SYDNEY, Aug 18 Reuters Australia39;s wine industry faces severe oversupply problems that will need years to resolve, experts say, pointing to Chinese tariffs, high production and export bottlenecks during the COVID19 pandemic.

Vineyards nationwide have enough wine in domestic storage to fill 859 Olympic swimming pools, Rabobank said this week in its thirdquarter wine report.

Thats over two billion litres of wine, or over 2.8 million bottles, said RaboResearch analyst Pia Piggott, adding that the inventory was depressing prices, particularly for commercial red wines.

Ties with biggest trading partner China deteriorated in 2020 after Australia called for an inquiry into the origins of COVID, triggering reprisals by Beijing, such as antidumping duties on Australian wine and barley.

The curbs battered the wine industry, with exports to China shrinking to just A8.1 million 5.2 million in the year to June, from a peak of A1.2 billion for the year to January 2020, when the pandemic began to take hold.

No other market can quickly compensate for the China market, said Lee McLean, chief executive of industry body Australian Grape Wine, thanks to Chinese drinkers39; obsession with red wine.

Diversification into markets such as Britain, Europe, the United States, and elsewhere in Asia would take time to yield results, McLean added.

China, traditionally an avid purchaser of Australian commodities, including iron ore, resumed buying coal and timber this year after tension…