Traders ship Asian coffee to ICE exchange as shipping logjam eases
08/02/2022 13:24
* Robusta coffee from Asia to boost dwindling ICE stockpiles
* Coffee deliveries seen weighing on ICE robusta prices
* Virtually no Asia coffee has been delivered to ICE since
2018
*
By Maytaal Angel
LONDON, Feb 8 (Reuters) - Traders are planning to deliver
thousands of tonnes of robusta coffee from Asia to the ICE
futures exchange in Europe for the first time in more than three
years - a move likely to take the heat out of benchmark coffee
prices that are near 10-year peaks.
The coffee was bought after local prices in the Asian region
slumped and global shipping logjams eased.
ICE ICE.N , which runs futures and equities exchanges
worldwide, functions in part as a market of last resort for
excess coffee, so any sign the relentless drawdown in its
stockpiles is ending could lessen investor worries over
supplies, prompting them to sell.
Traders shipped at least 18,000 tonnes of robusta coffee -
equal to more than a fifth of current ICE exchange stocks - from
Vietnam and Indonesia in January, much of it destined for
exchange-approved warehouses in Antwerp, Amsterdam and London,
five sources at top global trade houses told Reuters.
Vietnam is the world's top producer of robusta coffee but
exchange stocks are currently dominated by supplies from number
two robusta producer Brazil.
Indonesia is the third largest robusta producer.
Trade houses including Ecom, Sucafina and Louis Dreyfus
AKIRAU.UL are shipping the beans at relatively low freight
rates because they are using carriers known as breakbulk to
export the coffee, the trade sources said, something that has
not been seen for 25 years.
Sucafina confirmed it was shipping robusta from Vietnam in
breakbulk vessels. Louis Dreyfus declined to comment. Ecom was
not immediately available to comment.
The trade houses bought the coffee after Vietnamese and
Indonesian dealers - desperate to shift stock built up over two
years of shipping logjams - offered beans at record high
discounts to the benchmark ICE robusta futures price, the
sources said.
Coffee is normally shipped on container vessels but rates
have soared due to a shortage of available capacity brought on
by restrictions to combat the coronavirus pandemic.
The restrictions disrupted labour supply and caused a surge
in demand for retail goods from consumers stuck at home.
Traders said it has become cheaper to pile up bags of coffee
in breakbulk vessels, which are commonly used for goods that
cannot fit into standard-size containers.
The vessels haven't been used to ship coffee for years
because they require traders to ship very large cargoes and
because of risks that bean quality could suffer if it rains
while bags are loaded and unloaded at port.
GAME CHANGER
"Breakbulk is potentially a game changer. We're only tight
because the coffee is in the wrong place," said a Swiss-based
coffee trader at a global trade house.
Breakbulk shipping rates fell earlier this year to as low as
half that of container rates on the south-east Asia to Europe
route, he said.
That, coupled with the record high discounts prompted
traders to snap up the coffee because they knew they would at
least break-even if they delivered it to the exchange, and hit a
profit if they sold it to roasters.
Delivering robusta from Vietnam and Indonesia to the
exchange has not been a break-even trade for years.
ICE stocks data shows no significant deliveries of robusta
from Vietnam since late 2018, and none from Indonesia in more
than four years.
Later this month however, commodity trader Ecom plans to
deliver 5,000 tonnes of Indonesian origin robusta to the
exchange, according to a source with knowledge of the matter who
was not authorised to speak to Reuters.
That delivery is the minimum that will land at the exchange
from Indonesia and Vietnam over the next month, traders said,
with the true figure likely double that and expected to pick up
going forward.
At least three more breakbulk vessels are due to leave
Vietnam later this month with robusta coffee that was bought at
a discount to ICE futures, according to a senior, Swiss-based
trader at a global trade house.
"We see robusta prices averaging $1,950 a tonne in the
second quarter (versus around $2,240 at present) assisted by
large crops in Vietnam and Brazil and the facility to ship in
bulk from a few routes," said Rabobank analyst Carlos Mera.
(Reporting by Maytaal Angel. Editing by Nigel Hunt and David
Evans)
((maytaal.angel@thomsonreuters.com; 00442075429105 ;))