China using familiar seafood-focused trade strategy to punish UK

An unofficial ban on British crab is the latest move by China to use trade action to respond to political developments.

In 2011, Norwegian salmon exporters faced new veterinary inspections enacted after the Nobel Peace Prize was awarded to Chinese writer and human rights activist Liu Xiaobo. That year, volumes of Norwegian salmon reaching China shrunk 60 percent. It took until 2016 for the two countries to normalize relations. And Australia is currently dealing with a similarly unofficial but de facto closure of access to the Chinese market for its rock lobster. China, long the top destination for Australian lobster exports,  instituted the ban in November 2020 in apparent retaliation for a call from the Australian government for more clarity from Beijing over the origins of the COVID-19 virus.

China enhanced its testing procedures for cadmium content in British crab after the U.K. created a special immigration program for Hong Kong nationals in the wake of Beijing’s 2021 introduction of a new security law covering the city.

Paul Knight, head of Oban, Scotland-based PDK Shellfish, said his firm had enjoyed soaring Chinese demand for his crustaceans until the new testing regime was enacted. PDK Shellfish joined the China British Business Council’s China Acceleration Program and invested in a new vessel to meet the growing demand, and Knight himself traveled extensively throughout China to build up a clientele.  

“I spent time and money in the last two years setting up, then the unofficial ban came in,” Knight said.

Now PDK Shellfish is having to divert its crab to European buyers, Knight said, as China’s testing process and related paperwork takes up to two days upon the crab’s arrival at Chinese airports and that delay can cause significant mortalities.

Chinese buyers remain keen for product, Knight said, but demand is currently being met by Dutch suppliers. Whereas the average Dutch crab shipment takes 36 hours on average to reach its final destination in China, a shipment from Scotland takes 80 hours or more.

 “[The Dutch] are delighted with the situation,” Knight said.

Knight said PDK Shellfish’s departure from the Chinese market is not necessarily a losing move for the company. Prices paid by Chinese buyers were much stronger several years ago, he said, but European prices are now higher. Knight said that is the result of Chinese importers “coming in with high prices and then sucking up supply and controlling it and then reducing prices.”

“Right now, China is not of a lot of interest to me,” he said. “Prices have dropped to a point where they’re not viable for us.”

Additionally, shipping crabs to China requires four times the manpower that’s required for European sales, Knight said.

“There’s much more packing involved, then you’re getting up at crazy hours to get them on flights in the middle of the night, then there’s stopovers in Dubai and you’ve got to ensure they’re properly handled there,” he said.

In response to losing Chinese sales – and taking a hit from Brexit, which created extra paperwork and costs – Knight is investing GBP 4 million (USD 5 million, EUR 4.8 million) in a new building that will specialize in freezing crabs, a requirement of many buyers in Southern Europe.

Brexit has made life harder for PDK and other U.K.-based crustacean exporters to Europe, according to Knight.

“We were part of the E.U. traceability system and now we have to add an extra 24 hours to handle all the paperwork. The maximum time any shellfish should be in a truck is 72 hours but Brexit has added 24 hours to that,” he said.

Export costs have increased and so have losses to mortality, Knight said, adding that he is not optimistic for any short-term improvements.

“The E.U. and U.K. don’t get along,” he said.

Other alternatives to the E.U. market for now are limited given recent rises to fuel costs, Knight said. He has looked into Malaysia and the U.S. as possibilities, but they haven’t led anywhere yet.

Further complicating matters, the most-recent crab fishing season in Scotland has been “horrendous,” Knight said. He placed the blame on overfishing.

“The Chinese market got bigger [and] everyone bought bigger boats and there was not enough regulation,” he told SeafoodSource. “There was more ground attacked and it will take time to recover.”

Despite all the trouble he has gone through, Knight has not ruled out a return to the Chinese market in the future. Overreliance on China is not a good business model, he said, but sales to Chinese buyers are complimentary to E.U. sales.

“China wants crabs at the time of year that the Europeans don’t want them, so it means you have a year-round market,” he said.

Photo courtesy of PDK Shellfish