Sri Lanka’s tea production to rise to 280 million kilos in 2025
The Morning: Sri Lanka’s tea production is projected to increase to 275-280 million kilograms in 2025, up from 245.7 million kg in 2024, amidst climate and policy related uncertainties and demand from India and China, Capital Trust Securities said.
It said that export earnings from tea may reach $ 1.4-1.5 billion in 2025, slightly up from $ 1.435 billion in 2024 as industry experts predict that Sri Lanka will benefit from increasing demand in markets like India and China.
“…traditional buyers such as Iraq, Russia, and Libya continue to play a vital role in sustaining export performance,” it said.
The earnings from tea exports amounted to $602 million in the first five months of the year, with over 103 million kg volume exported.
Capital Trust Securities said that bulk tea volumes have stagnated in recent times; meanwhile, the industry has seen a significant shift toward value addition, with growing emphasis on tea packets, tea bags, and instant tea.
Even though some East African countries like Tanzania and Uganda are still facing issues, the global tea market remains well supplied due to improved production in Sri Lanka and Kenya, leading to a decline in prices.
The average auction price per kg has come down from $ 4.03 in January to $ 3.68 by May 2025.
Further, it said that the US, one of the world’s largest tea importers, will have direct impact from the imposition of tariffs on the exports.
The US imported over $ 500 million worth of tea in 2024, and Sri Lanka holds a significant 20% share of the US hot tea market.
Around 65% of these exports were value-added products like tea bags, packets, and instant tea, with an average FOB price of $7 per kg, higher than the national average of $ 5.83.
OSL take:
Sri Lanka’s tea industry is yet to be fully tapped of its potential given the rich heritage as well as increasing business potential in the industry. Local authorities are working to ensure that tea produced in Sri Lanka regains the top slot enjoyed by Ceylon Tea in foreign markets in the past. The high quality and standards of Sri Lankan tea has resulted in an increase in the prices fetched in foreign markets. The strong trade ties enjoyed by Sri Lanka with many foreign markets have given a further boost to the country’s tea industry. It is in such a backdrop that Sri Lanka is looking at increasing production of tea resulting in an expansion in the business/investment opportunities in the country’s tea industry. The Sri Lankan government has also presented incentives to businesses interested in engaging in the local tea industry. All these developments indicate the increasing business potential in Sri Lanka’s tea industry as well as sectors related to it given the increasing demand to add value and diversify the existing tea product export portfolio. Foreign businesses/investors could therefore explore the growing business/investment opportunities in Sri Lanka’s tea industry while also looking at expanding operations through partnerships or joint ventures with local businesses.
| Article Code : | VBS/AT/20250806/Z_3 |