Negative export earnings for first five months of 2015
January-May US$ export earnings at a five year low
Sri Lanka’s tea industry witnessed dampened growth from all sides on May, with not only its revenue and exports continuing on a declining trend, but also the cumulative export earnings for the first five months standing at a five year low.
Tea export earnings continued to drop for the fifth consecutive month this year with revenue during May falling 10.4 percent year-on-year (yoy) to Rs.16.4 billion.
Tea exports also declined by 0.6M/kgs this month with the same totalling to 27.6M/kgs compared to the 28.2M/kgs exported in May 2014.
Commodities broker Asia Siyaka Commodities’ latest tea market report highlighted that value of tea exports have declined 12 percent year-on-year (YoY) to Rs.74 billion.
In US dollar (US$) terms, this amounts to a five year low of US $ 562 million, a significant dip from last year’s figure of US $ 650 million.
The report emphasised that while yoy tea export volumes were down only by 2 percent, US$ earnings have slumped 13.5 percent.
Cumulative exports in January – May 2015 showed a drop of 3Mkgs with the total standing at 123.7M/kgs compared to the 126.7M/kgs recorded during the same period of the previous year.
The approximate average FOB price in US$ per kg for the period January-May 2015 is down to US $ 4.48 per kg against $ 5.04 per kg a year ago.
Bulk tea, both in terms of earnings and exports have shown a yoy growth while packeted tea and tea bags have declined.
Commenting on the unfavourable situation the tea industry is currently faced with, Asia Siyaka Commodities Managing Director and Chief Executive Officer Anil Cooke pointed out that a key reason for the continuous decline in the industry performance is due to less focus on value addition.
“There is a significant shift observed with regard to the type of tea exported. Sri Lanka is now exporting less value-added tea and more bulk, and this has eaten into the revenue,” said Cooke.
Asia Siyaka’s tea market report highlighted that Sri Lanka exported 9.2 M/kgs in tea bags during January-May 2015, while in 2014 this figure was 11.5 M/kgs, reflecting a 20 percent yoy drop.
Exports of Tea Bags to Russia / CIS during the period January – May peaked at 2.2 M/kgs in 2011. In 2014 the figure was 1.86 M/kgs. At the end of May 2015, quantities had crashed 55 percent to 0.84 M/kgs.
Meanwhile, John Keells Tea Vice President and Chief Executive Officer Sudath Munasinghe attributed the drop in revenue and export to the change in the buying patterns of Russia, which was until recently Sri Lanka’s largest tea buyer, and the unsettling environment in the Middle East.
“With the devaluation of the Ruble, Russia is now shifting to purchase cheaper tea and that too in lower quantities. The continuing turmoil in our key markets such as Syria and Libya only adds to the situation.”
“We hope the situation will improve with the increased effort in removing the sanctions on Iran,” said Munasinghe.
Forbes and Walkers Tea market report shared that when looking at the major importers of Sri Lankan tea, Turkey ranks first for the period January-May 2015 followed by Russia and Iraq.
Other noteworthy importers are UAE and Iran. Furthermore, China together with India have shown a steady growth in imports during 2015 when compared to 2014.
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