Israel-Iran tensions cloud India's tea export prospects in West Asia

Strong demand has lifted orthodox tea prices but exporters worry as Israel-Iran flare-up threatens disruptions in key West Asian markets like Iran and Iraq

Robust demand from West Asian markets — particularly Iran and Iraq — has pushed up prices of Indian orthodox tea. But the renewed Israel-Iran tension is threatening potential disruptions.

 

Anshuman Kanoria, chairman of Indian Tea Exporters Association (ITEA), said there is concern over cargo that is already on water, which is awaiting shipment, and also the fate of future orders. 

 

He said, “We are worried and concerned about the suffering on the ground as well as exports. The members are in touch with the buyers. At this moment, we are in a wait-and-watch mode.”

 

Producers and exporters are anticipating a temporary blip in trade.

 

Hemant Bangur, chairman of Indian Tea Association (ITA), said that Iran is one of the largest markets for Indian tea.

 

He added, “Things are too fluid right now for any assessment. But there may be temporary trade disruptions.”

 

Sandeep Singhania, president of Tea Association of India (TAI), said, till tensions de-escalate, there will be an impact.

 

He said, “Orthodox tea is dependent on demand from Iran. A setback in Iran will be a setback for exports, particularly orthodox (variety). We are keeping our fingers crossed, hoping that the situation settles down.”

 

The importance of Iran

 

Traditionally, Iran has been one of the top markets for Indian tea. Kanoria said Iran is an around 30 million kg (mkg) market for Indian tea.

 

In 2022, tea exports to Iran stood at 22.21 mkg. It took a knock in 2023 — dropping to 5.92 mkg as Iran stopped registering contracts for Indian tea. In 2024, tea exports to Iran increased to 9.24 mkg.

 

However, Kanoria said that direct export figures to Iran were not a true indicator of the size of the market. 

 

Kanoria added, “Teas to Iran are also routed through the UAE, a major re-exporting hub.”

 

In the current year, Indian orthodox tea has seen good demand as Sri Lanka – the world’s largest supplier of the variety – continues to operate below its peak output.

 

In 2024, India produced 118.67 mkg of orthodox tea out of a total production of 1,284.78 mkg; production of CTC was at 1,149.21 mkg.

 

Boost to prices

 

The strong demand for orthodox tea reflected on its prices. The average price realised for orthodox leaf at the Kolkata auctions for Sale 17 to Sale 24 was ₹317.32 per kg compared to ₹293.69 per kg in the previous year. The average for all varieties of teas was ₹275.34 per kg at the auctions against ₹265.08 last year.

 

Himanshu Shah, chairman of MK Shah Exports, said Sri Lanka was still at a great distance from its all-time high crop of around 350 mkg and is unlikely to recover lost ground.

 

Shah added, “Indian producers have seen an opportunity here and with encouragement of the Assam government, orthodox production is picking up. Erstwhile Sri Lankan tea buyers, mainly Iraq, Turkey and Syria, are returning to Indian teas.”

 

M K Shah is one of India’s largest producers and exporters of orthodox tea.

 

In 2022, when the island faced its worst economic crisis, production had dropped by about 16 per cent to 251.5 mkg. It has recovered since then — production at the end of 2024 stood at 262 mkg.

 

But it’s still a long way off from the pre-crisis level of 299.49 mkg in 2021 and peak of 340 mkg in 2013.

 

“Production in Sri Lanka has been more or less stagnant — it has not gone back to its normal level. That is providing Indian companies an opportunity,” said Sumit Jhunjhunwala, vice-president, ICRA.

 

Last year, India took the third spot in world tea exports, beating Sri Lanka after exporting 254.67 mkg.