Historically high prices for headed-and-gutted cod and haddock, combined with expensive ocean freight rates and energy costs, are threatening the viability of China’s processing-for-reexport sector.
“The situation is not sustainable and will crash at some point. But we just don’t know when,” an executive with a major Chinese processing firm told SeafoodSource on condition of anonymity to protect his business.
The sector is struggling to secure material supplies due to China’s zero-COVID restrictions, the executive said.
“In general terms, market demand is still strong currently both in the U.S. and Europe. However, the raw material supply is difficult due to China’s COVID control policy, as there are still numerous positive test results encountered on the packaging of the imported pollock, haddock, cod, and other [seafood].”
Unprecedented freight costs and the continued unpredictability of scheduling due to COVID-related interruptions have forced some Western customers to look closer to home for their processing needs, according to Peter Handy, the CEO of Portland, Maine, U.S.A.-based Bristol Seafood.
“We are seeing increased interest in U.S.-produced seafood, part of which is driven by some of the challenges you note regarding China,” he said.
Bristol Seafood, which has invested significantly in processing technology in order to be able to handle larger volumes of haddock processing, is seeing increased interest in U.S.-processed seafood, with more work coming the way of his firm as a result, he said.
“The increased interest has translated into contracts and business,” Handy said.
Rising inflation is a factor that is moving demand towards U.S. processing, though higher American labor rates are having the opposite effect, according to Handy. Yet overall, the trend is towards more processing in America, he told SeafoodSource.
Any switch from China to elsewhere for double frozen product may however be temporary, according to Bjorn Marius Jonasson, the director of sales for land-frozen groundfish at Reykjavik, Iceland-based Iceland Seafood International.
“There are companies in the U.S. who are processing there now, but not for cost reasons – not legitimately, at least – [but rather], it is the self-caused COVID issues China itself has generated with export [and] import delays [and] other draconian measures they have taken to stem the spread of COVID – and then the soaring freight cost,” he told SeafoodSource.
Jonassan said China will regain any processing business it has lost once it relaxes its anti-COVID protocols.
“China used to be a very reliable supply partner to many, not so anymore. But once things normalize and supply security returns, then I am certain a lot of the companies that are starting processing in other Southeast Asian countries and in Europe and [the] U.S. will shift back to China. Cost and efficiency wins the business eventually,” Jonasson said. “This shift has no impact on processing in Iceland. This is a different tier in the market and single-frozen and fresh supply from Iceland won’t be impacted by this.”
Photo courtesy of Jinghai Group
