Tea exporters in Kenya are facing challenges due to increased shipping costs caused by a shortage of merchant ships and attacks by Yemen-based militants on vessels in the Red Sea. Shipping a 40-foot container to key destinations like Russia has more than tripled in cost, severely impacting the profitability of tea exports from the region.
Hassan Bule, a Mombasa-based tea buyer, highlighted the drastic increase in shipping costs, stating that it used to cost about KES 339,418.27 (US$2,442) to ship a 40-foot container to Russia, but now it has risen to about KES 904,764.78 (US$6,513). This sharp rise in costs is making it financially challenging for tea exporters to maintain their competitiveness in the global market.
The situation has been exacerbated by the ongoing Russia-Ukraine war, which has forced vessels to take longer routes due to the closure of the Black Sea route. This has further contributed to delays in shipments and increased freight costs, impacting tea traders and exporters significantly.
George Omuga, managing director of the East African Trade Association (EATTA), emphasized the adverse effects on tea traders, noting that ship turnaround time has remained a challenge. This has resulted in dwindling export volumes to Russia and other neighboring countries, leading to a pile-up of tea stocks in warehouses as exporters wait for vessels to transport their goods.
The disruptions in shipping have also had repercussions on the weekly tea auctions in Mombasa, where prices have surged due to the increased demand for quality tea crop. For instance, in this week’s trade, a kilo of premium Kenyan tea sold at KES 571.82 (US$4.10), compared to KES 422.58 (US$3.03) at the beginning of the year.
Despite these challenges, Kenya has shown resilience in its tea industry, recording a remarkable 31% increase in the value of tea exports in 2023, setting a record high for the sector. Officials attribute this surge to higher export volumes during the year and the depreciation of the local currency, which made Kenyan tea more competitive in international markets.
Willy Mutai, CEO of the Tea Board of Kenya, unveiled these impressive statistics during the launch of the tea industry performance results for 2023 in Nairobi. The total export volume also witnessed a substantial increase, rising from 450.33 million kg in 2022 to 522.92 million kg in 2023, marking a 16% increase year-on-year. Despite the challenges posed by shipping disruptions, Kenya's tea industry continues to show promising growth potential.
