Many US lobster companies coping well with tariff impact
As the trade war between the United States and China continues, with indications that it may escalate even further, most U.S.-based lobster companies have seen their exports to China fall dramatically.
Despite the decrease, many companies say the market for lobster is still strong enough to keep the impact to their companies at a minimum. Some companies that never invested heavily into Chinese exports said2018 has been a better-than-average year.
“I’ve been processing lobster since 1993,” John Norton, CEO of Cozy Harbor of Portland, Maine, U.S.A, which specializes in fresh and frozen lobster tails, told SeafoodSource. “I’ve never seen a market this strong for lobster tails, ever.”
That strong demand is largely offsetting the effects of the tariffs on most of the lobster industry. Boat prices for lobster, said Norton, have remained similar to those seen in 2017.
The frozen market in Maine, said Norton, typically consumes around 50 percent of the state’s catch, while exports to China only make up between five and 10 percent.
Norton said his company has largely avoided shipping products to mainland China over the years, as the market for frozen lobster tails and meat in the country isn’t as strong as it is elsewhere in the region.
“Other parts of Asia are big parts of our business, but not mainland China,” he said.
For companies that were shipping to China, the impact of China’s tariffs has been dramatic. For Intershell International Corp., based in Gloucester, Massachusetts, business in China has essentially disappeared entirely.
“We sent 60,000 pounds last year to mainland China,” Monte Rome, CEO of Intershell, told SeafoodSource during Seafood Expo Asia last week. “This year we haven’t sent any.”
While the lack of live shipments to China has certainly had a negative impact, Intershell has managed to find other customers, including domestically, to do business with.
“You have to embrace the word 'nimble,'” Rome said. “We do that all the time, because we see items come and go.”
Rome said he has an optimistic view of how the trade war will end.
“I think when the playing field is leveled in trade, which I think is the objective that Trump has, we’ll be back to normal,” he said.
Greenhead Lobster, which recently announced it is constructing a new value-added processing facility in Bucksport, Maine, has also shifted away from shipments to China.
Hugh Reynolds, the owner and president of the company, said value-added represents the best path forward, and that Maine’s once-thriving business of shipping its live lobsters to China is “over and done,” due to the tariffs.
Maine Coast, another company which shipped lobster to China, has also seen significant drops in their exports to the country. Tom Adams, the company’s owner, said his firm has been shipping to mainland China since 2013.
“As we were a new, fast-growing company, and China was a fast-emerging customer, it made sense for us to be into a new market,” Adams told SeafoodSource at Seafood Expo Asia. “We were a new company with capacity looking for new customers.”
China, in 2016 and 2017, represented roughly 20 percent of the overall revenue of Maine Coast, and was on track for similar numbers in the first half of 2018.
“We did fine right up to the beginning of July, we were on track for normal revenue into China,” Adams said. “We already had the European tariff, so our European sales were down a little bit, but we were maintaining our revenue, similar to 2017. And then the tariff came.”
On 2 or 3 July, the company sent its last pre-tariff shipment, Adams said. Since then, the sales have dropped by 89 percent, “with basically three- [to] four-weeks notice,” he added.
The announcement came on a Friday night, and left Adams shocked, he said. But by the following Monday, he said, Maine Coast was already looking toward finding new markets and mitigating the impacts.
That move, Adams said, has paid off.
“My non-China sales are up 11 percent,” he said. “Overall revenue, we’re only four percent down for that time period last year.”
However, he added that the margins are lower, and that the trade war is certainly having a negative impact on the lobster market in the United States.
“We shipped to 29 different countries last year. But you don’t replace a market the size of China,” Adams said. “You’re not going to replace billions of people.”