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Tuesday June 25th, 2024

Sri Lanka’s tea prices hit record in August

Monthly tea auction data 2022

ECONOMYNEXT – Sri Lanka’s low-grown Ceylon teas hit a new record of 1,161.24 rupees a kilogram in August 2022, up from 619 rupees a year earlier industry data showed, as the currency collapsed steeply following mistargeted interest rates and a botched float with a surrender requirement.

In the last week of August low growns averaged 4.39 dollars a kilogram up from 2.95 a year earlier. Global commodity prices have moved up due to US money printing, which tends to weaken the dollar.

In Sri Lanka Mercantilists and soft-peggers usually claim that inflation comes from imported prices. However, prices of all traded goods, whether imported or exported go up when the central bank prints money to depreciate the currency.

Global prices also go up in dollar terms (commodity booms) when the US Federal Reserve prints money. At the moment commodity prices are booming due to the so-called ‘Powell Bubble’ the worst since the Greenspan-Bernanke bubble which broke in 2008/2009.

At the August 30 sale auction, Low Grown leafy/Tippy variety had seen an increased demand selling 1.7 million kilograms with strong demand.

Low Grown attract the highest prices for Ceylon Tea.

In the August 4th week auction, the Low Grown Tea sale average was 1,727.39 rupees, up from 1,654.03 rupees in the previous week.

In dollar terms, it had shot up to 4.78 dollars per kilogram, up from 4.58 dollars in the previous week.

BOPF’s Select best were lower whilst all others were firm.

OP’s Well-made varieties together with cleaner below best maintained. Bottom and others too followed a similar trend.

OPA’s well-made sorts together with cleaner below best followed a similar trend to their OP counterparts. Poorer types gained.

BOP1’s few Select best gained whilst others and below best were irregular. Teas at the lower end maintained.

FBOPF/FBOPF1’s Select best with best were dearer to last whilst others held firm. All tippy invoices were easier.

High Grown

The High Grown auction average was 1,422.56, down from 1,436.31 rupees.

In BOP, Best Westerns were firm. Below best and plainer teas were firm to Rs.50/- per kg dearer.

Nuwara Eliya’s were up by Rs.100/- per kg. Uda Pussellawa’s moved up by Rs.50/- per kg. Uva’s gained by Rs.100/- per kg and at times more.

In BOPF, Best Western’s were mostly firm. Below best and plainer types appreciated by Rs.50/- per kg.
Nuwara Eliya’s were barely steady. Uda Pussellawa’s Rs.50- per kg dearer. Uva’s gained by a similar margin.

Medium Grown

The Medium Grown auction average for the week was 1,234.18 rupees down from 1,135.53 rupees a week before.

This week, BOPF’s Select best and best were dearer by 50 rupees per kilogram whilst the all others were firm.

In BOP1, Select best were firm whilst all others dearer by Rs. 50/- per kg.

While OP1’s Select best, best and the below best declined by Rs.100/- per kg. Poorer sorts eased by Rs.50/- per kg.

In the PEKOE/PEKOE1 PEK category in general, appreciated by Rs. 50/- per kg while PEK1’s Select best and best increased by Rs. 100/- per kg whilst all others gained by Rs. 50/-
per kg.

In the FBOP category, Select best and best declined by Rs. 50/- per kg whilst all others were firm.

FBOPF1’s Select best, best and the below best dearer by Rs.100/- per kg. Poorer sorts eased by Rs.50/- per kg.


High-grown BP1s has had hardly any offerings while PF1’s firm to marginally dearer.

Mid grown BP1s were irregular.

Low-grown BPIs lower 50 rupees a kilogram, while better PF1 teas declined by 200 rupees per kilogram.

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Sri Lanka to sign Paris Club debt deals as fresh ISB talks to also start

ECONOMYNEXT – Sri Lanka will sign agreements on restructured debt with Paris Club creditors Wednesday, Cabinet spokesman Minister Bandula Gunawardana said as sources said talks with private creditors are also due to start later in the week.

The relevant senior officials and State Minister Shehan Semasinghe has already left the country to sign the agreements, Minister Gunawardana said.

