McLeod Russel to launch tea trading in Dubai

McLeod Russel India, the world’s biggest tea planter, is setting up a subsidiary to launch tea trading operations in Dubai, a financial hub which is fast emerging as a major centre for global trades in tea as well.

McLeod, according to managing director Aditya Khaitan, would launch its Dubai operations in May making it one of the few plantation owners in the world to have such an operation consisting of blending facilities and warehouses, which is mostly being carried out by global commodity traders.

“The subsidiary is being formed and we have already recruited people. I believe operations will start by mid-May. We would be one of the earlier people in the producers’ world who would be doing something like this,” Khaitan told DNA on Monday.

The subsidiary will be doing blending in Dubai in bulk
after bringing in teas from its gardens in Assam, Africa and Vietnam. Initially, McLeod would be outsourcing the entire operations. Later as volume picks up, it would create its own infrastructure like blending units and warehouses.

“As a first step we would be offering teas from our own estates. Once the volume and base picks up, we might start sourcing from other plantation companies also,” Khaitan said.

With the Middle East and the adjacent areas now accounting for 25% of the global tea trade, the emirate is now a major centre with Dubai Tea Trading Centre, housed within the Jebel Ali Free Zone, handling a record 10.6 million kilogram of multi-origin tea in 2010, up 40% over 2009.

“The advantage of having a facility in Dubai is that the teas that we would be blending would be fresher, being directly sourced from the gardens and it will be more customised for discerning buyers. All this would help us to command a premium over other merchant blenders,” Khaitan said.

Within India, Khaitan is eagerly waiting for the tea season to start by end-March with the arrival of the first-flush tea. Following poor crop in 2010 due to adverse weather conditions, this year’s first Assam tea would be commanding a price of about Rs 150-Rs 160 a kg, up from about Rs 130 in 2010, Khaitan said.

“There is shortage at the start of the season in India and less crop in most tea growing areas of Africa. The world need around 55-60 million kg of tea more every year to take care of the rising demand. I don’t see the world producing that much this year. Considering this, there would be shortage of around 100 million kg, globally keeping prices firm this year.”