Kiwi baby formula companies are having orders cancelled in China and contract negotiations with Chinese customers terminated as a result of Fonterra's botulism contamination crisis, says an industry group.

Chris Claridge, chief administration officer of the New Zealand Infant Formula Exporters Association, said $40 million worth of the group's products were immediately at risk.

"That's product at the ports, on the ship and being manufactured," Claridge said. "We're seeing serious commercial issues arising."

The association represents around 15 local baby milk exporters, none of whom used the 38 tonnes of potentially contaminated Fonterra whey protein in the making of their products.


Despite that, Claridge said members were facing threats of product recalls in China.

"I just don't think Kiwis understand what has happened in China," he said. "This is serious."

New Zealand infant formula exports have risen steadily in recent years and are now worth close to $200 million annually in China alone.

The 2008 Chinese melamine scandal, when tainted dairy products killed at least six babies and sickened hundreds of thousands more, prompted a surge in demand for imported baby formula in the world's second-biggest economy.

New Zealand infant formula can fetch up to $70 a can in the Chinese market.

Claridge said local infant formula exporters were very concerned about the toll the Fonterra crisis had taken on their businesses. "We're utterly dismayed that our reputation has been damaged by this," he said.