China's belt-tightening ripples out

China is now the country's largest trading partner with New Zealand's provision of milk to its masses, but niche-market exports of wine, paua and crayfish remain multimillion-dollar export earners. Senior business reporter Simon Hartley looks at the potential effects of the Chinese economy's austerity drive on southern exports of wine, paua and crayfish - the latter worth more than $220 million a year.

The Chinese Government's widespread crackdown on extravagant spending may yet have a downside for exports of Southern luxuries, from the wine industry to paua and live crayfish exports.

Chinese President Xi Jinping's austerity programme of more than a year, a nationwide campaign targeting extravagance and corruption, has been widely reported in Asia's media. There have been headlines about major downturns in luxury item sales, the curtailment of travel and the emptying of upmarket hotels and restaurants, especially by government and military officials.

Chinese Government researchers had claimed in early 2012, banqueting and entertainment in China was estimated at between $US50 billion ($NZ57.3 billion) and $US145 billion, sparking the austerity programme.

New Zealand paua, crayfish and wines are near the top of the Asian menu chain and command eye-watering prices at times.

It appears the austerity effects are only just beginning to be felt by those New Zealand exporters, amid the downturn in sales of luxury cars and watches, wedding banquets, conferences and government meetings.

Central Otago-based New Zealand Winegrowers Association chairman Steve Green said in recent months he had seen a 20% national decline in sales to China - a top-five export destination.

''We're seeing a [Chinese] reluctance to purchase luxury goods. But we're taking a long-term view that this is cyclical, and will change,'' he said, when contacted.

Reuters has reported on official Chinese Government spending. The Central Commission for Discipline Inspection said money spent on meetings, official overseas trips and vehicle purchases fell by about 53%, 39% and 10% respectively in 2013, from 2012.

The Beijing Daily and Beijing Times reported the city's 27 top hotels were absent from a list of 318 designated venues drawn up by the municipal procurement department for the 2014-15 fiscal year.

Mr Green said China, in the top five destinations for New Zealand wine exports, was behind Australia, the United Kingdom and United States, but ahead of Canada.

''They have gone from almost zero [exports] to being an important market,'' he said.

Statistics New Zealand (SNZ) said beverage exports in the decade to 2012 had more than tripled, to reach $1.5 billion. Most of the $1.1 billion increase had come from wine exports, which rose by $942 million.

In recent months, the world's two largest distillers had noted a significant decline in sales to China. The United Kingdom-listed Diageo saw a 40% sales slump in baijiu, a clear grain spirit popular in China, while Pernod Ricard expected to book a decline in whisky sales, following several years of surging growth, the Financial Times reported.

Mr Green was asked about the effect on sales of the high-end, niche-market Central Otago pinot noir, which makes up less than 5% of New Zealand wine exports.

He said it was too early to accurately say how the southern pinot noir would be affected. He understood it was the Bordeaux-style wines of Hawkes Bay and around Auckland which had been hit hardest by decline in Chinese demand.

Paua Industry Council chief executive officer Jeremy Cooper said while exporting at present was ''slower'', the waning of peak periods of paua sales, during the Chinese New Year and national China day, were being replaced by increased domestic sales in China.

''There's a huge increase in abalone being eaten in China, being fed by the aquaculture [industry] which is cheaper and smaller [size abalone],'' Mr Cooper said when contacted. Statistics New Zealand data showed mollusc exports - paua and mussels - were up 86%, from $17 million to $32 million, from 2007 to 2012.

''By itself, China accounted for more than one-fifth of [New Zealand's total] fish and fish preparations exports for the 2012 calendar year,'' SNZ said.

Mr Cooper said any decline in the amount of paua usually consumed in larger banquets was being taken up by expanding retail sales to consumers.

''There's a big middle-class which is becoming more affluent,'' he said.

Dunedin-based commercial paua fisherman Ross Newton has about 50 tonnes of leased quota to gather between Oamaru, Stewart Island and up to Milford Sound in Fiordland, ''The big thing is China's austerity [drive].

''It's affecting us in a big way. It has been stop-start to the season. We've been relying [on sales to] Singapore and Hong Kong,'' he said.

Mr Newton emphasised the commercial divers were at the start of the supply chain, and had nothing to do with the processing and marketing of paua for export.

Paua prices per kg of meat last year were $60 to $70, and prices were at similar levels at present, but he understood some fishers were offering from $50-60kg per kg.

Mr Newton, paua fishing since 1987, said one previous season he held quota for up to 120 tonnes. But quota had been cut back and commercial gatherers had imposed their own size limits, voluntarily taking larger paua than the recreational 125mm minimum length, and seeding paua beds around the east and West Coast.

