Tea exports down by 10%, value up by 28% in 1H 2023

• Weakened rupee boosts export earnings in 1H
• Iraq continues to lead as the No. 1 destination for Sri Lanka’s tea

 

Sri Lanka’s tea exports in the first half of 2023 have declined by 10%, whilst earnings jumped 28% from a year earlier.  As per Customs data analysed by Siyaka Research 112 million kilos of teas were shipped during January – June this year compared with 125 million kilos in the corresponding period of 2022, reflecting a 13 million kilo drop YoY.  Sri Lanka shipped 20.5 million kilos in May which is the highest quantity in any month this year; marginally higher than last year’s May quantity.

 A closer examination of the monthly export pattern reveals that in five out of the six months, tea quantities were lower compared to the corresponding months in the previous year. This decline raises concerns for the tea industry, which plays a vital role in Sri Lanka’s economy.

 Despite the decrease in export volumes, there has been a notable increase in rupee earnings. The earnings from exports rose significantly from Rs. 164 billion to Rs. 209 billion YoY. This surge can be attributed to the depreciation of the Sri Lankan rupee against the US dollar, which began in March 2022. The weakened rupee has boosted export earnings, reaching a peak exchange rate of Rs. 363 to the dollar in October.

 This converts to approximate $ 637 million in the first half of 2023, reflecting a 10.4% increase compared to the previous year’s figure of $ 577 million. This translates to an approximate Free on Board (FOB) value of $ 5.68 per kilogram, marking the highest dollar FOB figure in over 25 years. 

 However, it is worth noting that the total dollar earnings of $637 million in 2023 fall short of the $650 million earned in the first half of 2021, despite the higher FOB value. This discrepancy can be attributed to a lower export quantity of 112 million kilos, compared to 136 million kilos in the same period in 2021.

 Value-added exports, which account for 57% of the total, remained unchanged, whilst tea bag shipments remained steady, but the packet tea segment experienced a significant decline.

 Iraq continues to lead as the number one destination for Sri Lanka’s tea exports though quantities sharply dropped by 37% YoY to 14.7 million kilos against 23.51 million kilos the year before.  

 On the other hand, exports to and through Turkey saw a noteworthy increase of 89%, rising from 7 million kilos to 13 million kilos. After a period of decline, exports to Russia also saw growth, reaching 12.3 million kilos compared to 10.1 million kilos a year ago. The UAE stood at 7.4 million kilos, experiencing a decrease compared to the previous year, while China maintained a steady demand at 5.7 million kilos.