Storm brews over Lankan tea export markets
A top tea sector official has warned the industry of an impending crisis looming over the Iranian, Iraqi and Russian markets resulting in a direct impact on exports to the tea drinking consumers in these countries that form a sizable portion of Sri Lanka’s tea exports.
“I am worried about the future since problems in most parts of the world where we are exporting for an impact,” Sri Lanka Tea Exporters Association Chairman Rohan Fernando said in an interview with the Business Times on Thursday.
He warned that with Iran’s restrictive regime of sanctions; Iraq facing a severe internal crisis in terms of its buying power and with no build up on its reserves; and Russia facing a currency crisis due to the Ukrainian issue with the rouble declining against the dollar and possible indirect economic sanctions, the industry needed to take stock of the situation.
In this respect, Mr. Fernando expressed concern about the future business possibilities highlighting that the only exception were the markets in the Eastern hemisphere namely Japan, Korea, Hong Kong, Taiwan, Singapore and China.
He pointed out that in view of these possible crises the industry needed to take necessary preventive measures like control on giving credit and have a careful eye on the monetary situation in these countries. In addition, Mr. Fernando observed that currently the industry was going through a lull period since most markets were not buying as much as they traditionally do during the rest of the year compared to these months.
Upto the first week of August the industry would generally be facing a lull period even for the Russian market due to the summer as well as the Middle East segment due to the Ramadan period during which time trading slows in this region, he explained. Moreover, with the Iraq crisis likely to hamper Sri Lankan tea exports to that country the industry was currently taking a “wait and watch” approach to understand whether – since the outbreak of the war – teas could not be smuggled through.
With low growns having an adverse impact due to drop in demand, tea auctions were recording lower prices from around Rs.420 to Rs.350 and Rs.360 per kg. Low growns were the teas mainly bought for the Iraqi market.
Forbes and Walkers tea market report indicated that the lower growns however had a fair demand but noted that a better range of OP/OPA’s too sold at fully firm to marginally dearer rates while others were lower following quality.
The report also noted that shippers to Turkey, CIS, Iraq, Kuwait, Dubai and Saudi Arabia were active this week.
The Asia Siyaka Commodities report indicated May tea production increased to 39.04 million kg this year compared to last year’s 33.65 million kg for the same
period.