What the future holds for imported shrimp in China
Vannemei shrimp producers are having a bad year due to falling export prices, but there’s some respite in growing domestic demand and tighter regulation of imported shrimp into the local market. That’s the view of Choo Hean, managing director of shrimp farmer-processor Zhanjiang Regal Integrated Marine Resources, which exhibited at Seafood Expo Asia in Hong Kong.
“This is one of the worst years I’ve seen in the business,” said Choo, whose firm is based in China’s top vannemei producing region, Zhanjiang in Guangdong province. “Exports are down … it hurts that all the currencies are depreciating … everyone is trying to export and no one is importing.”
A key advantage of the domestic Chinese market is the comparative lack of competition. “In the export markets we are always competing with other Asian countries like India and Indonesia. But in China it’s easier as (importers of) product have to pay taxes.” Choo’s ultimate target is to split sales 50-50 between exports and sales on the domestic market.
One consolation of weaker economic growth in China meanwhile is slower growth in costs – particularly wages. “We were looking at a 10 to 15 percent rise in wages every year but it was different this year … companies realize the economy is not smooth.”
Higher standards at the farming end of the value chain meanwhile have also made life somewhat easier. “This industry is maturing in a lot of aspects … the Administration of Quality Supervision, Inspection and Quarantine (China’s export inspection and quality watchdog, AQSIQ) is doing its job, we’ve seen improvements … it’s not that the shrimp farms are increasing in size but farmers are now more aware that a lot of producers like us export and keep to minimum standards now, not like before when they didn’t know what was going on in terms of antibiotics and quality.”
Domestic players certainly look like they’ve been handed an advantage by China’s recent tightening of its customs regime, which has ended the common practice of “grey channel” imports. Veteran shrimp trader Didier Boon foresees a transition period of “two or three years and by then everyone will have to sell directly to Beijing, Shanghai, Tianjin wherever. The market will self-regulate itself and balance itself with the prices from India, Iran, Vietnam or wherever because when everything is official you can’t cheat on prices. Ultimately that’s good. On the short-term, however, it’s terrible for everyone in the import trade.”
China has cracked down on import tax evasion before but the authorities are serious this time, believes Boon, managing director of East China Seas Co. “A lot of the operators have disappeared before being caught or they’re already in prison so obviously there are lot of people who are not going to do this kind of business anymore.”
However China is going to be a good long term market for imported shrimp, Boon said, “because rising incomes and more money here means more access to shrimp … after a few years the market will pick up, like the market in Europe and America and everywhere it’s a matter of (whether) the market matures or not. It will mature.”
It’s a good time to be a trader of shrimp out of China as producer prices have been down sharply this year in China. “January to March is usually a peak period pricewise and we were expecting the prices would be up this year like every other year, but the price has gone down. Only two months ago prices levelled off. And now they’re much lower compared to last year. A lot of people are struggling to sell and that’s the reason for low prices.”
Boon believes Chinese shrimp prices also face downward pressure from bountiful supply from Vietnam which is tapped by Chinese shrimp exporters who are not affected by the customs crackdown (processors are allowed to import seafood for re-export tax free). “If the price is very low in Vietnam the company can export from their factory there. The export price for China depends a lot on Vietnam and as long as Vietnam is cheap, there’s no increase in Chinese prices.”