U.S. coffee importers have begun diverting shipments bound for West Coast roasters to ports on the Gulf and East Coasts due to a labor dispute that has caused prolonged backlogs in California, market sources said.
Traders said they began re-routing ships carrying coffee from El Salvador and Brazil, among other origins, destined for California ports three or four weeks ago, sending them instead to ports in Houston, New Orleans, Virginia and New Jersey.
"Why back up more containers in a place that's not releasing them?" said Christian Wolthers, president of green coffee importers Wolthers Douque USA in Fort Lauderdale, Florida, on Thursday.
West Coast ports were effectively closed for the second time in less than a week on Thursday due to an escalating labor dispute between management and the dockworkers' union.
The backlogs had already driven up spot differentials and prompted West Coast roasters to draw down inventories.
Now some importers are also diverting shipments elsewhere, and shipping them by rail or truck to their customers.
A source at the Port of Houston confirmed that volume has picked up. Market sources said this has caused a new backlog.
"The Houston rail is just too backed up now," said Jessica Sellers, vice president of trading at Serengeti Trading, a Dripping Springs, Texas-based buyer, on Friday. She has re-routed Brazilian coffee to the Norfolk, Virginia port, to be sent to Oakland by rail.
Rail shipment adds 6 to 8 cents a lb to the price of beans, several traders said.
Trucking can add 10 cents per pound, said John Visbal, president and chief executive of East Bay Logistics, which operates coffee and cocoa warehouses in California.
Visbal said there were seven ships carrying 87 containers of coffee, or 26,100 60-kg bags, destined for his warehouses either docked in the bay outside the Oakland port with cargo still on the vessel, anchored in the bay, or anchored at sea.
The MSC Bhavya, with 36 containers of coffee, is anchored about 30 miles offshore but is not currently scheduled to dock until Feb. 25, according to data on ThomsonReuters Eikon.
Some roasters are still hoping for a resolution, while they continue to draw down warehouse stocks.
Jon Rogers, president and founder of Lincoln, California based roasters Roger Family Co, said his warehouses contain just 40-50 percent of the coffee they should at this time of year.
"It looks pretty naked in there," Rogers said.
(Reporting by Luc Cohen; Editing by Richard Chang)
