STiR coffee and tea magazine

Volume 5, Number 6

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32 STiR coffee and tea / Issue 6, 2016 (December/January) W By Dan Shryock hen containers of green coffee heading for the West Coast of the United States didn't arrive on time in September, news quickly spread. Hanjin Ship- ping Co., the world's seventh-largest shipping firm, had filed for bankruptcy stranding as many as 80 ships at sea. The news was a clear indication that the global shipping industry was facing a ris- ing tide of problems and both coffee and tea importers were likely to get caught in a rough surf. At Royal Coffee in Emeryville, Calif., the impact was small but immediate. "We had one container stranded at sea. It was coming from Bali," Royal Coffee spokesman Evan Gilman said. "It was only delayed three or four days so we got lucky. But it gave us a sense of uncertainty until we worked out the logistical problems." Importers up and down the West Coast reported similar delays. It didn't take long for Royal Coffee and the others to conclude that problems were not isolated to the South Korean company. Too many ships on the high seas had created an excess of cargo space, thus pushing down freight rates. The economic law of supply and demand had taken effect. Overcapacity had lowered the demand for space on each ship. As a result, prices tumbled. The break-even price point for shipping companies is $1,400 per container per month, analysts say. On the Asia-Europe route used as a benchmark for tracking pric- es, freight rates have been averaging less than $700 per container for more than a year. Estimates place the combined losses for the 20 top companies as high as $20 billion in 2016. For Hanjin, the situation was exaggerated by high debt. As soon as creditors de- cided to cut off funds filing for bankruptcy the company's only option. The 80 Hanjin container ships had no place to go after ports around the world denied access. In time, the ships docked, cargo was unloaded and the coffee was delivered. Cargo owners around the world concerned about a similar event with another car- rier have begun shifting their business to shipping lines considered financially stable. Global Shipping Faces Rough Seas Philip von Mecklenburg-Blumenthal of Freightos Old locks restricted transit of ultra large container vessels (ULCV) through the Panama Canal

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