Sri Lanka has held detailed negotiations with bilateral creditors ever since a sovereign default in 2022 and President Ranil Wickremesinghe has personally met leaders of friendly countries to expedite the restructuring, he said.

The finalizing of the restructure was a ‘great victory’ for Sri Lanka he said.

Details will be revealed to parliament by President Wickremesinghe and an address to the nation on Wednesday he said.

Discussion with private bondholders are also taking place separately, he said.

Face to face talks with bond holders are likely to start Thursday, sources said.

Investors in a steering committee representing key bondholders have halted trading and are in a ‘restricted’ period Bloomberg Newswires reported.

Sri Lanka is attempting to restructure 12.5 billion dollars of sovereign bonds and about 1.7 billion dollars of past due interest following the declaration of an external default in 2022.

Private investors are seeking some so-called macro-linked bonds whose final haircut is linked to dollar GDP as well as some standard or ‘plain vanilla’ bonds with an upfront haircut.

The style of bonds have not been used in sovereign restructurings before. In the latest round of talks more plain vanilla bonds may be discussed, sources aware of the thinking of some bond investors said.

The ISB holders have proposed a 28 percent haircut and a 1.8 percent consent fee. The macro-linked bonds would have principle re-stated up to 92 percent of the original depending on the evolution of gross domestic product.

Sri Lanka is restructuring debt using an IMF debt sustainability model applied to middle income countries with market access as opposed to debt sustainability model used in countries like Ghana applicable to low income countries requiring deeper haircuts on both domestic and foreign debt.

Hair cuts may also depend on the maturity of bonds and the coupon interest.

Ghana has higher levels of commercial debt having started to access capital markets from around 2007.

Ghana also has a bad central bank like Sri Lanka and has gone to the International Monetary Fund 18 times.

The country is also operating flexible inflation targeting (inflation targeting without a clean float), which critics say is the latest spurious monetary regime peddled to hapless unstable countries without a doctrinal foundation in sound money.

Having done broad domestic debt restructuring as well as continued currency volatility both interest rates and inflation remains above 20 percent.

Ghana’s central bank has a worse monetary anchor (8 percent inflation plus 2 percent) compared to 5 percent plus two in Sri Lanka and runs into currency trouble despite being an oil producer like Iran, Venezuela and neighboring Nigeria.

Nigeria has an inflation target of 6-9 percent but ends up with around 20 plus inflation and currency trouble.

Sri Lanka has undershot its inflation target since reaching monetary stability in September 2022 and has appreciated the currency, amid deflationary policy giving a strong foundation for economic activity to resume. (Colombo/June26/2024)

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Sri Lanka to seek investors for 200MW BOOT power plant

EONOMYNEXT – Sri Lanka’s cabinet has given approval to seek investors for a 200 MegaWatt independent power plant on a build-own-operate-and-transfer (BOOT) basis, a government statement said.

The internal combustion power plant will be capable of running on natural gas and is part of the Long-Term Generation Expansion of state-run Ceylon Electricity Board.

The investor will get as 20-year power purchase agreement.

Land next to the ‘Sobhadanavi’ combined cycle plant will be made available for the developer.

According to the generation plan, the 200MW IC plant is expected to come on stream by 2026.

In 2026, a 115 MW gas turbine, a CEB owned diesel plants of 68 MW and 72 MW are due to be retired. (Colombo/June25/2026)

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Sri Lanka rupee closes steady at 305.25/35 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed fairly flat at 305.25/35 to the US dollar on Tuesday, down from 305.20/30 to the US dollar on Monday, dealers said, while bond yields up.

A bond maturing on 01.06.2026 closed at 10.75/11.05 percent.

A bond maturing on 15.12.2026 closed at 10.65/11.05 percent, up from 10.45/85 percent.

A bond maturing on 15.10.2027 closed at 10.65/11.10 percent.

A bond maturing on 15.03.2028 closed at 11.20/11.50 percent.

A bond maturing on 15.09.2029 closed at 12.10/15 percent, up from 12.05/17 percent.

A bond maturing on 01.12.2031 closed at 12.10/20 percent, up from 12.08/15 percent.

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