Australian Barley Cargo Turns Away From China Amid Tensions

(Bloomberg) --

A vessel laden with Australian barley has swung away from China after the Asian country slapped anti-dumping duties on imports of the grain for five years amid escalating bilateral tensions.

Dry bulk carrier African Quail has changed its destination from Machong port in southern China to Port of Jebel Ali in United Arab Emirates after loading barley from Port Lincoln in southern Australia this month, according to data from broker and adviser IKON Commodities and Bloomberg ship-tracking information. It was one of five vessels carrying the grain with original destinations in China, the data show.

Australia’s biggest barley customer is imposing an anti-dumping duty of 73.6% and an anti-subsidy duty of 6.9%, effective from May 19, according to China’s Ministry of Commerce. Industry groups are warning the measures will gut an export market worth A$1.4 billion ($916 million) in 2017.

Australia, which has fueled tensions with China by calling for an independent investigation into the origins of the coronavirus pandemic and into wildlife wet markets, has indicated it may appeal to the World Trade Organization.

Now the country’s exports of wine, seafood, oatmeal, fruit and dairy are in danger of being targeted if China opts for more escalation, according to people familiar with the matter. The scale of the barley tariffs isn’t a surprise, but the five-year duration was “longer than I or a number of trade participants would have expected,” said Andrew Whitelaw, senior market analyst at Mecardo.

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The immediate concern is for shipments already heading to China, said Ole Houe, director at IKON. “There’s unlikely to be a lot of immediate takers so those boats will likely have to be sold at large discounts,” he said. There’s a batch of grain sold but not shipped, which will have to be resold at a discount.

“For next year and for the crop we’re planting at the moment, the risk is also very real, but the market has already dropped to levels that make us competitive in the general feed grains market,” he said.

Australia should be able to export its barley to other markets, as its displacement as a supplier to China will be significant to global trade, said Tobin Gorey, Commonwealth Bank of Australia agricultural commodities strategist. China will have to turn to other exporters, including those in the EU and Black Sea, Canada and Argentina, for malting barley used in beer.

“As China’s brewers are forced to bid harder for other sources of barley, Australian barley will find a home with those out bid by China,” he said.

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