China's coronavirus shutdown takes its toll on New Zealand exporters

New Zealand companies which trade with China are feeling the pinch as the coronavirus epidemic dampens global trade.

The virus, called Covid-19, has killed more than 3000 people, the vast majority in mainland China, and infected more than 88,000 people across the globe. So far New Zealand has one confirmed case of the coronavirus, and more people are being tested for the disease.

The shutdown of factories in China, the world's manufacturing hub, has hit many sectors including the auto industry, smartphones, toys and games, fashion, and food and drink.

It is already disrupting the shipping of some goods to New Zealand, with electronics, iPhones, clothes, and raw materials in short supply.

READ MORE:
* Coronavirus: One suspected case comes back negative
* Coronavirus: PM did not rule out trans-Tasman travel restrictions as first person-to-person transmission in Australia
* Taranaki forestry industry cutting back as coronavirus hits demand

The Warehouse said there may be some stock delays of up to eight weeks, but the effects would not be felt for some months.

The retailer had sufficient inventory levels to cover any delays. In addition, the company's contingency plans included some manufacturing outside of China.

"We're monitoring the situation on a daily basis," a spokeswoman said. 

Mission Estate, whose wine makes up about 3 per cent of New Zealand's wine exports into China, was optimistic despite the uncertainty, said chief executive Peter Holley.

The movement of the virus around the world was prolific, and there was a fear it might end up affecting most markets.

However, existing customers were still engaging with Mission Estate and the winery was also fielding new inquiries in China.

"We remain optimistic that the virus will run its course and at some point in the future things will return to normality," Holley said.

One of the questions facing the company was the potential spread of cases in New Zealand.

If Auckland was particularly hit by coronavirus cases, it could cause issues with sales and distribution; if it hit Hawke's Bay, it could be a production problem; and if Marlborough was affected, it could create processing issues.

Auckland-based Douglas Pharmaceuticals was "acutely aware" of the potential impact of the epidemic.

Supply chain general manager Richard Marshall told New Zealand Doctor that the company sourced some of its ingredients from China, but it held three to four months' supply of its critical medicines and raw materials.

The company had contingency plans in place and had noticed a slowdown in the time it took for orders to be delivered.

However, Marshall did not believe the manufacture or distribution of medicines would be disrupted.

China has been New Zealand's biggest trading partner since 2017, but New Zealand's exports to China this year have plummeted because of weakened demand thanks to the coronavirus, according to Statistics NZ.

New Zealand's top four exports to China in 2019 were dairy products; wood (logs, wood, and wood articles); meat; and travel services, including spending by holidaymakers, business travellers, and students.

For 2019, nearly one quarter of New Zealand's goods and services exports were with China, while 16 per cent of New Zealand's imports by value were with China.

Two-way trade in goods and services with China was worth $33.4 billion last year, with exports worth $20.1 billion and imports of $13.3 billion resulting in a trade surplus of $6.8 billion.

New Zealand's a2 Milk has actually boosted trade with China this year, the company said on releasing its half-year results last week.

Acting chief executive Geoff Babidge said demand was strong and revenue for January and February 2020 was above expectations.

"However, this is a dynamic situation and at this stage we are unable to quantify the impact, either positively or negatively, for the full year."

Catherine Beard, executive director of Export NZ, said China was prioritising food imports, so New Zealand dairy and kiwifruit exports were still flowing.

In addition, some exporters already had extra stock in China when the coronavirus first became an issue, in preparation for the Chinese New Year holiday, although that buffer would eventually run out, she said.

Beard said there had not been much discussion about job losses among exporters and importers so far.

A Christchurch manufacturer told her business had just come to life again after "weeks of silence" from China. Another three more weeks of slowdown, and the company would have had to start thinking about staffing levels.

"For small business, timing is quite important."

Small and medium businesses were less exposed to China, because it could be a difficult place to do business if you were small, Beard said.