According to shipping consultancy Linerlytica, freight rates are expected to fall 70% over the next 12 months, as statistics from the Shanghai Containerized Freight Index (SCFI) show that shipping companies have been unable to stop the decline in freight rates since July.

It is understood that since the start of this year, the container shipping market price has shown the characteristics of being anything but quiet in the off-season and falling in the peak season. In April, which should have been the traditional off-season, the container shipping market price rose all the way due to factors such as continued tensions in the Red Sea situation and suppliers stepping up rush shipments before tariff increases.

But after entering July, although July-September was originally the peak season for the container shipping market, freight rates began to fall as liner companies increased capacity deployment and market demand decreased. Linerlytica believes that freight futures will continue to weaken, with freight trading prices in Northern Europe more than 70% below current spot prices. Although the decline is not as severe as the freight rate plunge at the end of 2022, current freight futures prices are expected to continue falling over the next 12 months. Although the Red Sea issue remains full of uncertainty, there will be no rebound at the end of this year, and early 2025 will not see the severe freight rate increases of this year.

In addition, long-term contract rates have the greatest impact on the global container shipping market. Therefore, according to the latest CoFIF EC contract of the Shanghai International Energy Exchange (INE), container freight rates are expected to fall by more than 70% by next June.However, the chief analyst at shipping benchmark platform Xeneta believes that a prerequisite for a 70% price drop would be resolving the Red Sea crisis and restoring vessels trading through the Suez Canal.

However, this news is good news for the coffee industry. Coffee transportation relies mainly on shipping, and falling container freight rates can reduce transportation costs. This is especially relevant given the recent rise in transportation costs and increased supply chain pressure caused by insufficient container capacity.

It helps ease supply chain pressure and may have a positive impact on coffee prices. Earlier, as major global coffee producers such as Brazil, Vietnam and Indonesia reported lower coffee production, combined with high transportation costs, coffee prices rose accordingly, which to some extent dampened consumer willingness to buy. Therefore, with freight rates now falling, market demand is stimulated, which has a positive impact on coffee production and sales.

However, a recent Reuters survey of feedback from interviews with 11 traders and analysts showed that, due to concerns about worsening weather and reduced supply, both Arabica and Robusta coffee futures prices are expected to be higher than current prices by the end of 2024.

The main reason for concern is that production in several of the largest coffee-producing countries is currently declining significantly, and both Brazil and Vietnam have reported drought conditions. The La Nina weather expected to arrive in September may worsen the current adverse conditions, affecting coffee production in next year's new crop season, so prices will remain high and may continue to rise.

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