Demand for seafood outstripping supply in China

There are signs that China’s economy is cooling, as economic data for the second quarter of 2021 showed China’s GDP growth slowed due to slower state-led investment and weaker consumption growth. China’s exports in Q2 2021 rose 20 percent, but higher prices for oil and other imports are eroding China’s strong trade balance.

Meanwhile, seafood prices are soaring across the country. Wholesale prices for freshwater seafood surged 20 percent year-on-year in the first half of 2021 in China, according to data published by the National Bureau of Statistics. The climb in prices is 13.1 percentage points higher than the rise seen in the first half of 2020 and has added 0.12 to China’s overall consumer price index (CPI). The overall seafood price index was up 17.2 percent in the first six months, suggesting tightened supply.

A sharp fall in Chinese pork prices, which soared last year, has dulled the impact of skyrocketing seafood prices on the food element of the CPI, but Richard (Ruiqing) Yao, the head of aquaculture at animal health specialist Elanco China, said domestic producers and importers are having trouble keeping up with demand.

“While fish and other seafood are becoming more popular with consumers as a healthy choice, a number of factors are constraining production,” Yao said. “These include new environmental protection policies, ongoing COVID interruptions, extreme weather events in key areas, and some labor shortages. Together with feed cost increases, these have helped to push up seafood prices overall, while consumer demand remains high.” 

The pricing situation is being compounded by “reduced levels of imports due to COVID” and a three-month moratorium on fishing in the Bohai Sea, Yellow Sea, and East China Sea that commenced 1 May, Yao said. China Customs has instituted a strict food safety regime to prevent COVID-19 from entering the country through imported foodstuffs, but the residual impact has been an inspections logjam that has impeded seafood from entering the Chinese market in a timely fashion.

Additionally, sky-high freight costs, port delays, tightened availability of reefer containers, and a shortage of truck drivers – many of whom re-skilled due to COVID lockdowns and layoffs – are pressuring costs in a sellers’ market, according to Paul Farrah, the head of Dieppe, New Brunswick, Canada-based frozen seafood provider Partner Seafood. As a result, even with higher prices being driven by growing demand, Chinese importers may struggle to get supply due to strong demand in other consumer markets.

“Demand is greater than supply,” Farrah told SeafoodSource. “China usually waits for the price to settle, [but] while waiting, [now] there isn’t enough supply.”

Larger-than-foreseen demand from the U.S. means less supply for clients in China, Farrah said – especially when it comes to lobster, crab, and capelin. That sentiment was echoed by Mike Hutt, the executive director of the Virginia Marine Products Board, which coordinates seafood trade efforts on behalf of the U.S. state of Virginia. Hutt said Chinese buyers are increasingly seeking out blue crab, conch meat, and live oysters from his state’s suppliers. But they’re having trouble meeting that demand, as the U.S. domestic retail and foodservice sectors are booming at the same time the state’s seafood processors are having trouble staffing up. Hutt said his office intends to reengage with Chinese markets in 2022 by traveling to trade fairs, but that it appears the industry is busy for now with markets closer to home.

This summer is shaping up to be a “particularly strong one” in sales for Chinese online seafood distributor GFresh but supply issues have emerged with tightened checks on southern Chinese ports, said Anthony Wan, head of Gfresh, a Shanghai-based online distributor of imported seafood.

According to Wan, salmon prices have recovered since the initial COVID outbreaks, rising to a current average of USD 12.00 (EUR 10.00) per kilogram from a low of USD 6.00 (EUR 5.04) per kilogram. Prices on Ecuadorian shrimp have doubled year-on-year, to an average USD 8.00 (EUR 6.72) per kilogram, Wan told SeafoodSource, and lower supply of Dungeness crab is driving prices for the species way up among Chinese buyers. Demand for live lobsters is strong, with prices for North American lobsters “consistently high” – and that’s with frozen lobsters from Australia now able to enter China by air, after months during which Australian lobsters were locked out of the country.

“As [live] Australian rock lobsters are still not able to enter China, most of the other lobster substitutes have seen prices increase, particularly in spiny tropical lobster varieties,” Wan said. “[But] this is a positive sign for the industry that has been hit hard by the geopolitical tensions between the two nations.”

But supply issues and logistical complications, such as the bottleneck that occurred recently in Guangdong Province when its leaders instituted a halt on receipt of cargoes of imported seafood due to loading capacity issues, continue to “eat into exporters’ margins,” Wan said.

China’s peak seafood consumption period has also been later this year, due to poor weather conditions delaying local supply and trade, according to Hansen Lee, the president of Coland Holdings Co., a Hong Kong-based company involved in the manufacturing and distribution of fishmeal, fish oil, and aquafeed. Lee said demand for fishmeal – largely to supply the feed sector – has grown even with COVID-related disruptions to supply. That, in turn, has resulted in higher prices for China’s aquaculture output at the same time there is heightened demand for inputs like feed and medicines.

“There is some impact,” Lee said. “The fishmeal imports in the first five months of 2021 are 796,000 tons, while 458,000 tons [were] imported in 2020.”

Other structural issues are barriers to growth of China’s aquaculture output. Coland is a major supplier to the eel sector but this has remained stagnant due to limits in fry resources, according to Lee.

But Yao, of Elanco, said the multitude of issues facing the domestic aquaculture sector could ultimately strengthen it.

“Maintaining the health and performance of domestic aquaculture systems at this time is critical, so there is also increased demand for good-quality animal health products to maintain water quality and help prevent disease,” Yao said.

Photo courtesy of evgenii mitroshin/Shutterstock