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Australian wine exports saw “not unexpected” export declines, affected by China’s punitive tariffs and the ongoing impact of the pandemic, according to Wine Australia’s latest Export Report released.

Its exports declined by 10% in volume to 625 million litres and 19% in value to AU$2.08 billion in the past 12 months ended in June. Its exports to China including Hong Kong and Macau fell the sharpest by 74% to AU$206 million, less than 20% of its peak at AU$1.2 billion, as the report shows.

Exports to Hong Kong, majority of Australian wine exports to China shrank 9% to AU$170 million during the year.

The decline in volume and value was not unexpected, as it was largely the result of the continued impact of the significant reduction in exports to mainland China, driven by high deposit tariffs imposed in November 2020. This is expected to remain a significant influence on the moving annual total data of Australian wine exports until late 2022, according to the wine trade body.

Additional headwinds caused by the pandemic including severe shipping delays and increased freight costs – and rising inflation, business costs and interest rates also contributed to the export contraction. All these have created “extremely challenging” environment for Australian wine exports, as the report says.

Wine Australia Manager, Market Insights, Peter Bailey said that while the total data showed declines, there were some encouraging signs in key and emerging markets.

“When mainland China is excluded from the data, exports increased by 5% in value to AU$2.06 billion, an increase of AU$105 million – the highest value since 2009–2010. This is despite volume declining by 3% to 619 million litres. The value growth for these markets was driven by a 9% increase in average value to au$3.32 FOB per litre,” he said.

“The key contributors to the value growth included Singapore, the US, Malaysia, Thailand, India and New Zealand.”

In 2021–22, Australian wine exporters shipped wine to 113 destination markets. At a region-level, the most significant growth came from exports to Southeast Asia, up 51% to AU$314 million, but also to North America, up 5% to AU$612 million, and the Middle East, up 48% to AU$20 million. This growth was offset by a decline in exports to Northeast Asia (including mainland China), down 64% to AU$328 million, and Europe, down 9 per cent to $658 million.

US ranked as Australia’s biggest export market by value at AU$436 million, followed by the UK at AU$421 million. China still ranked as its third largest export, ahead of Canada (AU$174 million) and Singapore (AU$169 million)

China and Australia’s relations sank to historic low over issues ranging from Covid origin, 5G to human rights issues. Since March last year, China formally imposed up to 218% anti-dumping tariffs on Australian wines effective till 2026.

Earlier this year, there are signs of thawing of the frosty relations. Top officials from the two countries met for the first time in three years earlier in Singapore. There are also talks that China is expected to drop Australian coal ban.