The Last Tea Premium Ever Paid

In 1866, five of the fastest sailing ships ever built left the same Chinese river within hours of one another and held station across 14,000 miles of ocean, and the reason was written down in plain commercial language before any of them cast off. The bills of lading covering that season's cargoes out of Foochow carried a premium of ten shillings per ton³, payable to whichever ship docked in London first, on top of the ordinary freight rate. That clause is the whole engine of the thing. Remove it and there is no race, only five cargoes of leaf arriving whenever the wind allows.

The clause was, in the language of the trade, a first-to-market payment, and it existed because the market it served was genuinely bottlenecked. Once the East India Company's monopoly ended in 1834² the China trade opened to anyone with a hull and a charter, and whoever landed the new season's crop first could sell it before a competitor's cargo touched the dock. Consumers believed fresher tea was better tea. Buyers paid accordingly. The premium was not sentiment about sail; it was a shipowner's share of a price advantage that could be measured, and the figure agreed on was ten shillings a ton.

What ten shillings a ton actually bought

In that 1866 season, Captain John Keay of the Ariel had taken the first cargo at Foochow: 560 tons of first and second pickings, the finest leaves available, at a high freight rate¹. On that tonnage the premium works out at 5,600 shillings, or £280, riding entirely on the order of arrival. Against the £12,000 to £15,000 it cost to build a clipper in the first place¹, £280 is a real sum but not the return that justifies the vessel. A clipper built at that cost might, in a good season, bring home a cargo worth almost £3,000, and against that scale the premium was never the prize on its own. It was the visible, contractual tip of a much larger advantage, which was selling a full hold into a market that no rival cargo had yet reached.

Ariel left Foochow on 28 May 1866 at five in the afternoon. Taeping, Fiery Cross, Serica and Taitsing went within hours. Ariel and Taeping made London on 6 September after a passage of 99 days², which is an average of about 141 miles a day, or roughly six miles an hour sustained without a break for a quarter of a year. Taeping docked on the tide under half an hour ahead of Ariel⁴, with Serica following a little over an hour later, on the same tide. Ninety-nine days is more than 142,000 minutes, and the two leaders were separated at the end of it by something under thirty of them.

That margin, in that same 1866 season, is where the contract broke. The owners and agents of the two leading ships agreed to split the premium between Ariel and Taeping rather than dispute the closeness of the finish⁴. The most celebrated finish in the history of the tea trade produced no clean winner in the sense the clause had contemplated, because a clause that pays only the first ship cannot cope with three of them on one tide.

The hull that made the speed made the risk

The speed cost something too: a hull built for it. A hull drawn fine enough to hold that daily average is a hull with little buoyancy aft, and a following sea in the Southern Ocean or the typhoon season of the South China Sea can climb over the stern of such a ship and swamp her, which the trade called being pooped. This was not a theoretical objection. Ariel was lost with all hands in 1872, six years after her famous race, in circumstances consistent with exactly that. The ten shillings a ton bought a design decision, and the design decision was paid for by crews.

The season the clause was last written

The 1866 race is usually filed as the high point of the clipper trade. It was also the terminus. No tea season after it saw a premium written into a clipper's bill of lading again, and the reason had already docked before the racers did. A steam-assisted vessel, the Erl King, had landed tea in London about two weeks ahead of the leading clippers⁴. Two weeks is not a close finish. It is the entire premise of the premium removed, since the clippers were not, that year, bringing the first tea of the season to market at all. By the time Taeping and Ariel came up the river the London market was already supplied and prices were already under pressure. The administrative awkwardness of three ships on one tide finished off a clause that the steamer had already made pointless.

What the canal did to the arithmetic

The Suez Canal changed the arithmetic. Before November 1869 a steamship bound for China went round the Cape of Good Hope and had to fill so much of her capacity with coal that there was little room left for paying cargo, which is why sail held the route at all. Opened that November, the canal cut the distance by around 3,000 miles for any ship that could use it³, and a steamship could use it. A clipper could not: the Red Sea's steady headwinds are the wrong kind of wind for a square-rigged sailing ship, so the very route that saved a steamer weeks was closed to the vessels that had just raced each other across an ocean to prove they were the fastest thing afloat⁴. The clipper's advantage did not shrink. It was fenced out of the shortcut entirely. By the mid-1870s the tea trade had passed almost entirely to steam⁴.

The bottleneck the premium paid for was already dissolving in the same season the race was run, and no shipping contract wrote the clause again after it. Three years later, the canal removed the exact advantage the premium had rewarded, for every ship that could use it. A clipper could not.