By Mark Godfrey, SeafoodSource contributing editor reporting from Beijing, China
Published on 04 December, 2013
Exports of fresh Chilean salmon to China are set to soar, according to the pioneer of the fresh trade into the southern port city of Guangzhou. Traditionally, shipments from Chile have been in frozen format, however fresh shipments to China will increase from 30,000 tons in 2013 to 40,000 tons in 2014, predicts Will Hengst, sales head at the Great Fish Co, a China-based marketing firm specializing in Chilean fresh and frozen seafood product.
He believes Chilean fresh product can be a serious competitor for fresh Norwegian imports thanks to a favorable import tax scenario (Chile has signed a free trade deal with China). “Effectively, Chile pays 3 percent compared to Norway which has to pay 10 percent.” Hengst told SeafoodSource. “We have made the calculations and we know that even with the freight costs we are competitive.”
Chile however is struggling to come up with sufficient quantities of the larger-sized salmon prized in China, one of the country’s key salmon producers told SeafoodSource.
“We’re in a dilemma, we have to balance the demand for larger-sized fish from China with the need for cash flow works against Chilean firms keeping the fish in the water longer,” explained a sales executive at Invermar, a Chilean salmon firm producing Atlantic and Pacific salmon as well as rainbow trout. While he declined to be named, stating company rules, the executive predicted a “slight shift” to larger sizes in 2014, provided revenues stay solid.
This is a problem acknowledged by Hengst, who has been trying to convince customers here to try smaller sizes. “China’s keenness for 7 kilo sized fish is a challenge and we’ve been trying to convince customers to accept smaller sizes. We have been used to supplying demand in Brazil which takes a five kilo fish no problems. Also, U.S. demand remains focused on salmon filets, so size doesn’t matter so much.”
To make up for size, Hengst has been pushing other unique selling points with Chinese customers: he claims the fattier nature of Chilean salmon is preferred in China.
“The percentage of stomach fat is much larger in Chilean salmon, and this is very appreciated among our Chinese customers. Also Chinese customers tell us they find the taste is longer lasting than Norwegian salmon.” An integrated model of production makes Chilean salmon producers better able to control the consistency of quality, said Hengst. “Our company is vertically integrated, from the eggs to the finished fish. Norwegian firms buy their fish from everywhere.”
Capturing more of the China salmon market may be possible for Chile given Rabobank earlier this year predicted that Chile’s Atlantic salmon production would increase by more than 20 percent year-over-year, whereas in 2013, supply from Norway is expected to contract by up to 3 percent. The Chile output estimate is however below initial estimates due to increasingly difficult sanitary and financial scenarios. Rabobank estimates Chile’s Atlantic salmon production this year will be in the range of 450,000 to 470,000 tons, which would still represent a more than 20 percent increase on 2012. Coho and trout production are however expected to contract by some 40,000 and 80,000 tons, respectively, thus reducing Chilean total salmon and trout production by 1 percent year on year.
Meanwhile, Chile is batting for more sales in China for other seafood products, including mussels. Chilean mussels are perfectly positioned for a mid-market share in China, said Hermann Mecklenburg at Pacific Gold. “Our mussels sell for USD 2.50 (EUR 1.84) per kilo which is cheaper than New Zealand which sells for USD 5 (EUR 3.69) and good value next to local [Chinese] mussels which are averaging USD 1.50 (EUR 1.11) per kilo.” Mecklenburg has seen demand from international themed F&B outlets at hotel chains spreading across China: hotels, for instance, are serving Spanish-style paellas and salads. Mecklenburg has also been pursuing sales with high-end food retail chains such as the Shanghai-based Ole chain. Seasonality also helps — “our key production period is November, December and January which is off-peak in other producing countries.”
Chile’s salmon industry was badly affected in 2008 and 2009 by outbreaks of the ISA (infectious salmon anemia) virus. A partial reemergence of the disease this year suggests the Chilean salmon industry requires further improvement to prevent rather than control the disease. National Fisheries and Aquaculture Service (Sernapesca) is launching new regulations that will come into force in 2014. These new regulations — which include a new density regulation —will likely result in little or no production growth between 2014 and 2016.
Hengst meanwhile is long-term bullish on China. In the past ten years that he’s been trading in China, average white collar monthly wages have gone from CNY 1,000 (USD 164, EUR 121) to CNY 8,000 (USD 1,313/EUR 968). “As wealth increases people’s sources of protein change. In the USA people upgrade to beef as a preferred protein source but in China people upgrade to seafood. Wealthy Chinese have moved on from tofu to salmon.”