War risk, rerouted ships hit Sri Lanka’s cuppa tea as escalating conflict in West Asia disrupts critical trade routes, placing unprecedented strain on the island’s $1.5 billion tea export industry and threatening its global competitiveness.
War risk, rerouted ships hit Sri Lanka’s cuppa tea amid export and shipping crisis
Sri Lanka’s tea sector, long regarded as a cornerstone of the country’s export economy, is now confronting a multi-layered crisis driven by geopolitical instability, rising shipping costs, and weakening demand in key markets. What initially began as logistical delays linked to Red Sea tensions has evolved into a systemic disruption affecting supply chains, pricing, and market access.
Industry stakeholders warn that the impact is particularly severe given Sri Lanka’s heavy reliance on markets across West Asia and North Africa. These regions, alongside the Commonwealth of Independent States and emerging East Asian buyers, form the backbone of demand for “Ceylon Tea.” However, the ongoing conflict has disrupted major transit hubs such as Dubai and Doha, undermining established trade routes and complicating export logistics.
The situation has intensified following recent military developments involving the Red Sea and surrounding corridors, which are vital for global shipping. Exporters say high-value tea shipments are increasingly becoming unsellable due to delays and rising costs, while warehouses at the Port of Colombo are nearing full capacity with unsent cargo.
According to industry estimates, up to 60–70 percent of Sri Lanka’s tea exports are exposed to disruptions linked to the current crisis. Key markets such as Iraq, Iran, Saudi Arabia, and the United Arab Emirates remain directly affected, reducing both demand and the feasibility of shipping goods into the region.
The War risk, rerouted ships hit Sri Lanka’s cuppa tea scenario is further exacerbated by financial and pricing pressures. The absence or reduced participation of major buyers like Iran—traditionally a significant but unconventional market—has triggered immediate price corrections. At the first tea auction following the escalation, prices fell by 4.3 percent, while sales volumes dropped by 13.1 percent, reflecting weakening market sentiment.
For exporters, the operational challenge has shifted from delays to near-total shipment paralysis. Industry sources indicate that while tea production and packaging continue, the inability to secure reliable shipping routes has left large volumes stranded. Some shipments have been offloaded at intermediate ports, while others remain in transit with uncertain delivery timelines.
Shipping companies have also begun requesting exporters to manage cargo retrieval independently in certain cases, adding logistical complexity and cost. At the same time, insurance premiums for vessels traversing high-risk zones have surged sharply, with some reports indicating increases of over 1,000 percent.
The combined effect of war risk and insurance surcharges has made Sri Lankan tea less competitive in global markets. Exporters are often forced to absorb these additional costs to maintain pricing levels, particularly in price-sensitive regions. As a result, the industry is estimated to be losing between $10 million and $15 million weekly in revenue.
The disruption of key maritime chokepoints, including the Strait of Hormuz and the Suez Canal, has compelled shipping lines to reroute vessels around the Cape of Good Hope. While this alternative route ensures safety, it adds between 15 and 20 days to transit times, significantly increasing fuel costs and undermining delivery schedules.
Major global carriers, including Maersk, MSC, and Hapag-Lloyd, have introduced emergency surcharges to offset the heightened risks. These include War Risk Surcharges and Emergency Conflict Surcharges, which can add up to $3,500 per container, depending on size and route.
Beyond logistics, the crisis has also disrupted Sri Lanka’s unique tea-for-oil barter arrangement with Iran, which has historically allowed the country to settle crude oil imports without direct dollar transactions. With trade routes effectively blocked and sanctions tightening, executing this arrangement has become increasingly unfeasible.
The broader implications of the War risk, rerouted ships hit Sri Lanka’s cuppa tea crisis extend to the entire value chain, from plantation workers to exporters and listed companies. Share prices of several tea firms have already declined significantly, reflecting investor concerns over prolonged disruption.
This latest shock comes at a time when the industry is already grappling with structural challenges, including ageing plantation labour models, climate variability, and input cost pressures. The convergence of these issues raises concerns about the long-term sustainability of Sri Lanka’s tea sector if external shocks persist.
While exporters continue to explore alternative markets and shipping routes, industry analysts caution that such adjustments require time and investment. In the interim, maintaining relationships with traditional buyers and managing cost pressures will be critical.
The War risk, rerouted ships hit Sri Lanka’s cuppa tea underscores the vulnerability of export-dependent economies to geopolitical disruptions. For Sri Lanka, safeguarding its tea industry—one of its most iconic global brands—will require coordinated policy support, logistical innovation, and strategic diversification in an increasingly uncertain global trade environment.