Dubai's tea trading centre plans to expand operations

Dubai's fledgling tea trading centre has bold ambitions and longer term could trade other soft commodities such as coffee and spices, Sanjay Sethi, head of the Dubai Tea Trading Centre, said in an interview.

The Middle East is the second largest consumer of tea with about 250 tonnes consumed annually and sales are rising fast in the region which accounts for 24 per cent of global tea imports.

Created in December 2004 the DTTC started receiving teas in March and has already transacted 1,000 tonnes of multi-origin teas from nine different countries.

"We would be happy to grow the volume of teas routed through Dubai by 5 to 7 per cent in the second year," said Sethi.

The DTTC is part of the Dubai Metals and Commodities Centre, a state-run free zone that aims to make Dubai into a major centre for hard and soft commodities.

"The target is to increase the flow of tea through Dubai by 10-15 per cent in the next three years to 70 million kg," David Rutledge, the DMCC's chief executive, said.

It offers its members free storage for up to 60 days, preferential clearing at Dubai ports, financing, the use of blending facilities and a 50-year tax holiday, incentives which Kenya's rival Mombasa tea auction is struggling to match. Kenya is one of the three largest black tea producers in the world along with India and Sri Lanka. Its 36-year-old auction, the world's second largest black tea market, offered 305 million kg (305,000 tonnes) of African teas last year.

Unlike Mombasa, the DTTC is not an auction but a platform for buyers and sellers. It does not set prices nor take part in negotiations.

David Mugambi, chairman of the umbrella group East Africa Tea Trade Association, said on Friday Mombasa's tea auction could lose business to Dubai if it failed to match the attractive incentives on offer.

"Eventually we are likely to witness an exodus of tea traders and producers from Mombasa to centres offering a more enabling and conducive environment".

Sethi said Kenyan tea was still fairly nominal in the Middle East, but instead of viewing the DTTC as a threat Kenya's tea traders should look at the centre as offering an opportunity to build demand in the region for its teas.

Last year Dubai handled 74 million kg of multi-origin tea, which was primarily re-exported. An extra 61 million kg was transhipped through Dubai's ports, accounting for almost nine percent of the world's tea trade.

"Our initial objective was to get representation from most of the tea producing countries," said Sethi, with a drive now on to get buyers. Year two would be about boosting membership and volumes. In the third phase of the expansion it planned to expand into Europe and the United States.

So far members are mainly supply-based but the DTTC has a few large buyers like Unilever.

Longer term Sethi said the DTTC would look at other commodities like coffee and spices once the tea trade was firmly established.

In 2004 total world tea production stood at 3.2 billion kg. Of this, 1.47 billion kg, or close to 50 per cent of the tea produced, was exported out of growing countries as surpluses.