Associate Sponsors

Tea industry on edge as Iran-Israel tensions threaten export revival

The biggest worry for Indian tea exporters when the Israel-Hamas conflict flared up in October 2023 was that it would spill over to other West Asian countries, particularly Iran

Ishita Ayan Dutt Kolkata

4 min read Last Updated : Oct 04 2024 | 1:01 AM IST

The escalating tension between Iran and Israel has put the Indian tea industry on tenterhooks at a time when business in the West Asian market was just starting to improve.

The biggest worry for Indian tea exporters when the Israel-Hamas conflict flared up in October 2023 was that it would spill over to other West Asian countries, particularly Iran. Now, the direct involvement of Iran, one of the top buyers of Indian tea, is causing apprehension in the industry. Iran, an orthodox tea market, has traditionally been one of the top destinations for Indian tea. Compared to a normal trade year, it had picked up lower volumes last year, which reflected on orthodox prices. But the industry said that there was good demand from Iran this year.

“Last year, volumes to Iran were lower due to various factors, including payment challenges, but it had returned with substantial strength this year. Substantial growth in Iraq, coupled with Iran returning to old volumes, resulted in an increase in orthodox tea prices,” said Anshuman Kanoria, chairman of the Indian Tea Exporters Association, said. According to data sourced from the Calcutta Tea Traders Association, the average price for North India orthodox leaf was Rs 288.77 per kg in 2024 compared to Rs 217.20 per kg in 2023. The average for South India orthodox leaves was Rs 164.97 per kg in 2024 against Rs 147.35 per kg in the previous year.

On the latest conflict in West Asia, Kanoria said: “There are shipments on the way. We have to keep a close watch on the logistics cost. Shipping rates have been sky-high and just about coming down.”

It’s early days, but the industry is skeptical about the unfolding situation.

Mohit Agarwal, director of Asian Tea Company, said: “The situation is very fluid – it’s a ‘wait and watch’ situation for us. There is a lot of apprehension and nervousness. Shipping routes and insurance might get impacted if the situation does not de-escalate. We are keeping our fingers crossed and hoping that normalcy returns.”

Dipak Shah, chairman of the South India Tea Exporters Association, said the involvement of Iran was a “big concern,” making exporters nervous. “There are concerns around shipments to both Iran and Iraq. Huge shipments go to Iraq. The apprehension is on account of freight costs and safety of cargo.”

Indian Tea Association (ITA) Chairman Hemant Bangur said there is concern. “But it’s early days, we hope it will not escalate into a major crisis.” This year, overall tea exports were on an uptrend with major markets showing an uptick.

According to Tea Board data, total exports during January-June 2024 stood at 121.48 million kg (mkg) compared to 98.87 mkg in the year-ago period. The major gains were from Russia and West Asia. Exports to Iran stood at 4.91 mkg in January-June 2024 compared to 3.03 mkg in January-June 2023. Payment challenges had impacted volumes to Iran in 2023.

Exports to Iraq during January-June 2024 were at 20.13 mkg compared to 14.01 mkg in the same period the previous year.
Exports to the UAE, a major re-export hub, during the same period stood at 19.17 mkg as against 14.16 mkg. Similarly, exports to Russia during the period were at 21.39 mkg compared to 15.90 mkg in the same period last year.