China’s harsh anti-dumping tariff imposed on Australian wine has cost Australian wine industry AU$ 1 billion, according to the country’s wine trade body, resulting in a 30% decrease in Australia’s overall wine exports last year.
According to the latest Export Report released by Wine Australia, the country’s wine exports had met “unprecedentedly tough market conditions” resulting in a decrease to AUD 2.03 billion (US$1.46 billion) in value and 619 million litres in volume for the year ended December 2021.
Notably, the 619 million litres of wine shipped in 2021 is the lowest volume shipped in a 12-month period since the year ended September 2004.
Drastic drop in exports to China
The report has attributed the decrease largely to the shrinking exports to China, aside with other factors including global freight crisis and a retreat in some markets after the COVID-19 induced stockpiling in 2020.
China first announced the anti-dumping investigation on Australia and imposed a preliminary tariff of 212% in 2020, which was eventually formalised at 218% for a period of five years in March 2021.
Compared to 2020 where shipments were mostly free from tariffs, Australia’s exports to China in 2021 have significantly declined by 97% in value to AUD 29 million (US$21 million), equivalent to a loss of nearly AUD 1 billion (US$ 719 million).
The figure decreased by 93% in volume to 6.4 million litres, which equals to a loss of 90 million litres. As a result, China is no longer Australia’s biggest export market.
Apart from the loss of shipments to China, other factors crippling the country’s exports include declining shipments to the UK, the US and Canada. This is a result of a surge in export in 2020 due to COVID-19 induced stockpiling, followed by the global freight crisis later in 2021.
Low wine inventory levels were also seen at the beginning of 2021 after three consecutive small vintages, as well as delays in shipping the larger 2021 vintage amid the global shipment jam.
Wine Australia General Manager Corporate Affairs and Regulation Rachel Triggs said 2021 represents the first full 12-month period to be observed under the China tariffs and global challenges, “…we’ll keep seeing significant differences in the year-to-date export figures as a result of the deposit tariffs until the end of 2022,” she said.
Growth in other Asian markets
As Australia has lost its access to the China market, the other top five markets replacing China’s position by value were the UK (-1%), the US (-7%), Hong Kong (+45%), Singapore (+108%) and Canada (-14%).
By volume, the top five markets were the UK (-9%), the US (-8%), Canada (-16%), Germany (-1%) and New Zealand (-7%).
Although Australia’s wine exports to China suffered severely from the tense diplomatic tie between the two nations, exports to other markets reached AUD 2 billion (US$1.4 billion) for the first time since 2009, Triggs noted. Exports excluding China have increased by 7% in value as a whole, and by 6% in volume to 613 million litres.
The markets recorded with the largest increase in export figures are mainly in the Asian region, which include Singapore (108%), Hong Kong (+45%), South Korea (+74%), Taiwan (+65%) and Thailand (31%).
The report has identified the increase in other markets as a positive sign indicating previous demand for products in China is emerging in other markets. This highlights the importance of Australian grapes and the market diversification of the country’s wine sector.
Commenting on the export growth in other destinations, Triggs believed it would take time to offset the loss in China market, “This is not something that will happen overnight, nor within a year. But the Australian wine sector is resilient, and there are early signs that hard work in expanding and diversifying markets is paying off,” she commented.