DTTC sees 72.8 per cent surge in tea re-exports in four months

The Dubai Tea Trading Centre (DTTC) handled re-export of 2.8 million kilogrammes of tea from January to April 2009, a 72.8 per cent increase over the same period in 2008, a top executive said. The statement comes amid reports of poor tea harvests globally that have kept tea prices on the boil.

"It is true that tea production in the top producers India and Kenya has been impacted due to adverse weather conditions and there has been a slump in production. This has, however, had no impact on tea trade through the DTTC during the first four months of 2009," said Sanjay Sethi, Director of DTTC, told Emirates Business in an e-mailed statement.

"Since inception, trade volumes transacted through DTTC have grown by 15-20 per cent year-on-year. However, the early months of 2009 have witnessed a significant jump in trade volumes, because of the value-addition that DTTC offers," Sethi said.

There are reports of rising tea prices and reduction in volumes of tea in exporting countries. Tea prices have hit record highs, rising almost 35 per cent in the past 12 months, because of the impact of simultaneous droughts in the main exporting countries.

Sharp output falls in India, Kenya and Sri Lanka have come as demand remains robust in spite of the impact of the economic crisis, exacerbating last year's deficit. Major black tea producing countries have continued to record lower production...owing to dry weather conditions.

According to recent reports, Sri Lanka's tea output plummeted to 48.8 million kg in the first quarter, down 41.5 per cent from the same period a year ago. The country, which has traditionally been the world's largest exporter of black tea, has dropped to second place. Tea production in Kenya, the world's largest exporter, fell to 65.8 million kg, down 6.9 per cent over the first quarter of 2008. India, the third-biggest exporter, saw a nine per cent drop in output in the first quarter, to 81.8 million kg. Kenya, India and Sri Lanka are the largest exporters of tea to Dubai.

As a reflection of supply-demand economics, tea prices have risen. Recent reports said the wholesale price of the best black tea, rose last week to $3.69 per kg at the weekly auctions in Mombasa, Kenya – above the previous record of $3.63 a kg last year. Wholesale prices of the highest quality black tea have more than doubled from a decade low of $1.75 per kg in December 2001. Prices averaged $3.07 last year.

Tea still does not trade in a futures exchange and the business is based on physical deals at auctions. DTTC is an initiative of Dubai Multi Commodities Centre, a body that has been promoting trade of commodity futures in Dubai. Sethi said DTTC does not have any plans to introduce tea futures in the near future. A senior DMCC official earlier told Emirates Business introducing tea futures is technically difficult considering the several blends the stimulant comes in.

In 2008, Dubai's total tea trade reached 148.6 million kg, compared to 144.6 million kg in 2007. The figure is expected to rise considering businessmen from Africa are looking forward to adopting Dubai as a re-export hub.

"Having a blending and packaging centre in Dubai will reduce my transportation cost by more than a half. I am looking forward to using the DTTC facility," said Farid Shamji, who runs Chai Export, a Nairobi, Kenya-based company.

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