Potential mending of ties with China to drive up Australian seafood prices

A potential détente between the Chinese and Australian governments is likely to benefit Australia’s seafood sector, according to an Australian seafood industry consultant.

Tensions between the two countries spiked in Australian officials when called for an investigation of the COVID-19 outbreak that originated in Wuhan, China in early 2020. In November 2020, the Chinese Ministry of Commerce asked the country’s seafood importers to cancel all orders from Australia.

In May 2022, Anthony Albanese won the election to replace Scott Morrison as prime minister of Australia. On 23 June, he called for the restoration of high-level dialogue with China in order to repair political relations between the two countries. Soon after his election, Chinese Premier Li Keqiang contacted Albanese to urge better bilateral cooperation and Chinese Foreign Minister Wang Yi called for cooperation with Australia on Pacific issues. Subsequently, Australian and Chinese foreign ministers met on 7 July for the first time in three years, with restoration of normal trading relations a primary topic of discussion. Australian Foreign Minister Penny Wong said the new government in Canberra was "willing to engage" with China, but said trade restrictions imposed by China must be lifted first.

"We believe it would be in China and Australia's interest for this relationship to be stabilized, and that would require both parties to make a step," Wong told Reuters 7 July.

Anthony Ciconte, the managing partner of the Brighton, Victoria, Australia-based Atlantis Fisheries Consulting Group, said he believes it is possible to attain reset in the China-Australia relationship, despite a range of issues standing in the way.

“This will take some time to get right. However, this government is already proving to be quite the relationship-builder. If the Australian government is successful in its attempt to reset how Australia and China coexist, there will be winners and losers in the broader economy,” Ciconte said.

China was the biggest market for Australian seafood in 2018 before trade tensions started, after which Australian exporters shifted products to Southeast Asia and Japan, as well as the U.S.A. reopening of the market in China – with which Australia officially has a free trade agreement – will drive a rebound in demand and pricing for lobster, abalone, sea cucumber, and orange roughy, Ciconte said.

“The seafood sector will be extremely well-served in the event of any pillar rebuild in the China-Australia trade horizon,” Ciconte said. “Australian seafood consumed in China, which has been the target of a trade ban, has seen a situation of domestic oversupply emerge, and lower domestic prices for those products, in particular lobster. If the trade relationship with China is improved and lobster is allowed to be imported by Chinese organizations again, obviously the demand slack is up taken and prices will go up again domestically. Add to this the recalibration effect of the current ban and the pandemic has had on industry efficiency and the need to find new markets, and we could see even better prices that what was previously experienced, in the lobster industry at least.”

While lower prices have benefitted Australia’s domestic market, its seafood industry struggled through the COVID-19 pandemic and received government assistance. However, an Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report released in March 2022 showed signs of a recovery, which Ciconte said will be accelerated if the Chinese market is reopened to Australian seafood exports.

“One thing for sure, the days of all Australians and tourists being able to enjoy the world’s best lobster and historical low prices will be over,” Ciconte said. “In terms of prices, it's no secret that inflation has impacted all levels of supply chains, and prices generally have gone up for food. However, seafood prices have been spasmodically impacted. Seafood that was traditionally consumed domestically has increased in price, due in part to both an increase in domestic demand and an increase in the cost of production.”

Overreliance on Chinese demand left Australian seafood exporters badly exposed, but the Australian seafood sector engaged in a transformation over the past two years, becoming leaner and more diversified – assets that will serve it well in the future, Ciconte said.

“Our relevant regulators did most of it by assisting with levy relief and temporary rebates. However, industry also did things like design better gear and look for better innovation in areas, and [finding] other markets. In addition, new trade agreements with the U.K. and better access to U.S and other Asian markets also helped,” he said.

However, if the Chinese market reopens to it, the sector will now be faced with the challenges of having to rationalize supply away from other markets, he said.

A reopening of the market “will be a business scenario to watch with interest as companies decide what is their best long-term interests,” Ciconte said.

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