Tea Market Dynamics Amidst Conflict

The ongoing conflict in West Asia has led to a shortage of tea supplies, increasing demand for Indian orthodox tea, and thereby pushing up its prices at auctions.

Factors Influencing Tea Prices

• Freight rates have surged, and cargo movement is limited due to disruptions, yet there is optimism about the restoration of trade flows.
• Merchant exporters are building inventories in anticipation of a rebound in shipments.
• Data from the Calcutta Tea Traders Association indicates an increase in the average price of orthodox tea from Rs 315.26 per kg to Rs 330.61 per kg between April and May 2026.

Market Conditions

• Countries such as Iraq, UAE, Iran, Saudi Arabia, Turkey, and Egypt account for 46% of India's tea exports.
• Despite the peak season for North Indian tea exports to West Asia, the routes for export are longer and more costly.
• Tea exports from India declined from 69.24 million kg in January-March 2025 to 54.69 million kg during the same period in 2026.

Logistics and Economic Impact

• Exporters face increased logistics costs due to alternative shipping routes, which include a combination of sea and road transport.
• There is a noted shortage at destination markets, allowing sellers to pass on higher logistics costs or receive partial compensation.
• Some importers are making advance payments to ensure supply amid the uncertainty.

Production and Market Outlook

• Production and prices are higher this year, with ongoing strength in the orthodox tea market.
• Sri Lanka, a major supplier, experienced a production drop, from 88.63 mkg in January-April 2025 to 83.94 mkg in the same period in 2026.
• Industry experts remain confident that current challenges will be resolved and the market will favor sellers until at least August.

What's Brewing

• Increased buying interest supports orthodox tea prices at auctions.
• Major tea-consuming countries are low on stocks, enhancing demand.
• Advance payments by importers are common to secure supplies amidst uncertainty.