• Tea-for-oil deal drives spikes, significant gain in low-grown tea sectors
• Tea Board Chair anticipates potential revenue surpassing $ 2.65 b 
• Steady gains in tea prices expected, with Rs. 50-100 hike in varieties suited for Iran

Prices at the Colombo tea auctions have surged given the impressive performance of the Sri Lanka-Iran tea-for-oil barter mechanism as well as the increased demand from Russia observed over the past two to three weeks.

Speaking to The Sunday Morning Business, Sri Lanka Tea Board (SLTB) Chairman Niraj de Mel stated that the Sri Lanka-Iran tea-for-oil barter was functioning exactly as envisaged and that, consequently, a steady increase in overall prices at the auctions had been observed over the past two to three weeks, particularly in the low-grown sector.  

“From November to early December, there had been around a Rs. 15 increase on average per kg. We are expecting that there will be a further increase at this week’s auction as well. In fact, the types of tea that are suitable for Iran have seen a Rs. 50-100 increase over the last two to three weeks,” he said.

He also said that this year’s winter buying had been slow to come into the tea export market. Nevertheless, he stated that since the last two to three auctions, they had observed increased activity from Russia, which should have been there since September.

He further stated that they expected Sri Lanka’s tea export revenue to either equal last year’s achievement of $ 2.65 billion or exceed it. 

However, he lamented that production was down Year-on-Year in November due to the adverse weather conditions. Despite this, he still expects annual production to reach 254-255 million kg, which is an increase of 3-4 million kg compared to the 251 million kg recorded in 2022.

The tea-for-oil barter mechanism between Sri Lanka and Iran involves the Ceylon Petroleum Corporation (CPC) transferring a monthly payment tranche of $ 5 million to the SLTB, whereupon the SLTB will pay the tea exporters for exports of tea to Iran up to a value of $ 5 million per month. Concurrently, the Iranian tea importers will pay the National Iranian Oil Company in riyals.