EAST African tea exports to Iran are expected to jump more than fivefold by 2019 as trade ties with the Persian Gulf nation normalise after western sanctions were lifted, a regional tea traders’ association said.
Shipments from nations including Kenya, the world’s biggest exporter of black tea, may climb to 20,000 metric tons within the next four years from a record low of 3,200 tons last year, said Edward Mudibo, managing director of the East African Trade Association.
“The potential for the Iran market could be five-fold the current status without the restrictions there had been over the past five years,” Mudibo said in a phone interview Wednesday from the port city of Mombasa.
Iran is among the world’s 10 biggest tea-consuming nations, with consumption estimated at 83,400 tons in 2013, according to Food and Agriculture Organisation statistics. Financial and trade sanctions imposed by the U.S. and European countries because of its nuclear program curbed access to foreign currency and limited Iranian buyers’ ability to transact. That posed “payment challenges” to East African tea exporters from Tanzania, Uganda, Rwanda and Burundi, Mudibo said.
Most of the tea produced in East Africa is sold at the Mombasa auction, the world’s largest market for the leaves. The weekly sale handled 358.6 million kilograms (791 million pounds) in 2015, compared with 390.2 million kilogrammes a year earlier, according to data compiled by Tea Brokers East Africa Ltd., a Mombasa-based trader of the crop. It competes with the Colombo auction, which traded 315.5 million kilogrammes of tea last year, compared with 333.5 million kilogrammes in 2014, according to data e-mailed by the Sri Lanka Tea Board.
“Iran seeks good quality tea which our auctions are known for,” Mudibo said. “We are looking at a conservative 16,000 tons, but we could go up to a range of 20,000 tons, which we can safely ship without much effort.”
Kenya, East Africa’s largest economy, generated at least $1.2 billion from tea exports last year, the second-biggest source of foreign-currency earnings after remittances by citizens living abroad. The increased demand from Iran is expected to result in higher prices, Mudibo said.
“Increased exports to Iran shall translate to a corresponding increase in tea prices,” Mudibo said.
The average auction price of tea sold in Mombasa rose 34 percent to $2.73 a kilogram (2.2 pounds) last year, according to Tea Brokers of East Africa data.
The EATTA exported 40,000 tons of the crop to markets including Pakistan, Egypt and the U.K. between January and November 2015, compared with 49,940 tons a year earlier.
“With Iran in the picture, even if we produce more, we know there is a market,” Mudibo said. “Iran is very major to our tea, it has potential to be among the top five key export markets.”