COLOMBO: The war in the Gulf has arrived in Sri Lanka’s tea ledgers. Exports of Ceylon Tea fell sharply over the first seven months of 2026, with shipping disruption across the Middle East compounding weaker demand in several key markets and contributing to a $67 million decline in export earnings.
Tea exports during January–July dropped 4.9 per cent to 143.51 million kilograms, down from 150.85 million kilograms in the corresponding period last year, according to Forbes and Walker Research data and Customs figures analysed by Siyaka Research.
The contraction accelerated in July. Shipments that month fell to 20.41 million kilograms — a decline of 3.63 million kilograms, or roughly 15 per cent, from 24.04 million kilograms a year earlier. Analysts attributed the renewed pressure partly to continued disruption of shipping routes in the Middle East, which has affected both export flows and market access.
The regional breakdown reveals a trade being violently rearranged rather than simply shrinking.
Türkiye emerged as the single largest importer of Ceylon Tea during January–July, taking 24.76 million kilograms — a 138 per cent surge from 10.40 million kilograms a year earlier. Azerbaijan also posted strong growth, up 49 per cent to 7.14 million kilograms, while Russia recorded a modest 2.6 per cent increase to 13.35 million kilograms despite persistent payment and banking restrictions linked to international sanctions.
Iraq, historically Sri Lanka’s largest buyer, went the other way: imports fell 36 per cent to 14.42 million kilograms.
The damage has been sharpest in the Gulf. Export Development Board data showed tea earnings fell 17.3 per cent year-on-year in March to $114.75 million, with shipments to Iraq down 38 per cent and to the United Arab Emirates down a staggering 93 per cent. Nearly half of Sri Lanka’s total Ceylon Tea exports — worth close to $680 million annually — are shipped to the Middle East. Iran alone typically imports between eight and ten million kilograms of premium Sri Lankan tea each year.
By category, Instant Tea was the only segment to record a positive volume variance in the first seven months. Every other category declined against the same period in 2025. Cumulative figures for the first half showed the free-on-board value at Rs. 1,810.28 per kilogram — up in rupee terms from Rs. 1,745.10, but down in dollar terms to $5.70 from $5.86. The divergence matters: higher local-currency prices are masking a deterioration in the dollar value of shipments, which is the measure that actually governs export earnings and foreign-exchange generation.
The human cost sits at the bottom of the supply chain. Plantation workers typically earn a daily wage of between 1,350 and 1,750 rupees — barely above the national daily minimum of 1,200 rupees. More than half of them live below the World Bank’s international lower-middle-income poverty line of $3.65 a day.
“Plantation workers are facing crisis after crisis,” said Thangawel Ganeshalingam, convener for the Movement for Plantation People’s Land Rights, which works with about 200 estates. “Due to higher costs, school absenteeism is on the rise, people are cutting down on meals and some are leaving the plantations looking for better jobs in cities.”
Exporters are adapting where they can. Dilmah, whose Ceylon tea brand is sold in 108 countries and which derives roughly 30 per cent of its business from the Middle East, is accelerating a push into Canada, South America and the United States. “We have absorbed the costs for a while, but fuel costs and knock-on effects on logistics, whether between Perth and Melbourne or Colombo and Dubai, are fuelling inflation everywhere,” said chairman and chief executive Dilhan Fernando.
The tea numbers land amid broader strain on President Anura Kumara Dissanayake’s government. Inflation has breached the Central Bank’s seven per cent upper limit. Cabinet Spokesperson and Minister Dr Nalinda Jayatissa said this week the government will retain its QR-based fuel distribution system given continuing supply uncertainty.
There is one significant piece of good news. Exploration has identified substantial natural gas accumulations in two offshore wells in the deepwater Mannar basin — a potential long-term hedge against exactly the kind of imported-energy shock now squeezing the island’s exporters.
Analysts note the episode has exposed a structural weakness Colombo has long tolerated; heavy dependence on a narrow set of overseas markets, most of them clustered in a region now defined by conflict.
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