans take the Suez route.

Traders who have the beans stored in European warehouses are charging a hefty premium in the physical market. At the peak of the container squeeze, traders were demanding $450 a metric ton above the exchange price for Vietnamese coffee held in Europe, three times the normal rate, as per Bloomberg.

Brazil has already taken the benefit of the price dislocations led by the container shortage that hit Vietnam in 2020. The No. 2 robusta producer exported a record 4.9 million bags of coffee in 2020, a 24 percent increase from a year earlier, according to industry group Cecafe.