The growing dynamics of rising domestic consumption across Asia and a shortage of land in China will see a growing role for third parties like Ecuador and India in supplying world shrimp demand.
“Growth in Chinese domestic consumption of shrimp is out-pacing all other markets,” according to seafood veteran Didier Boon, head of Beijing-based East China Seas. Likewise, he said, the shift of large Thai shrimp producers away from farming into value-added areas will limit supply growth and any significant slip in prices.
Speaking to SeafoodSource in Beijing, Boon downplayed any chance for a significant rebound in Chinese shrimp output for export in 2014, as long as anti-dumping measures remain in place in the key U.S. market. China’s leading exporter of shrimp has reported record 160 percent increase in retained profits for 2013. Zhanjiang-based Guolian officially reported revenues of CNY 22.08 billion (USD 3.6 billion, EUR 2.6 billion), up 52 percent year-on-year, due to what the firm called a “reduction in global shrimp production” which, it noted, meant the firm had an “excellent” order book through last year.
Notably, Guolian’s results were helped by the coming-on-line of a new tilapia processing division, as well as a marketing firm in the U.S., where the firm has battled higher taxes following the imposition of countervailing duties by U.S. authorities.
Antidumping duties and disease challenges for Asian producers will continue to benefit Ecuador, believes Boon, who has a sourcing office and two factories there. “Ecuador has a fantastic name because [shrimp] cookers in Europe need a really perfect product…crucially there’s no domestic market in Ecuador, forcing shrimp producers to maintain very high standards, whereas Chinese shrimp farmers can always fall back on domestic demand. Likewise, Thailand has a large domestic market.”
But Boon is not convinced there’s such a wide gap in quality between Chinese and Ecuadorian shrimp: “It’s like three Mercedes cars, made in Germany, China and Belgium. The quality will be the same, but you won’t pay the same price.” High profits for shrimp farmers in Ecuador have prompted other Latin players to enter the market. Boon points out how Panama and Venezuela have emerged as shrimp producers but he believes production in both will remain relatively insignificant, centered on a few big players, compared to a more widely spread and consistent growth in Ecuador.
Boon believes Ecuador will retain its image as a market leader in terms of quality and consistency but demand seen in 2013 will ease off somewhat when India and Thailand return to the market in the wake of the EMS disease outbreak. But large domestic consumption and a keenness among key players like Charoen Pokphand (CP) to shift away from shrimp farming into value-added side of the business means prices for shrimp are unlikely to fall back sharply in the post-EMS market.
India may prove Ecuador’s main competitor, given its ability to produce large-size shrimp. Also, it has the advantage of having more access to land, according to Boon. “It has a very long coastline and large coastal plains, and far fewer of the tourist resorts which have restricted shrimp production in China,” said Boon.
There are disadvantages to being in Ecuador, such as the comparatively higher price of credit for processors. “You pay 9.3 percent interest in Ecuador, while loans are very cheap in France…This is why European shrimp markets prefer to cook locally rather than at source in Ecuador.”
Capital remains a big barrier to expanding East China Seas sourcing business in Ecuador. “Each container costs USD 170,000 (EUR 123,433) and you have to pay half of that before the shrimp is out of the water,” said Boon.
Growth in Chinese consumption is out-pacing consumption growth in most any other market. But the prosperity driving that consumption has also proven a barrier for domestic seafood production. Longterm, a shortage of land is threatening Chinese output, warns Boon. “Ten years ago you could fly into Shantou in Guangdong province and all you can see for miles is [shrimp] ponds. Now all you see is real estate. It’s a similar situation in Hainan [province].”
Yet China will stay top dog in processing, believes Boon, who first came here in 1994 to buy shrimp for European markets. “Over the next decade costs in China are unlikely to rise any faster” than alternative destinations such as Vietnam or Indonesia, said Boon. He claims that’s because of better infrastructure and a more productive labor force.
“The yield from a worker in Vietnam is about half of what you get from a guy in China…the Vietnamese have adopted French ways while a Chinese worker will work in reality 12 hours seven days.” Bureaucracy is a “nightmare” in Vietnam and India while the state sanitary/quarantine inspection authorities in China have tightened up to ensure the quality of exports has improved, claims Boon.
