- Demand largely unabated
Amidst lowering demand for tea from Iran due to the closure of the Strait of Hormuz, Ceylon tea’s potential alternate Middle Eastern markets, such as Libya, are also increasingly difficult to reach due to the compromised state of the Red Sea’s Suez Canal, former Sri Lanka Tea Board Chairperson Niraj de Mel said recently, speaking on Ada Derana’s Rebuild Sri Lanka show.
“We know that 52% of tea exports go to the Middle East, and another 9% goes to Russia. To reach Russia, ships have to cross the Suez Canal, which is also at risk due to the war, which results in ships crossing through the cape, which is an additional cost,” De Mel said, referring to the Cape of Good Hope, which requires ships to travel round the Southern tip of Africa.
“There is higher demand in countries like Libya, however it is hard to target countries above Africa since it requires crossing the Suez Canal, which is the closest route. We are now left with sending these shipments through an indirect circuitous route.”
Responding to the widely circulated reports on a loss of Rs. 10 million to Rs. 15 million in tea export revenue on a weekly basis due to the closure of the strait, De Mel said: “It’s actually hard to calculate the loss incurred at this stage. These estimates likely come from container shipping companies, who have been advised to not make shipments into the region, due to the war. On top of that, for a 40-foot container they charge a surcharge of $ 3000, and for a 20-foot container around $ 2000.”
He added that as shipping costs are typically not borne by the importer, especially at this stage when reliability on shipping routes is unpredictable, it is up to exporters to figure how they are to deliver the shipment, and in this case they are burdened with a bigger shipment cost. “The estimates circulating are likely to be calculated with these additional charges,” he said.
“All of these eventually impact the price of tea. When tea prices are hit because of the challenges faced in the export sector, this will impact everyone in the value chain from the grower itself.”
However, De Mel said that though the war started on 28 February, the industry braced for this to be reflected at the tea auction that took place afterwards. “We expected demand to drop at the next tea auction, which happened last week. That didn’t happen, though of course the grade of tea exported to Iran saw unsold quantities, but it was not as much as we had expected it to be.”
“There was a drop in [kilogram] price in the grade of tea that is typically exported to Iran by Rs. 60. Even today, there is good demand because all other Middle Eastern countries are sending orders, with advance payments,” he assured.
“Also in this Ramadan period, we can expect though they might make less visits to purchase orders, consumption of tea is to be high. So they need to replenish the stock.”
Sri Lanka’s total exports to the Middle East were valued at $ 1,084 million in 2025. More specifically, in tea exports to the region, Sri Lanka exported a value of $ 562 million in tea to the region in 2025, which is around 52% of what the country exported to the region, Board of Investment (BOI) data shows.
Further, Sri Lankan shipments have also been impacted as US bases in the UAE were targeted by the Islamic Revolutionary Guard Corps (IRGC), in retaliation to the US-Israel airstrikes which targeted Tehran. “Exports are not the only thing that has been impacted. We have been using Dubai as a transit hub, so there is an effect from that. When you take total tea exports, the Middle East commands 35% of the demand,” EDB Chairperson Mangala Wijesinghe said, speaking on the show, however noting that smaller items have since been exported through airfreight.
“Between Dubai and Sri Lanka we restarted our airline service, with which we restarted exporting our fruits and frozen foods.”