Australian agriculture and seafood exporters facing financial ruin are desperate to reconnect trade with the Chinese market, as green shoots appear following an easing of the coronavirus pandemic there.
- The cost of international airfreight has skyrocketed since the outbreak of the coronavirus pandemic
- This has made it difficult for Australian seafood exporters to reconnect with the Chinese market, even as business begins to resume there
- State governments are working with industry to plan alternative flying options which could include government subsidies or freight sharing across different industries
But one economic expert has warned China’s economic recovery is not assured.
Before the pandemic, Brad Adams’ ASX-listed export company Ocean Grown Abalone had a market value of $30 million, but that has now halved.
He is among countless Australian seafood exporters desperate to reconnect the airfreight supply chain to get his product to key export markets.
“We’re like restaurants. If we can’t sell our product, we can’t survive,” Mr Adams said.
“To have all airlines around the world grounded has ground world trade to a halt for these perishable products.”
Mr Adams said the cost to send airfreight had doubled and, in some cases, quadrupled, making it uneconomic for many producers.
On the other hand, Mr Adams said the Chinese economy was beginning to show signs of recovery and that demand for his produce still existed — he was just unable to get it to market.
Ocean Grown Abalone is the biggest employer in the regional town of Augusta, in Western Australia’s South West, and the company has had to halve production and lay off staff while the borders are closed.
“When the market was closed, it was shut up shop, stop fishing, don’t go to work,” he said.
“As China comes out the other side of the virus, we’re seeing the orders are starting to return.”
Future far from certain
Lowy Institute Senior Fellow, Richard McGregor, said the Chinese economy was showing some signs of repair, but warned the recovery was far from certain.
“It is certainly true the productive capacity of the Chinese economy is starting to get back on its feet,” he said.
“Workers are starting to get back into factories, they’re beginning to produce goods — but that’s only one side of the equation.”
The other side of the equation is demand.
Many Chinese citizens have gone two to three months with no income and Mr McGregor said there was not a great deal of pent-up demand from the Middle Kingdom.
The COVID-19 pandemic has also created some issues for China’s exports.
“Outside China, just at a time when they’d like to sell more to foreign countries, those countries’ economies are starting to go downhill rapidly,” Mr McGregor said.
“There’s still a lot of demand in China, and a collapse in demand outside China, so that makes it difficult.”
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Mr McGregor said many expected China’s economy to bounce back in the second and third quarters of this financial year, but the ongoing public health crisis remains a big market variable.
“It is certainly true the brutal quarantine measures implemented in China in the early months of this year have worked up to a point,” Mr McGregor said.
“Most people would expect a second wave of infections at some stage, and China is on alert for that.
“We don’t know how big that will be.”
Keeping a foot in the door
But despite the challenges, private enterprise and state governments are hedging their bets, and trying to keep a foot in the door of the Chinese market.
Mr Adams, who is also the president of the Australasian Abalone Association, said the Australian seafood industry was working together to try to charter weekly airfreight to key export markets.
WA Agriculture Minister, Alannah MacTiernan, has confirmed plans to establish a national freight milk-run from Hobart to Perth to export fresh produce to Asian markets. (ABC News: Rob Koenig-Luck)
Western Australia’s Agriculture Minister, Alannah MacTiernan, said the states were working alongside industry to develop a national approach to keep the fresh food trade open.
“The proposition is to have that as a national program where [the plane would leave] … Hobart, go to Melbourne then to Perth and up to Asia,” she said
Ms MacTiernan said there was also potential to incorporate lamb, beef and pork into the shipments in partnership with other states, and she earmarked a possible collaboration with mining companies.
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“Some of the companies are bringing in spare parts … and we know that companies like Rio [Tinto] are bringing in lots of protective equipment [to Australian mine sites],” she said.
“We’re looking to see if we could get them to use some of these plane charters [on the way back] to try and defray some of the costs.”
Former Agriculture Minister, Terry Redman, is calling on his federal counterpart, Deputy Prime Minister Michael McCormack, to step up and back the proposal financially.
“The state and federal governments have a role to play, I think that may be a subsidy in the short-term,” Mr Redman said.
“I’ve never like the term subsidy, but we’re operating in a very extraordinary space now.
“It’s very real … and there’s never been anything like this in WA’s 100-year history, therefore we have to look at all the options and it may well be that we take those options that we haven’t supported in the past.”
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‘Don’t wait’ for help: Export Council
However Export Council of Australia chair, Dianne Tipping, has questioned whether the government should be expected to subsidise flights for industry.
She said the state and federal governments were already working hard to keep freight networks open within Australia and keep product flowing to the borders.
Ms Tipping believed industries and individual businesses needed to collaborate and come up with novel ways to secure supply lines into China.
Her advice to exporters was “don’t wait” for help.
“What we’ve got to do is look at ways to get more cargo available so carriers that are bringing aircraft into Australia are able to have a full belly and be able to make that cargo flight with a reasonable bottom line,” she said.
“You have to remember the only market that’s accessible for the next month will be China as they come down their curve.
“They’re going to want cargo and we’re going to be one of the only countries that can do that very quickly.”