US pullout from Iran nuclear deal likely to impact Lankan tea exports

The US’ decision to unilaterally abandon the nuclear deal with Iran is likely to put a damper on Sri Lankan tea exports, a leading tea broking house in the country said.

“… USA’s decision to abandon the nuclear deal with Iran is anticipated to be a major setback for the industry,” Ceylon Tea Brokers PLC said in its first quarter tea industry overview. 

The Iran nuclear deal was reached in 2015 between Iran and a group of world powers, namely the US, UK, Russia, France, China and Germany. 

The US has threatened to reimpose sanctions against Iran’s automobile, civil aviation, energy and finance sectors. 

However, the European states have been scrambling to ensure Iran gets enough economic benefits to persuade it to stay in the deal.

Sri Lanka’s total tea production for first quarter of 2018 stood at 74.23 million kilos, in comparison to 66.88 million kilos for the same period, last year. During the quarter, Sri Lanka exported 5.56 million kilos, against 6.09 million kilos in the same period, last year.

The Sri Lankan tea exports to Iran fell 19 percent to 27.4 million kilos for the full year 2017, from the year before. As at December last year, Iran was the fourth largest market, with a 9.5 percent share of total Sri Lankan tea exports, down from almost 21 percent in 2016, according to the Sri Lanka Tea Board.

Meanwhile, during the first quarter of 2018, Iraq emerged as the number one market for Sri Lankan tea, with exports of 6.61 million kilos, up from 7.47 million kilos same quarter, last year, followed by Turkey with nine million kilos, up by 7.18 million kilos. 

Russia emerged as the number three player, with exports of 8.99 million kilos, up from 8.5 million, last year. The Sri Lankan tea exports for the first quarter of 2018 amounted to 68.89 million kilos, vis-à-vis 68.04 million kilos recorded for the same period, last year. The FOB average price per kilo for this period stood at Rs.828.45, as against Rs.769.87.

The total revenue realized for the first quarter from tea exports was US $ 349.17 million, compared to US $ 311.85 million recorded for the same period, last year.  The top tea importing nations in the world last year in order were Pakistan, Russia, the US, UK and Egypt, while the main tea exporters were Kenya, China, Sri Lanka and India.