Demand is intact, but disruption is redefining the trade
Be that as it may, Sri Lanka’s tea industry is not collapsing under the weight of the war in the Middle East. It is, however, operating under a new and far more difficult reality – one where demand continues to exist, but the ability to deliver has become increasingly uncertain. The distinction matters. Because this is not a story of disappearing markets, but of a system struggling to function under disruption.
The Middle East has long been the backbone of Sri Lanka’s tea exports, accounting for a substantial share of total volumes. Markets such as Iraq, Iran, the UAE, and Saudi Arabia have historically absorbed a large proportion of Ceylon Tea, providing both scale and stability to the industry. That dependence, which once underpinned growth, has now become a source of vulnerability. With the Strait of Hormuz under strain and shipping routes increasingly exposed to risk, the movement of goods has become the central challenge.
What exporters are now facing is not a shortage of buyers, but a breakdown in logistics. Ships are being rerouted, transit times extended, and insurance costs sharply increased. In some cases, shipments are delayed indefinitely, not because contracts have failed, but because the physical routes required to fulfil them have become uncertain. Industry estimates suggest losses of millions of dollars per week, not due to falling demand, but due to the inability to execute deliveries on time. Tea, quite literally, is waiting – either in warehouses or at port.
Yet the industry has not buckled, and that is not accidental. Sri Lanka’s tea sector has, over time, built a degree of diversification that is now proving critical. Beyond the Middle East, exporters continue to serve markets in Russia and the CIS region, as well as parts of Europe and East Asia.
These markets are not perfect substitutes, but they provide a cushion that prevents a complete collapse in export flows. In effect, diversification is buying time.
At the same time, price dynamics are becoming uneven. In certain markets, reduced supply has led to stronger auction prices, reflecting scarcity and continued demand.
In others, particularly where currencies have weakened sharply, purchasing power has eroded, creating a more fragile demand environment. The result is a market that is not uniformly rising or falling, but fragmenting under pressure.
Exporters are adapting as best they can. Alternative shipping routes are being explored, transshipment points adjusted, and delivery schedules reworked to accommodate delays.
These adaptations, however, come at a cost. Freight charges are higher, turnaround times longer, and margins tighter. The tea is still moving – but it is moving less efficiently, and at greater risk.
What ultimately sustains the industry, for now, is its inherent resilience. Tea is not immediately perishable, allowing exporters some flexibility in timing shipments. Long-standing relationships with international buyers also provide a degree of stability, with contracts often honoured despite delays. But resilience is not the same as immunity.
If the current disruptions persist, the pressure will begin to move beyond exporters and into the estates themselves, affecting production, wages, and livelihoods.
The real story, then, is not whether Sri Lanka’s tea industry will survive this moment. It is how long it can continue to absorb the strain before the cracks begin to show more visibly across the value chain.
