Exporters voice concern over interruptions to supply consistency:
Ravi LADDUWAHETTY
Sri Lanka, the largest global manufacturer of orthodox teas is in for good times with the demand and the buying power of countries purchasing Ceylon Tea seen to be increasing Tea Exporters Association chairman - designate Niraj De Mel told Daily News Business yesterday.
De Mel, also Managing Director of Van Rees Ceylon Limited who will be taking over the reins of the Association after its Annual General Meeting scheduled for August 19, said that the wet weather patterns prevalent in the tea growing areas along with the requisite sunshine, would be conducive for production growth in the months ahead and the year should end as another good cropping year.
Tea is enjoying good times in exports, with March producing 23 percent growth, bringing the cumulative first quarter increase to 17 percent. Total exports in March was Rs. 14.8 billion, up by 23 percent or Rs. 2.8 billion from Rs. 12 billion over the corresponding period a year ago.
In the first quarter, exports rose by 17 percent to Rs. 41 billion. Tea in bags and tea in packets together with green tea have shown a significant gain year on year during the first quarter. Volume wise exports in March were 27.6 million kilograms showing a gain of 3.6 million kilograms vis-a-vis 24.04 million kilograms of 2010. Cumulative exports for the period January -March 2011 totaling 77.4 million kilograms show a gain of 7.2 million kilograms vis-a-vis 70.2 million kilograms for 2010.
Tea output in March jumped to 33.2 million kilograms against 21.1 million kilograms in the same month last year. Output in the first quarter edged up 3 percent to 76.24 million kg from 74.02 million in the same period last year.
De Mel said that the industry has seen the fluctuating fortunes on the supply and demand side with heavy rains, floods, and landslides from October 2010 to January 2011 resulting in restricted offerings from January 2011 till February 2011.
“Due to the low auction offerings at the beginning of the year, prices started rising, as the exporters had to meet the contracted orders. As always the case with the rainy weather followed by adequate sunlight, healthy crops began to flush, leading to good quantities being offered from mid March.” he said.
The correction of tea prices began from mid March. However, the deterrent to the growth of the industry is the crisis in the Middle East and due to the problems in some of the main importing countries of Ceylon Tea such as Libya, Syria and Iran, a negative impact on the tea prices is evident since April.
De Mel also noted that the paradoxes of the industry were that on one side there is the healthy offerings while on the other side is the uncertainty and instability of demand. However, the main importers of Ceylon Tea - Russia and Iraq were helping towards absorption of the large offerings despite the decline of tea prices.
However, in contrast to this backdrop, one of the latest concerns of the industry was the stalemate of the ongoing wage negotiations between the Regional Plantation Companies and the labour trade unions.
One of the points of concern for the exporters right now, is that the hampering of deliveries from upcountry tea estates which commenced from last week will prevent them from meeting shipment timelines. A quick settlement to the on going negotiations will be most welcome from the point of view of the exporters to maintain Sri Lanka’s image as a reliable supplier of tea to the consumers.
Sri Lanka exports of bulk teas has been around 65 percent while the value added teas, which are teas in porcelain packs, jars, reed packs, tea in tea bags et al, has accounted for the remaining 35 percent.
“We do a lot of branded cartons of five and ten kilograms predominantly to Syria and Iran and going by the basis of the classification adopted by the Sri Lanka Tea Board that the value added component is ten kilograms and below, then the value added teas account for approx 55 percent and the bulk 45 percent, he said.
Another challenge that Sri Lanka faced was that Russia which accounted for a bulk of the exports and also in the value added form, imposed high taxes to protect its own packing industry.
So, the value added teas imported from Sri Lanka to this destination have been reduced and in turn, what is imported into Russia has been in bulk form, for the Russians to do the value addition, thus the real Sri Lankan value addition is affected.
Sri Lanka exports up to 55-60 million kilograms of tea to Russia annually of which 8-12 million kilos are to Ukraine.
source - www.dailynews.lk
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