The on-going conflict between Ukraine and Russia has started ringing alarm bells among tea exporters in Kochi auctions. They are anxious over the possibility of certain hurdles to tea shipments to many CIS countries cropping up, if the situation worsens.
A tea exporter concentrating on exports to CIS countries told BusinessLine that Ukraine is a major buyer of orthodox leaf teas among the CIS nations, which procure 40 per cent of the orthodox leaf from the auctions. As per figures, the offered quantities in Kochi auctions in orthodox leaf categories are around two lakh kg in a week. Of this, Ukraine procures 10 per cent of the quantity directly at an offered price in the range between $3.5 to $3.8 per kg. There are also markets for inferior quality orthodox tea in CIS.
At present, the purchase orders from CIS buyers are intact, but the possibility of a conflict in the region is likely to hit shipments. Because of the price competitiveness, he said many CIS nations focus on South Indian auctions for meeting their requirements compared to North India. However, there are instances where North Indian buyers procure orthodox leaf from South Indian markets to meet their export commitments after blending.
Other concerns
However, the exporter went on to add that “rather than the threat of a war, shippers are now concerned more on the obstacles being faced due to container shortage and the rising freight cost which makes the entire tea shipments dearer”.
Venkitaraman Anand, CEO, Harrisons Malayalam Ltd said that “the geopolitical problems might make buyers across the globe go cautious over building up stock. This tension will also dampen the mood in the CIS and we may not see much of economic activities unless the conflict comes to an end or the issues are settled.”
The Indian tea exports to Ukraine which peaked in 2017 with a value of around $9.6 million have been gradually decreasing and were only around $6.85 million in 2020. India also exports around 48 to 50 million kg of tea to Russia, mostly orthodox leaf.
Upasi figures show a declining trend in exports to Ukraine from 3.25 million kg in 2019 to 2.91 million kg in 2020. The January-November figure in 2021 stood at 1.60 million kg.
Noting that there would not be any major setback following the border tensions between Ukraine and Russia, N.Lakshmanan Chettiar, the Madurai-based tea planter, however, emphasised the need to improve the quality of Indian orthodox teas, as the market would be stronger in Europe, North America and West Asia. “The quantities from Sri Lanka will come down and we need to step up our quality, responsibility in catering a product which does not have a chemical taint and residue”, he said.