Fruit overload hits HK with Chinese New Year logistical 'collapse'

Countries Featured Top Stories Most Read Today's Headline
Fruit overload hits HK with Chinese New Year logistical 'collapse'

The allure of strong Chinese New Year prices draws fruit exporters from around the world to Hong Kong each year, where containers are discharged and either distributed locally or re-shipped to mainland Chinese destinations. Ahead of celebrations kicking off today (Jan. 23), Chile sent significantly more cherries to the continent in addition to the influx of U.S. apples, Peruvian grapes and fruit from other destinations, leading to a breakdown in port capacity. At we hear from two Chilean exporters about what went wrong in Hong Kong.

Cherry shipment statistics revealed by Exportadora San Andres marketing manager René Wünkhaus speak volumes, literally, about the context of the port's Chinese New Year oversupply issues.

"Until week 51 Chile had exported around 30% more to all markets in comparison to the previous season, but the Asian market volume increased by 85% - we went from about 700 to 1,300 containers that were to be sold in a period of about two weeks," he says.

He adds that until last Friday the Chilean season's cherry shipments to Asia were up 46% year-on-year.

This targeted pre-celebration supply yielded positive results for a while. According to San Francisco Lo Garces export manager Sergio Rojas, prices were "spectacular, better than last year" until Jan. 10.

It was just a few days after this, between Jan. 14-16, that the ships Ital Melodia and Roma arrived, carrying large volumes which effectively meant around 500 containers needed to be moved in the space of two days.

"The unloading in Hong Kong to then go to Guangzhou and Shanghai produced a logistical collapse in Hong Kong. The logistics weren't there to support the arrival of these larger vessels," says Rojas.

"With the collapse prices fell a lot compared to the first ships that arrived - in the first ships the volumes were much lower and prices were high.

"There is an idea of the high prices that China can give and during the whole year the whole world thought the same. High expectations were created and everyone put their cards on China."

Wünkhaus doesn't go as far as to say the logistics collapsed, but says they went pretty close.

"As well as Chilean cherries, other countries sent their products to be traded ahead of the Chinese New Year. For example in the market you could see a lot of U.S. apples, Peruvian grapes, and not to mention the domestic fruit of local producers who also wanted to benefit from the higher consumption and demand before the holiday," he says.

"The increased supply, which was mostly traded in Guangzhou, brought about enormous logistical problems as a consequence both in ports and that market. With such an amount of trucks, containers, pallets with fruit on the floor, tricycles transporting fruit, and vans, that the system almost collapsed."

Quality control and lessons learned

Wünkhaus says fruit quality and condition has been normal in Guangzhou, while fruit in bad condition has been heavily punished by the market.

"Fruit with Labels that positively differentiated them in the market consistently arrived well. This consistency gave security to buyers that the products they were buying would reach the end markets without problems, and they were therefore willing to pay a higher price.

"Also, these labeled fruits were sold first, which is also a plus in an oversupplied market."

Rojas says the situation was different for each exporter and depended on the strategy of the consignee, in terms of which containers could be moved, what varieties could wait and how they could be moved. He says with festivities now underway, sales will be stagnant until Jan. 28.

Rojas says the 'craziness' of the Chinese market is part of the reason why the oversupply occured, and is a valuable lesson for diversification.

"One year a Chinese person could eat four cherries and the next year they eat 15. It's impossible but we don't have to be pessimists as we are talking about timing. We'll have to see what happens after the Chinese New Year.

"We have to think about diversifying more, looking at other markets because the supply is too much and the consumption is not that great.

"We must hope that this wave will pass and be optimistic that the containers that are arriving and will be on their journeys will rebound to a price that is not so low, to give a relatively better return than last year, considering that this year's volume was much higher than last year's."

Wünkhaus adds that exporters did a very good job this year in delivering fruit in good condition, and the market has recognized this, but the industry does need to diversify so that logistical restraints don't get in the way.

Subscribe to our newsletter