By: Staff Writer
November 20, Colombo (LNW): Sri Lanka’s tea industry is witnessing a rebound in 2025, fuelled by rising production and export volumes yet falling prices and cost pressures are clouding its long-term growth potential.
According to official data, tea production in the first half of 2025 climbed to 135.74 million kg, up from 127.44 million kg a year earlier.
Export volumes also rose sharply in that period, hitting 126.81 million kg, compared to 119.11 million kg during the same months in 2024.
Despite increased output, the average price of Sri Lankan tea dropped markedly. In the first half of 2025, the national average auction price fell to Rs 1,158.54 (US$ 3.89) per kg, down from Rs 1,265.67 (US$ 4.12) in H1 2024.
This squeeze on prices comes even as export revenues climbed to Rs 221.29 billion (about US$ 743.12 million) during the same period — up from Rs 210.95 billion (US$ 687.02 million) in H1 2024.
In July 2025, Sri Lanka broke new ground in the tea export market. Shipments reached 24 million kg, a 13 percent rise year-on-year and the strongest monthly volume in 42 months.
By mid-year, the cumulative export volume hit 150 million kg, up 7 percent over the same period in 2024, while earnings reached an unprecedented Rs 263 billion (US$ ~884 million), with a record average Free-On-Board (FOB) price of US$ 5.87 per kg.
The first quarter of 2025 also saw solid gains. Production for January–March rose to 61.78 million kg, a 3.61 million-kg increase compared to Q1 2024.
But average auction prices dropped again: the national average fell to Rs 1,179.32 (US$ 3.98) per kg, down from Rs 1,286.99 (US$ 4.11) in the same quarter a year earlier.
On the macro side, the Central Bank of Sri Lanka reported a modest 2.9 percent year-on-year (y-o-y) increase in domestic tea output in May 2025, attributing the rise mainly to favorable weather.
Still, analysts caution that these volume gains may not translate into stronger profitability. A forecast from Capital Trust Securities projects that Sri Lanka’s tea production could rise further to 275–280 million kg in 2025, with export earnings hitting US$1.4–1.5 billion, up from US$1.435 billion in 2024.
But that projection comes with caveats: rising supply globally, currency fluctuations, and policy uncertainty could weigh on average prices.
In April 2025, the monthly output surged: tea production reached 26.39 million kg, a 23 percent year-on-year increase the highest April crop in five years.
Meanwhile, export revenue from January to April reached US$477.88 million, with export volume climbing to 81.41 million kg.
Sustainability and cost challenges remain key headwinds. Producers face mounting input costs, especially with proposed wage hikes for estate workers. Smallholder growers, who supply a significant portion of Sri Lanka’s tea, may also feel the impact of tighter margins and competition from value-added segments like tea bags and instant tea.
As Sri Lanka reclaims export momentum, the industry is at a critical inflection point. Growth in volume is clear but without better value retention, the sector risks undermining its competitive edge just as it seeks to scale sustainably into premium, value-added markets.
