India's tea exports may see marginal decline despite geopolitical problems

Shipments yielded less revenue for exporters last year as tea prices fell following a glut in the global market with a rise in production in Kenya and a few other countries

Higher offtake by non-regular buyers may take Indian tea exports closer to 220 million kg despite geopolitical problems like the ongoing Ukraine-Russia and Israel-Palestine wars.

The tea industry had expected to export around 200 million kg considering poor demand in traditional markets and due to the impact of the Ukraine-Russia and Israel-Palestine war. In 2022, Indian tea exports stood at 231 million kg.

“The export scene is not as bad as we expected. Indian exporters have been able to sell more in countries such as Iraq, Turkey, Syria and Jordan. These are high-risk countries because of payment problems. But the effort has to some extent made up the shortfall in exports to Iran," said Anshuman Kanoria, chairman of the Indian Tea Exporters Association.

Iran and Russia are key buyers of Indian tea. Iran has been buying Indian tea but its purchases have not reached the 2022 level. “The country is yet to allocate more foreign exchange for tea purchases. The Russian market has been stagnant with the war going on," said Kanoria. Inflationary pressure in the buying countries has also hit exports.

Exports decline

As per the Tea Board figures, India’s tea exports from January to October 2023 touched 182.69 million kg, which is 3 percent lower compared to shipments during the same period in 2022. Exporters said that the last two months of 2023 may have seen a shipment of 30-40 million kg.

“One trend observed in 2023 is the higher demand for speciality teas, which include various value-added teas from different countries. Buyers seemed more interested in such teas than the usual bulk variety," said Sumit Shah, ED, Madhu Jayanti International Ltd.

Shipments yielded less revenue for exporters last year as tea prices fell following a glut in the global market with a rise in production in Kenya and a few other countries.

“The prices of orthodox tea, which forms the bulk of the exports, were down in 2023 compared to the previous year. The average price dropped from a level of Rs 150 per kg to Rs 135-140 per kg range,’’ said Anil George Joseph, VP, Tea, Harrisons Malayalam Ltd. The country’s orthodox tea production was also up by 8-10 percent.

Indian tea production, a majority of which is in the CTC (crush, tear, curl) segment is absorbed mostly by the domestic market. Production has been marginally lower falling by 12 million kg (0.89 percent) to 1,290 million kg in the January-November 2023 period. North Indian tea production, which accounts for the majority of the total output dropped marginally. At the same time, production in South India rose by a small measure. Tea production in the country stood at 1,366 million kg in 2022.

Global tea production during the same period was up by 32 million kg (1.52 percent). A significant increase came from Kenya, where output rose by 8 percent in the 11-month period to 465 million kg. Sri Lankan tea output rose by nearly 2 percent to 254 million kg, said Rajesh Gupta, MD, Global Tea Auctioneers Pvt Ltd. Data from China, the world’s largest tea producer, is not available.

“The black tea shortage in North India and Malawi has been compensated by the healthy output in Kenya, Sri Lanka and Bangladesh," said Gupta.

Weak prices

Overall tea prices, both in the domestic as well as overseas markets, have been weak in 2023. The average tea price dropped by 6 percent year-on-year in 2023 to Rs 168.58 per kg at auction centres.

“The North Indian auction price average declined in the last three quarters, resulting in a 7 percent fall during the year. South Indian tea prices were up in the first half of the year but went down in the next six months and hence the overall price for the year is marginally up (by 0.43 percent)," Gupta said.

Tea prices have been ruling below the cost of production for the past couple of years. “We need to get an average of Rs 180-200 per kg to cover the cost of production," claimed Joseph.

The industry is expecting some respite after a few months due to the upcoming elections in May. “Usually election campaigns boost tea consumption and we hope to get some small relief during these months,’’ said Ajay Jalan, president of the Tea Association of India.

Surge in freight costs

However, the export situation worsened in January with the crisis in the Red Sea, where attacks on ships by Yemen’s Houthis have led to cargo being re-routed leading to a spike in freight costs.

“While Indian freight rates have increased in the last couple of weeks, it could be an advantage for Kenyan exports, which have not been affected by the problem,’’ Kanoria said.

The Iran-Pakistan conflict could also impact the tea exports from India in the next few months if the situation escalates.