Sri Lanka’s Auction No.37, a one-day restricted sale due to intervening holidays, concluded last week with a total volume of 4 million kg, marking a noticeable shift from the usual auction dynamics. This auction showcased an irregular market trend, particularly reflecting a decrease in ex-estate offerings.
The total volume of ex-estate teas, which often indicate the overall quality and premium aspects of the auction, dropped to 0.6 million kg, down from the 0.7 million kg offered in the previous week. A decline in the overall quality of teas, especially in the higher quality bracket, contributed to this weaker performance.
Fluctuations in key tea grades
Key tea grades such as Best Western Broken Orange Pekoe and Broken Orange Pekoe Fannings (BOP/BOPF) saw significant declines. The average price drop reached up to Rs. 50 per kg, reflecting a weakening market. Teas in the Below Best and Plainer categories started off hesitantly, with prices lowering by Rs. 20-30 per kg compared to the previous auction.
However, a gradual recovery was noted as the sale progressed, indicating selective buying interest. Nuwara Eliya BOP/BOPF teas, known for their distinct quality, witnessed reduced demand, mainly attributed to the declining quality this week. On the other hand, Uda Pussellawa teas showed some appreciation in value, while Uva teas displayed mixed results, hinting at fluctuating market preferences.
High- and Medium-Grown Crush, Tear, Curl (CTC) teas followed a similarly irregular trend, remaining barely steady compared to previous levels. In contrast, Low-Grown CTC types showed buoyancy, sustaining interest in the market.
Export market dynamics and demand
The auction saw selective interest from shippers targeting key international markets, including the UK and South Africa. Shippers from Japan and the Commonwealth of Independent States (CIS) continued to demonstrate strong buying power, helping sustain certain segments of the market. The demand from these regions suggests a shift in export preferences, especially given the challenges in the domestic market.
Low-Growns, which made up a substantial portion of the auction at 1.8 million kg, experienced moderate demand. The Leafy, Semi-Leafy, and Tippy categories of teas displayed varying performance levels. Well-made Best Orange Pekoe 1 (BOP1) teas remained firm in price, while other varieties in these categories were irregular. Orange Pekoe 1 (OP1) teas, a staple for many buyers, held steady. Notably, Select Best PEK/PEK1 (Pekoe) grades appreciated in value, showing a positive shift in demand.
Similarly, Select Best Flowery Broken Orange Pekoe (FBOP) and Flowery Fannings 1 (FF1) teas maintained steady pricing, while Below Best and clean leaf teas appreciated in value. The balance of these categories, however, remained irregular, largely driven by varying quality.
In the Premium catalogue, the high demand for Very Tippy teas resulted in increased prices. Select Best and Below Best teas also saw an upward trend, reflecting buyer interest in premium-grade teas.
Export trends for 2024
Sri Lanka’s tea exports in August 2024 were recorded at 22.09 million kg, reflecting a decline of 1.24 million kg compared to August 2023, which stood at 23.33 million kg. The Free on Board (FOB) value for August 2024 showed a significant rise, standing at Rs. 1,776.66 ($ 5.95), an increase of Rs. 127.81 and $ 0.80 compared to the same period in 2023.
Cumulative exports for the period January-August 2024 totalled 162.56 million kg, marking an increase of 4.24 million kg compared to the same period in 2023, which recorded 158.32 million kg. The overall FOB value for the year stood at Rs. 1,772.16 ($ 5.83), showing a decrease of Rs. 29.08, though an increase in USD terms by $ 0.34 when compared to 2023.
Key importers of Ceylon Tea
Iraq retained its position as the largest importer of Ceylon Tea for the cumulative period in 2024 with a total of 21.19 million kg, showing a slight decline of 4% Year-on-Year (YoY) compared to 22.18 million kg in 2023. Russia followed closely, marking a 3% YoY increase, with 16.51 million kg imported in 2024, up from 16.05 million kg in the previous year. The UAE saw a notable increase of 35%, with 15.81 million kg imported, while Türkiye recorded a sharp 40% decline, importing 12.20 million kg.
Among other notable markets, Iran’s import volume surged by 131% YoY to 7.87 million kg and China imported 6.89 million kg during the January-August period.