Red Sea crisis takes a toll on tea shipments from Kochi auctions

The Red Sea crisis and the resultant shipping surcharge have started hitting the tea trade in Kochi, with many overseas buyers seeking either postponement or cancellation of orders due to high freight cost.

A tea exporter concentrating on Kochi auctions told businessline that international buyers are even demanding to deliver cargo at the existing rates without adding the shipping surcharge. This would be unviable for the trade here, given the current situation of declining business orders. “It is unviable for us to meet such demand mainly because of the subdued demand prevailing across the markets and it has started affecting new purchase orders in the auctions”, he said.

• Also read: Red Sea crisis: Indian tea exporters to Europe and US stare at massive losses

Subdued demand across markets

He said even the earlier rate of $25 per container rate to Dubai has increased more than 10-fold to $250-300 because of additional costs and the rates to many other destinations have also tripled. The present developments are likely to have an impact on tea exports from auction centres, which is evident from the drop in the sales percentage of orthodox leaves at 74 per cent in sale 2, out of the offered quantity of 1,78,713 kg. This is fair support extended by traditional exporters from CIS countries and West Asia, he said.

Dipak Shah, Chairman, South India Tea Exporters Association, said that there are some odd cases where disagreements arise, with buyers demanding the agreed-upon cost. A mixed trend is observed, where shippers have no choice but to accept the higher freight cost and ship at the old quoted rates. A subdued demand prevails across the markets, leading buyers to seek cheaper teas.

• Also read: India’s tea export likely to be down by 10% this year

At the same time, he said that the CTC leaf market in South India has witnessed a sudden increase in the export of tea to Iraq, with the procurement reaching close to five million kg from Iraqi buyers in the last two months. The current developments look promising, but they may come down by taking into account the geo-political situations. On a broader outlook, the overall developments look promising but there are no signs of improvement, he added. 

However, the CTC dust market was firm to dearer in Kochi, with an increase in prices for liquoring teas and popular marks, mainly due to lower arrivals witnessing a ₹2 increase in average price realisation at ₹138, the auctioneers Forbes, Ewart & Figgis, said.

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