Strait of Hormuz Blockade Deals Heavy Blow to Shipping, Indian Coffee Could Lose 80% of West Asian Market

As the world's 7th largest coffee producer, India exports about 70% of its output and has expanded into markets including the United Arab Emirates, Kuwait, Jordan, and Saudi Arabia over the past decade. Ramesh Rajah, president of the Indian Coffee Exporters' Association, told 'Nikkei Asia': 'Exporters could lose up to 80% of the West Asian market in the coming months.' He added that this is because more Indian coffee needs to be transported through the Strait of Hormuz. He stated: 'Shipments are being delayed, rerouted, or held up at transshipment points, and soaring freight costs are squeezing profit margins.' The industry veteran noted that freight costs have 'nearly doubled' since the start of the Iran war, but Indian exporters find it difficult to pass the increased costs on to buyers. 'What was initially expected to last only a few weeks has now persisted for much longer, creating uncertainty for the entire supply chain.' According to the Coffee Board of India, India produces about 350,000 to 370,000 metric tons of coffee annually, accounting for about 3% to 4% of global production. Its export revenue was about $1.14 billion in the fiscal year ending March 2023, and that figure nearly doubled to a record $2.13 billion in the fiscal year that ended last month. The U.S. Department of Agriculture ranks India as the world's 7th largest coffee producer, behind Brazil, Vietnam, and four other countries. Jacob Mammen, managing director of Badra Estates, a veteran Indian company founded in 1943, said that in addition to the immediate disruptions, the current situation is also testing a major transformation in the Indian coffee industry. He pointed out that the Indian coffee model was shaped after liberalization in the 1990s, which ended decades of state-controlled sales and pushed growers into the global market. 'Since then, India has re-established its position in Europe and Asia, with an increasing focus on specialty and value-added coffee,' Mammen said. But the U.S. and Israeli attacks on Iran, which began on February 28, have hit the prospects of this export-oriented coffee producer. UN trade data shows that the West Asian market accounted for 16.1% of India's total coffee exports in 2024, up from 12.6% a decade ago. Indian exporters, especially small and medium-sized producers, are highly dependent on shipping routes through the Strait of Hormuz and the Red Sea, but recent shipping delays during the peak Ramadan period have significantly disrupted trade flows. A top Indian exporter, who spoke to 'Nikkei Asia' on condition of anonymity, revealed that many growers sell their coffee to them for global distribution, but now their businesses are bearing the brunt of delays, freight rate hikes, and logistical bottlenecks, especially on routes related to the Middle East. There are also initial signs of a shift in global sourcing. Some buyers in Europe are increasing their purchases from alternative sources like Uganda, indicating that supply disruptions are changing trade flows, posing a key impact on Indian farmers.