TRADE-SRI LANKA: Hammer Falls on London Tea Auction

By IPS Correspondents Reprint | | Print |

Feisal Samath

COLOMBO, May 15 1998 (IPS) - The hammers fall next month on the venerable London Tea Auction giving way to Colombo and auction centres in other tea producing countries.

Over the years Colombo has emerged as the world’s biggest tea auction centre by virtue of the fact that the country is the top tea seller in the world eclipsing London.

“London is no longer considered the barometer of international prices – Colombo has taken over that role,” said Chrisantha Perera a veteran tea trader and director of commodities at the brokers’ firm of Forbes and Walker Ltd.

Over the years, producers have realised that better prices are obtained at their end rather than channelising teas through the London auction system, Perera added.

That was not the case in the latter part of the 19th century when the British Empire held sway over large parts of the world and allowed British mercantile interests to dominate plantations in many countries.

After the British invaded Sri Lanka (then known as Ceylon) in 1796, the planters followed and established coffee estates. But when coffee was hit by a blight they took a bold step and tried out tea.

For labour, the British shipped in thousands of Tamils from South India and their descendants continue to live and work on the plantations under Sri Lankan management.

As the colonial economy gained root the London tea auction system flourished and Britian became the only country which marketed tea but did not produce any of it.

But that will end in June and the sound of the gavel which reverberated at the end of each sale will be heard no more bringing to an end yet another hoary legacy of the Empire.

With over 200 million kgs of tea shipped out of Colombo every year, Sri Lanka is now the world’s biggest tea exporter. Although India produces much more it is also happens to be a major consumer.

“The London tea auction where the majority of teas by producer countries was sold and re-exported to 50 other destinations worked perfectly as long as the British controlled the world’s tea production,” said Maxwell Fernando a tea consultant at Somerville and Co., another major broker.

In fact, before the second world war more than 60 per cent of teas produced by worldwide British interests were sold through the London auction. But after the war ended the auction did not reopen till 1951 while centres at Calcutta and Colombo were functional by 1947.

New centres emerged in other producer countries which, taking a cue from the British developed their own methods of tea marketing at the expense of the London auction.

Sri Lankan tea analysts said that as a result the post-war period saw a sharp drop in the quantities of tea consigned for the London auction. By 1996, Colombo was marketing 95 per cent of its production.

A little known fact is that the auction system originated in Britain for the sale of ancient books and artifacts when a proper assessment of their true value was not possible said Fernando.

The tea auction system came into being after concern emerged over the British East India company having too much of a monopoly over the tea produced in China – then the biggest tea producer.

Authorities felt that it was more prudent to dispose of the tea through a public ‘outcry’ system at the auction rooms rather than by private deals where there was room for corruption.

By 1750, the tea auction was well developed and and tea chests arriving in London were transferred to warehouses across the country to be graded and valued according to set standards.

Samples drawn from each chest were presented to a panel of ‘tea-tasters,’ who ‘sipped the samples,’ in a practice that still exists today.

The London auction centre which was originally on Mincing Lane was later shifted to its present location, the Chamber of Commerce Building where the auction rooms have a panoramic view overlooking the river Thames.

But all that ends next month. Perera says the London auction centre was doomed in the eighties when auction centres in producer countries became more active selling their own tea. “Since then it has held little more than sentimental value,” he said.