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Sri Lanka tea prices hit record in Feb 2022, Russia invasion dims prospects

ON RIDE: Tea prices hit a record on February before Russia’s invasion of Ukraine

ECONOMYNEXT- Sri Lanka tea prices which hit a record national average of 725 rupees in February, is seeing pressure after Russia invaded Ukraine, despite lower volumes offered, auction results show.

In January, Russia was the second-largest buyer of Ceylon Tea tea.

“Undoubtedly trading conditions are likely to be strained and additional war risk surcharges would further escalate the high logistics rates, which have already adversely impacted tea prices,” Forbes and Walker, a Colombo-based tea brokerage said.

Amid sanctions, the Russian Ruble had collapsed from around 77 before the invasion to around 110 after creating affordability issues.

Russia’s central bank jacked up interest rates by 20 percent to reduce credit and imposed exchange controls in a bid to stabilize the currency.

Sri Lanka sold 4.98 million kilograms of tea in the auction of March 01 and 02, down from 6.0 million kilograms a week earlier.

The average tea sale price for the month of February rose to 725.63 (3.60 USD) compared to 645.95 (3.33 USD) last year in the record.

Global commodity prices had been soaring as the Federal Reserve printed money, weakening the dollar pushing up inflation to 40 year highs.

High Growns saw lower demand, while demand for Low Growns was at lower rates, Ceylon Tea Brokers said in a market report.

Prices declined with quality also playing a part.

“Overall quality of teas from the Western planting districts showed a decline with fewer seasonal teas on offer,” Forbes and Walker said.

“Consequently, prices for the better Westerns declined by Rs. 20-30 per kg and more with the exception of the few available seasonal teas which continued to sell in keeping with quality.

“In the Below Best category, BOP/BOPF’s declined Rs. 20-40 per kg and Rs. 20 per kg respectively.

“High and Medium Grown CTC teas continued to witness a bearish sentiment, whilst the Low Growns which have been selling at premium levels for a period of time declined fairly sharply by Rs. 30-60 per kg.”

Low Growns command the highest prices among Sri Lanka’s tea and has become the mainstay of the industry. The tea sector has also been hit by a fertilizer ban in 2021. (Colombo/Mar07/2022)

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Sri Lanka suffers over $138mn foreign outflow from govt bonds in 2024 after rate cuts

ECONOMYNEXT – Foreign investors have dumped 41.6 billion-rupee ($138.6 million) worth of Sri Lanka government securities in the first 20 weeks of 2024, the central bank data showed, after reduction in the key policy interest rates.

The foreign holding in Sri Lanka’s treasury bills and treasury bonds fell to 75.9 billion rupees on the week ended on Friday (17), May 2024, from 117.4 billion rupees on the week ended on December 29.

The central bank rate has reduced the key policy rates by 50 basis points so far in 2024, extending the rates cut by 700 basis points since June last year.

The rupee appreciated 9.1 percent in the first four months, but the gain failed to attract foreign investors amid a dragged debt restructuring negotiation with external private creditors.

Currency dealers said lackluster demand for dollars due to dampened imports with heavy controls, boom in both tourism revenue and remittances have helped to increase the dollar liquidity in the market, leading to the appreciation of the local currency.

The dealers said foreign investors can earn capital gain if they had bought government securities before the appreciation and now the offshore investors might be selling their bonds.

“They are also discouraged by policy rate cut because that will reduce their returns from the rupee bond investments,” a currency dealer said.

The yield in 12-month T-bills has fallen 336 basis points in the first four months of this year, the central bank data showed.

The central bank also reduced the Statutory Reserve Ratio (SRR) of commercial banks by 200 basis points in August last year to boost liquidity in the market with an aim to reduce market interest rates.

Under tough International Monetary Fund (IMF) conditions for its $3 billion loan program, the central bank raised key monetary policy rates in 2022 and last year to bring down inflation which hit over 70 percent in 2022. The inflation has fallen to the lower single digit now.

The rupee has appreciated to around 300 against the US dollar this week from around 330 level early in November. The local currency was at 365 rupees against the US dollar in early 2022. Depreciation causes capital loss for foreign investors. (Colombo/May 18/2024)

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Sri Lanka’s ‘Sancharaka Udawa’ tourist fair seeks to involve universities

ECONOMYNEXT – Sri Lanka’s ‘Sancharaka Udawa’ tourism fair kicked off this week to promote interaction between industry stakeholders and relevant Government bodies, including the Tourist Police, and also universities.

“Several universities, including Colombo, Uva Wellasa, Kelaniya, Sabaragamuwa and Rajarata were given free stalls to facilitate student interaction with industry professionals,” Chairman of the Sancharaka Udawa Organising Committee, Charith De De Alwis said in a statement.

The event takes place today (18) at the BMICH and houses stalls for hoteliers, tour and transport services, with a goal of attracting 10,000 visitors.

Organized by the Sri Lanka Association of Inbound Tour Operators (SLAITO) and the Sri Lanka Tourism Promotion Bureau (SLTPB), the 11th edition of Sancharaka Udawa offers a platform for both B2B and B2C sectors.

“Sancharaka Udawa houses over 170 exhibitors and a footfall of more than 10,000 visitors,” De Alwis said.

This year’s edition will include participants from outbound tourism sectors to facilitate capacity building. The event provides networking opportunities for industry newcomers and veterans.

“The networking platform offers opportunity for small and medium-sized service providers integrating them into the broader tourism landscape. The anticipated outcome is a substantial increase in bookings particularly for regional small-scale tourism service providers.” (Colombo/May18/2024)

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Sri Lanka’s CEB sells LTL shares to West Coast IPP for Rs26bn

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board has sold shares of an affiliate to West Coast Power Company Limited, an independent power producer giving profits of 25.9 billion rupees in the March 2024 quarter, interim accounts showed.

The sale has been carried out as a transfer.

“Twenty-eight percent (28-pct) of share ownership of CEB within LTL Holding’s equity capital has been transferred to West Coast Power Company Ltd for a total consideration of Rs 26 billion as part of a partial settlement of outstanding dues…” the March interim accounts said.

“This transaction resulted in a net gain of Rs25.9 billion rupees which has been recognized and reflected in the ‘Gain from Share Disposal’ in the individual financial statement in CEB.”

LTL Holdings is a former transformer making unit of the CEB set up with ABB where the foreign holding was sold to its management.

The firm has since set up several IPPs.

West Coast Power operates a 300MW combined cycle IPP in Kerawalapitiya promoted by LTL group liked firms in which both the Treasury and Employees Provident Fund also have shares.

Its operational and maintenance contract is with Lakdhanavi, another private IPP. The firm has been paying dividends.

The capital gain from the transfer of shares helped the CEB post profits to 84 billion rupees for the March 2024 quarter.

CEB reported gross profits of 62.7 billion rupees from energy sales and 30.6 billion rupees in other income and gains in the March 2024 quarter. Other income was only 3.1 billion rupees in last year. (Colombo/May18/2024)

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