The worsening trade spat between China and Australia might have upended a profitable export market for Australian wine producers, but the economic pains are also being felt on the other side of the ocean, as the Chinese wine market struggles to absorb the aftershock of the boozy breakup.
In March this year, China imposed up to 218.2% anti-dumping tariff on Australian wines, which up till that point accounted for about 40% China’s overall imported wines.
As a result, Australian wine exports to China collapsed.
From January to June this year, Australian wines destined to China plunged to just AU$13 million, down from AU$419 million of the same period last year, according to data released by Wine Australia.
In China, the ripple effects are also immediate and over-reaching. In the first six months of the year, despite the country’s recovering demand and strong on-trade bounce-up, its wine imports fell short to reflect the buoyance.
According to data released by Chinese customs, China imported 212.9 million liters of wine worth RMB 5.33 billion (US$822 million) in first half of the year, which is a drop of 1.5% in volume and a further drop of 8.4% in value over the same period last year.
The new data is disappointing as the comparison base of 2020 was already a historic low, due to Covid-19.
Going forward, with the latest surge of Covid cases caused by the more infectious Delta variant could add more uncertainties to the country’s wine market, which traditionally depends on sales from restaurants, bars and hotels.
Additionally, the data also signals that the early rush to import French and Chilean wines to replace Australian wines might have subsided. Increases led by the two countries have yet to absorb Australia’s 40% market share.
Sudden drop in June
Up till May, the country’s wine import value was growing moderately at 0.15%, as we have reported, which means the drop was probably most prominent in June, though detailed data of the month is not yet released.
This coincided with a time when China’s affluent Guangdong province, also the country’s biggest wine consumer by value, was hit with a new wave of Covid cases.
The Delta variant dominated infections in the provincial upsurge, the first time it has hit China.
At the time, Reuters reported that strict disinfection and quarantine measures since May 21 have led to congestion of vessels waiting to berth in one of China’s busiest container ports, Yantian International Container Terminal (YICT) in Shenzhen.
“The impact would be bigger than the Suez Canal incident,” Patrik Berglund, chief executive of Xeneta, an ocean freight rate benchmarking firm headquartered in Oslo, told the news agency.
Normal operation resumed towards the end of June at most ports in Guangdong.
The new surge of cases that are now reported over 30 cities across China, the biggest uptick yet for the country for more than a year, will most likely dent the country’s wine consumption again.