Several seasons ago paua had fetched up to $115 a kg, but the recent strong New Zealand dollar had since also undermined prices.

He understood large numbers of restaurants in China had closed because of the austerity drive.

Mr Cooper said while China was the destination for 95% of paua exports, Chinese populations elsewhere in the world, such as Vancouver, were also important markets.

He said a total 1056 tonnes of paua (green weight with shell) was taken annually by all commercial operations, with little annual fluctuation. The 40% meat content was mainly canned, and even the 5% to 10% paua exported chilled was eventually canned at its destination.

The strength of the New Zealand dollar was also a headache for the industry. Mr Cooper estimated profit margins were down 20%-30% because of the exchange rate with the US dollar.

While able to speak only regarding ''getting paua to the beach'', as opposed to its processing and marketing, Mr Cooper said the annual take of paua for export rarely varied.

Similarly, the crayfish export tonnage this year was expected to be similar to last year, as are expectations of demand and pricing; albeit also hit by the strong kiwi.

SNZ data said from 2007 to 2012, lobster exports grew 84%, from $121 million to $223 million, while for the same period overall seafood exports were up by 26%, from $1.25 billion in 2007 to $1.57 billion in 2012.

China as an export destination took the lion's share. Total New Zealand seafood exports were up more than 200%, from $117 million in 2007 to $353 million in 2012.

In 2012, those exports receipts were headed by rock lobster (crayfish, $223 million), followed by mussels ($207 million), hoki ($187 million), squid ($86 million), jack mackerel ($64 million) and salmon ($52 million).

''The value of rock lobster [crayfish] exports also increased significantly ... as a result of increases in both volume and price,'' SNZ said of the 2012 figure.

The Fiordland Lobster Company is the country's largest live crayfish exporter. Chief executive Alan Buckner was bullish about prospects for the season, which began on April 1.

He said there was not yet any sign in the lobster sector of falling demand because of the Chinese austerity programme.

''Our expectation is that the demand this year will be comparable to last year. It's the year of the horse in China, which is a good year for weddings, and this should assist in driving demand,'' he said.

Mr Buckner is in China this week, visiting major customers in Shanghai, Shenzhen and Hong Kong. China takes the majority of Fiordland Lobster's live crayfish, but it also exports to Hong Kong, Japan, Singapore and the United Arab Emirates.

SNZ data said China was now the main player in New Zealand's export ''fish and fish preparations'' market, its value doubling during the five years to 2012.

''Rising Chinese demand for crustaceans, mainly rock lobster, frozen fish and molluscs [including paua] heavily influenced the increase,'' SNZ said.

From 2007 to 2012, crayfish tonnage for export increased 12.5%, from 2.4 million tonnes to 2.7 million tonnes.

Mr Buckner said it was still too early to assess the start of the season, but based on last season's catch history, the industry was confident the fishery should perform as well as it has during the past two seasons.

''The market demand is always relatively light in early April due to the Qingming festival, also known as tomb sweeping day,'' Mr Buckner said.

Mr Buckner said last season the price ''on occasions'' reached $100 per kg, at the high demand periods, such as China's national day in October, and the Chinese New Year. It had hit $100 per kg in 2009, but waned after that.

''Our expectation is that the volume we export from New Zealand this year will be comparable to last year,'' Mr Buckner said.

While the strength of the New Zealand dollar was having a negative effect on all New Zealand exporters, Mr Buckner said the strong Chinese demand for lobster was offsetting some of that problem for the lobster industry.


Seafood and beverages to China
• From 2007 to 2012 - overall NZ seafood exports were up by 26%, from $1.25 billion in 2007 to $1.57 billion in 2012.
• China is NZ's largest seafood market, with 2013 exports up 19% to $376 million.
• From 2007 to 2012 - total NZ seafood exports were up more than 200%, from $117 million in 2007 to $353 million in 2012.
• Over two decades, total seafood sales to China grew from $500 million to $1.5 billion.
• From 2007 to 2012 - mollusc exports, paua and mussels, were up 86%, from $17 million to $32 million.
• Crayfish - $223 million value in export receipts for 2012, compared to: mussels, at $207 million, hoki, $187 million, squid, $86 million, jack mackerel, $64 million and salmon, $52 million.
• From 2007 to 2012 - crayfish tonnage for export increased 12.5%, from 2.4 million tonnes to 2.7 million tonnes.
• From 2007 to 2012 - crayfish exports grew 84%, from $121 million to $223 million.
• NZ's overall beverage exports in the decade to 2012 had more than tripled, to reach $1.5 billion, with most of the $1.1 billion increase coming from wine exports, which rose by $942 million.

SOURCE: STATISTICS NEW ZEALAND


- simon.hartley@odt.co.nz

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