Sri Lanka tea prices surge with Iran barter
The Morning: Prices at the Colombo tea auctions have surged given the impressive performance of the Sri Lanka-Iran tea-for-oil barter mechanism as well as the increased demand from Russia observed over the past two to three weeks.
Speaking to The Sunday Morning Business, Sri Lanka Tea Board (SLTB) Chairman Niraj de Mel stated that the Sri Lanka-Iran tea-for-oil barter was functioning exactly as envisaged and that, consequently, a steady increase in overall prices at the auctions had been observed over the past two to three weeks, particularly in the low-grown sector.
“From November to early December (2023), there had been around a Rs. 15 increases on average per kg. We are expecting that there will be a further increase at this week’s auction as well. In fact, the types of tea that are suitable for Iran have seen a Rs. 50-100 increase over the last two to three weeks,” he said.
He also said that this year’s winter buying had been slow to come into the tea export market. Nevertheless, he stated that since the last two to three auctions, they had observed increased activity from Russia, which should have been there since September.
He further stated that they expected Sri Lanka’s tea export revenue to either equal last year’s achievement of $ 2.65 billion or exceed it.
However, he lamented that production was down Year-on-Year in November due to the adverse weather conditions. Despite this, he still expects annual production to reach 254-255 million kg, which is an increase of 3-4 million kg compared to the 251 million kg recorded in 2022.
The tea-for-oil barter mechanism between Sri Lanka and Iran involves the Ceylon Petroleum Corporation (CPC) transferring a monthly payment tranche of $ 5 million to the SLTB, whereupon the SLTB will pay the tea exporters for exports of tea to Iran up to a value of $ 5 million per month. Concurrently, the Iranian tea importers will pay the National Iranian Oil Company in riyals.
Sri Lanka’s tea industry is once again on the growth path with locally produced tea being recognized for its high standards and quality. Ceylon Tea was once among the leading tea brands in the world and Sri Lanka is once again looking at regaining its lost glory. The government of Sri Lanka is also targeting an increase in revenue generated by tea exports in the next few years. The many trade agreements as well as trade concessions enjoyed by Sri Lanka have also helped boost the country’s tea exports, since tea is one of the country’s main export crops. In order to further expand and develop the tea industry, local authorities have introduced various incentive schemes to encourage and support local businesses/investors engaged in the tea industry. The focus of expanding the tea industry has also opened up a host of new business/investment opportunities in the industry that also include the development of infrastructure and supplementary infrastructure facilities required by the industry. Pn the other hand, local export authorities are also pushing tea exporters to diversify and expand their product portfolios to look at new markets. With the steady growth witnessed in Sri Lanka’s tea industry, foreign businesses/investors could confidently explore the expanding business/investment opportunities in the country’s tea industry while also looking at forming partnerships or joint ventures with local businesses in the tea industry with the aim of expansion.
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