Tea prices will be hit if clash escalates to ME

by Elmo Leonard

Syria and Iran are being directly spoken of in the Lebanon-Israeli conflict, and with it, the chances of the clash escalating into the Middle Eastern region, which is the prime regional market for Ceylon tea, deepens.

"If it happens, the types of Ceylon teas, mainly low growns, shipped to the Middle Eastern region will accumulate at the Colombo auctions and these prices will drop," Dinal Fernando of Asia Siyaka said. Down the line, the growers will be hit. Syria is Sri Lanka's third largest buyer of Ceylon tea, after Russia and the CIS nations and UAE. Iran is the fourth largest buyer, and Turkey, the fifth. In addition, Turkey also gets some of its teas "smuggled in", through buyers in Syria.

There are also chances that shipments of tea to Jordan, who is Sri Lanka's sixth largest buyer of tea will be affected, with Jordan bordering Israel.

Transshipment, to Iraq, who is Sri Lanka's eighth largest buyer, would then be affected. Lebanon is the twenty-fifth largest buyer of Ceylon tea, but its capital, Beirut is a transshipment hub, including teas to that region.

Syria purchased 27.7 million kilos of tea last year valued at $65 million, according to Forbes and Walker statistics.

Syria's purchases are mainly Pekoes and also transships Pekoes to Turkey. Iran purchases include Flowery Broken Orange Pekoes (FBOP) and FBOP Fannings.

The Dubai port is a large transshipper of Ceylon tea, and a conflict would mean a slow-down of teas passing through.

Jordan was Sri Lanka's sixth largest purchaser of tea in 2005, taking 12 million kilos, valued at $24.3 million, according to Forbes and Walker.

Meanwhile, heralding the dawn of Sri Lanka's Eastern quality tea season, an Uva Highland Estate invoice of BOP tea sold last week at Rs 480 per kilo and Aislaby Estate tea BOPF at Rs 465 per kilo. Both estates are in the Malwatte Valley, in Uva.

The adjacent Udapussalawa estates are also beginning to send in good teas, to the auctions, Fernando said. Nuwara Eliya, which lies central to the eastern and western plantations, are producing brighter flavour teas, Fernando said. The Eastern, or Uva/Udapussalawa quality tea season begins around August, with the onset of dry weather. With it, these plantations experience bright sunshine, cool nights and desiccating winds, which sweep through the tea highlands, concentrating flavour in the tea leaf.

The Eastern quality tea season lasts as long as the drought stays, and the flavour of tea entering the Colombo auctions, increases each week, until the rains end the spell.

Meanwhile, the 15 percent tax on profits made on the sale of tea bags, was lifted last week. Sri Lanka exported 5.81 percent of its tea of 290 million kilograms in tea bags, last year.

A multinational praised the move. The 15 percent tax will now remain with the industry and be an incentive for bagging more Ceylon tea, the multinational said. Tea in bags fetch higher prices than packeted tea.