Ukraine war likely to hit tea exports

The Russia-Ukraine war is likely to stir-up a storm in the tea bowl of the country especially in South India which contributes around 45 per cent of the total tea exports from the country. According to tea exporters, if the sale at the auctions of the Cochin Tea Trade Association held last week is any indication, the coming weeks would be crucial for the tea traders from the country. The last auction had witnessed a subdued export demand, especially to Russia and Ukraine, for orthodox leaf teas at Kochi auctions with exporters refraining from bidding in most lots.

According to sources, the average price of orthodox leaf teas has seen a decline of RS10 per kg, while there was a 5-10 per cent decline in the total quantity of tea on offer in all categories – CTC or orthodox, leaf or dust – in the absence of keen export buying. The 5-10 per cent decline would roughly translate into a loss of around RS1.7 crore, according to the tea exporters.

Russia alone imports over 20 per cent of the total tea exports from the country and the lion’s share of the export is being routed through the Kochi Port. While Russia imports around 37 million kg tea from India of the total 142 million kg tea it imports from different countries in a year, the export to Ukraine was 2.7 million kg from here last year. There is also steady export to Commonwealth Independent States (CIS) along with other European countries.

In the backdrop of the war, the exporters are not ready to take the risk as as there is no clarity on the shipment of containers in transit to these destinations like whether they would reach destinations on time or not, said R.Sanjith, secretary of United Planters Association of Southern India’s (UPASI). Further, instances of payment for exports have been struck after several banks were denied access to a global financial system SWIFT and weakening of rupee against Dollar created a panic in the export sector, said Mr Sanjith.

“The soaring freight rates which reached an all time recent high, has also hurt the exporters. The depth of the crisis would be known in the coming weeks as the last auction was merely an indicator,” said Thomas Jacob, chairman of Tea Trade Association of Cochin. Though the export demand was subdued in the last auction, the strong demand in the domestic market helped the sector stay afloat. But if the war situation continues to turn grim in the coming weeks, the export market will have to suffer a lot, said Praveen B Menon, secretary, Tea Trade Association of Cochin.