Dalian COVID-19 outbreak creates more seafood supply-chain headaches

Factories in Dalian, a major seafood processing hub in China, have faced a monthlong COVID-19-related shutdown, and could face at least another month of closures, according to a circular issued by the city's government.

Dalian officials said they will continue to impose maximal control measures of imported cold-chain enterprises until 15 January in order to "resolutely block the risk of epidemic spread of imported cold-chain food in the [city's] production and processing links."

With export shipments for processed pollock, hake, cod, and salmon fillets already a month behind schedule, according to a major Chinese seafood importer, delays are likely to be further exacerbated by the enhanced controls.

Factories in Zhuanghe, a processing-centric district in Dalian, were shut down in mid-November by Dalian authorities, who requested all cold-chain food companies, including government-approved, third-party, bonded and individual cold-storage operators, food producers, and sales firms to halt operations immediately. While some seafood-related firms have recently been allowed to recommence operations, Landy Chow at Siam Canadian’s China offices confirmed to SeafoodSource the factories are all facing significant backlogs.

“Clearance for imported raw material in Dalian is difficult and takes quite some weeks due to the COVID-19 spike in that area,” he said.

Dalian is key to China’s imported cold-chain goods market, handling 70 percent of such products, according to Robin Wang, the CEO of SMH International – a seafood-focused marketing agency with offices in Shanghai and Hong Kong.

“Since the Dalian outbreak … our importers have been unable to get seafood, including Alaska, to the rest of China, so there have definitely been delays,” Wang said.

Prices are up due to supply squeezes and continued high demand, Wang told SeafoodSource.

“Throughout the year, demand levels for seafood have remained strong, continuing to trend up,” he said. “With lower market supply, we have seen prices increase as well. Prices could rise even more in the short term, but will remain dependent on how quickly products can be released. Officials have reported that this recent outbreak is in the last week of containment, which could suggest protocols for product release may follow soon if all goes well.” 

One area where supply difficulties have eased is with shipping costs – according to Chow, rates on ocean freight from China to North America have dropped “significantly.”

“And booking a container is easier than before, but still not that easy,” he told SeafoodSource. “I would believe that the ocean freight [costs] keep[s] dropping after Chinese New Year. But it still has a long way to go back to the normal level.”

Beijing-based seafood marketing consultant Fan Xubing said the COVID-19 crisis in China has created losers and winners, with Russia and Australia in the former category and Canada and the U.S. in the latter.

“I personally think many seafood like Russian pollock and farmed Atlantic salmon will have a difficult year again for 2021. Australian live spiny lobster will also suffer in 2021 due to the bad bilateral relation[s] between the two countries,” Fan said.

The perception of laxer coronavirus controls has damaged Russian exporters, Fan said.

“It's often found the crewmembers or pollock product/package [has] been contaminated by COVID-19 from import port like Dalian in 2020 and 2021, so the Chinese government set up very strict controls on Russian pollock export to China,” Fan said.

China’s ban on live lobster exports from Australia – and a clampdown on smuggled Australian crustaceans coming in through Hong Kong – is benefitting Canadian and U.S. lobster exporters, Fan said, with sales of live North American lobster booming in 2021.

“[The Chinese government and public] are very trusting of live lobster from Canada because live North American lobster fishing, processing, and export procedures are strictly regulated [and] in Canada, there hasn’t been any COVID-19 cases through [seafood] the past two years,” he said. “It's also because COVID-19 has not been detected on live seafood imported through air freight during past two years."

Fan’s office advises importers of cold-water shrimp – among them the Canadian Association of Prawn Producers. CAPP is trying to expand sales in east and southern China through increased investment in retail promotion and advertising on public transportation vehicles, but this year has been down compared to last, Fan said.

“The last 10 months have not been so good compared with same months of 2020. In 2020, China's cold-water shrimp imports achieved an historical high record,” he said. “[Also,] imports of frozen vannamei shrimp from Ecuador and India recovered over the first 10 months of 2021.”

Delays in China’s supply chain as a result of COVID-19 have kept seafood prices “stubbornly high” in Hong Kong, Benjamin So, the founder of seafood distributor 178 Degrees, told SeafoodSource. The continuing rise of China as a buyer and consumer of seafood may be squeezing supply elsewhere, even with coronavirus restrictions, he said.

“Our freight costs increased significantly in the second quarter of 2020 and have continued to be high. We are also seeing price pressures on other input costs. We have been trying to absorb increases but will soon need to pass on some of those to customers,” he said.

The disruptions caused by the pandemic to the seafood supply chain has forced sustainability to take a back seat.

“It has been difficult to attract attention to matters of sustainability while there are so many other pressing operational issues to deal with,” So said.

Photo courtesy of Nomad1988/Shutterstock