Due to China’s deadly coronavirus outbreak, wine shipments are being delayed in the port of Shanghai, leaving South African exporters reeling. Anton Pretorius reports.
South African wine exporters with pending shipments to China are watching nervously from the sidelines as the coronavirus (COVID-19) brings the entire country, including its global shipping trade, to a grinding halt.
The bottleneck is mainly in the Chinese ports of Shanghai, Xingang, Tianjin and Ningbo. These Chinese ports are at full capacity and reefer containers have been prohibited. Port authorities are advising shipping companies to unload their cargo elsewhere.
Due to the mounting costs, shipping companies have introduced a congestion tax for reefer transport to China, varying between $1 000 and $1 250 (R15 000 and R19 000) per container.
Locals feeling the pinch
This is bad news for South African wine exporters such as Imbuko Wines who ship 19 to 22 containers (40 ft) of wine to China every year – accounting for 7-8% of the company’s exports.
According to Theunis van Zyl, managing director at Imbuko Wines, there’s been a severe backlog of ships in the port of Shanghai. “At the moment, it’s a logistical nightmare. The congestion of containers and ships have had a noticeable impact on our exports,” he says.
“At the moment, we’re sitting with approximately 3 000 cases of our wine that’s stuck at the terminal, and can’t be cleared for release. Another 9 000 cases are sitting in our warehouse that cannot be shipped. All productions are placed on hold until further notice.”
Imbuko’s agency in China have told the company that all exports to the country have been stopped indefinitely (as instructed by Chinese authorities). “We’ve been told to suspend all shipping to Shanghai for the moment, and we will be notified when things return back to normal.”
“The problem is that port personnel have been instructed to remain at home and cannot unload the ships,” Theunis says.
Hein Koegelenberg, CEO of La Motte – a brand that has had success in the tough Chinese wine market – says most wine shipped to China are sitting in warehouses. “Stock has not moved during the Chinese New Year,” he says.
“At the moment, it’s like a ghost town, and businesses are reportedly only open from this week onwards.”
Business in limbo
Yntze Buitenwerf from Belgium-based specialised reefer operator, Seatrade Reefer Chartering, doesn’t foresee any rapid improvement of the situation. “The total number of reefer containers worldwide is around 1.5 to 1.6 million. This means that around 8% (120 000) reefer containers have disappeared from the market due to the blockage.”
Marcus Ford, Wines of South Africa (WoSA)’s Asia market manager, says the reality of the situation in China is that “things are definitely not back to normal yet.”
“There’s disruptions to all parts of the country and all businesses are struggling to get back up and running.”
He refers to the Chinese New Year holidays which were extended by an extra week. Chinese citizens who left their home city were also required to self-quarantine for 14 days. “A significant portion of the Chinese labour force have been out of action for three weeks longer than usual.”
Fruitnet.com recently reported that South African exporters of table grapes, which are now in their peak shipment period, are concerned that uncertainty and lack of demand once the fruit is distributed may affect them adversely.
End in sight?
Theunis says the repercussions of this logistical catastrophe is a six-month loss in sales once you add up all costs and stock losses. “We’re very concerned about this. It’s having a serious impact on our exports. You can only imagine what kind of economic impact this could have.”
“All wine trade shows have been suspended or put on ice, which means that we, as a business, are losing out on many potential clients and leads.”
Reports are widespread of the postponement of trade fairs and promotional tours, including the China Food and Drinks Fair (aka Tang Jiu Hui in Chengdu). Wine tastings, dinners, wine shops and bars have delayed reopening, and distributors are forecasting sales cuts.
“We’re very concerned,” says Hein. “We will not get paid on time, and we can’t do anything about it.” He says it’s impossible to speculate how long it will take before things return to normal. “It can take more than 12 months, and there will be new distribution opportunities. The problem is the amount of stock of all products sitting on the books of distribution operators.”
The situation has hit the wine trade hard. With initial hopes that everything might return back to normal by the end of the Chinese New Year (Saturday, 25 January 2020) long gone, the future looks dire.
Marcus describes the conditions in Shanghai: “On a short trip to my local supermarket this week, I had my temperature checked three times in under an hour, and then again when I returned to my home office. Add to this the slightly surreal sight of the supermarket cashier dressed in full protective gear [see image below], it’s no surprise that things have not yet returned back to normal.”
According to smartcompany.com.au, Australia’s $1.3 billion-a-year wine exports to China, about 20% of the national crop, is facing a massive hit from the coronavirus (COVID-19). Exporters say sales are down by as much as 90% in the first two months of the year. If the crisis continues, millions could be lost by year’s end.