Devaluation of currencies against the dollar in key export markets for Rwandan tea and the war in Ukraine have kept prices low, with traders worried that prices might even get worse in the next few months.
Pakistan, which buys up to 55 percent of the tea from the East African markets, has suffered a sharp devaluation of its currency against the dollar for the most of this year.
Currencies of other key buyers like the UK, Sudan, Egypt and Kazakhstan are also battling currency devaluations against the dollar, which has affected tea prices on the international market.
“Tea prices have gone down due to a combination of factors, a country like Pakistan, which buys about 55 percent of our region's tea is struggling with currency devaluation, Russia is also a key buyer and its war in Ukraine has hurt the market,” said Charles Kenge Iruta, the Sales and Marketing Manager at Rwanda Mountain Tea.
Rwandan tea is currently sold at $2.80 per kilogramme, a fall from the $3/kg it fetched in January 2022, and the pre-pandemic prices of $3.05/kg in January 2020. In contrast, the price for Kenyan tea stands at $2.60 per kg.
“The coups in Sudan have also affected that market, ” said Kenge.
The decline in purchasing power of the main export markets and a drastic increase in freight fees has also contributed to the decline in tea prices. Kenge said freight costs had tripled and now “transporting a container from Mombasa to Europe or Asia costs
around $12,000, up from $4,000.”
The market has also been flooded with high volumes of tea due to a spike in production this year thanks to the conducive climate experienced around tea producing areas of the region.
Good production levels are expected to continue well into the next few months due to the good rains, which analysts worry might cause a glut and push down the prices further.
Rwandan tea continues to be the most sought for-fetching premium prices on the Mombasa Tea Auction, and it is still ranked number one largely due to its superior quality and unique flavors.
Tanzanian tea fetched the lowest price due to its quality followed by Uganda’s, Burundi’s and Kenya’s tea.