Market disruptions, supply crunch mar seafood industry’s build-up to Chinese New Year

China’s seafood market is facing increased turbulence and uncertainty at the onset of what is usually its busiest period, the run-up to Chinese New Year, which falls on 12 February.

“The market is up and down” following a rash of new COVID-19 outbreaks, which has resulted in the key port city of Dalian going into lockdown, according to an executive from a leading importer.

The lockdown has entailed the “closing of Dalian port and queues at Tianjin port,” which has hurt all aspects of the economy, said the executive, who works at a major state-owned firm purchasing seafood globally, and who requested anonymity in order to speak candidly. The COVID-19 outbreaks have dented confidence among consumers and catering companies, he told SeafoodSource.

“Whereas two months ago restaurant owners were optimistic there has been a new pessimism,” he said. “I was in Shanghai last week and big restaurant owners were telling me that banquets have been canceled, [with] thousands of tables canceled.”

Port checks on shipments for COVID-19 traces have also added to anxiety and discouraged some importers, according to Didier Boon, the head of seafood importer and exporter East China Seas.

“Demand in China is very aleatory, as nobody knows if goods are going to go through customs or not for the COVID inspection,” Boon said. “Most of my customers who are private companies and medium- or smaller[-sized] companies do not want to take the risk [of importing into China],” Boon told SeafoodSource.

As an additional complication, China’s government has ordered many labor-intensive factories across China to stop production two weeks before the holidays to allow 14 days quarantine for all migrant workers going back home for the Chinese New Year, Boon said.

“There is a tremendous lack of goods before Chinese New Year and will not start production before 5 March,” he said. “My company has more than 100 containers that will be postponed for more than one or two months, basically due to a lack of raw materials. Many smaller factories had to close, as they are unable to compete with bigger ones for raw materials.”

Tightened availability of freight capacity into and out of China has been a major driver of costs for exporting to China, according to Gary Wilcox, the CEO at logistics firm JAG UFS Group, which has an office in Beijing. He said rates are averaging at USD 10,000 (EUR 8,226) for a 40-foot container.

“And with Chinese New Year looming, things will get worse before they get better,” Wilcox told SeafoodSource. 

Congestion at destination ports “remains a problem as well,” Wilcox said. Air freight rates have come down, he said, but also remain high.

“[They’re] still about 75 percent higher than pre-pandemic rates and with stricter lockdown restrictions and lack of passenger aircraft, I cannot see the returning to pre-pandemic rates any time soon,” Wilcox said.

Higher freight rates have “just been swallowed” by “hungry customers” keen to get their hands on seafood supply, said Boon. But it’s unclear if this forbearance will extend beyond Chinese New Year. Boon said he thinks there are two big factors driving demand, with one of them relating to a shutdown of Chinese aquaculture and processing production in early 2020.

“During the pandemic in China, nobody could do anything and farms were stopped. When they started operation beginning in April, they realized that the demand from the rest of the world would be zero and simply stopped putting seeds and fingerlings in ponds,” he said. “All was good until August, when demand suddenly start to grow at an incomprehensible rate but there were virtually no shrimps, no pangasius, no tilapia in ponds. So they started in a hurry but far too late to fulfil all the orders falling one after the other. Factories started fighting for the raw material and prices starts moving at incredible speed. Traffic started to increase very fast and so did the freight rates, as everybody started to fight for containers.”

Even with the market mired in COVID-related uncertainty, domestic demand for seafood looks strong, according to the Chinese sourcing firm executive. He said many international exporters and export associations are perhaps too cautious and should be more proactive towards growing the future market in China.

“Lots of large companies are saying, ’Let’s wait until things stabilize to make marketing plans,’ but then it may be too late,” he said. “China moves on speed.”

The executive said major international seafood companies should be better supporting their processing and distribution partners in China.

“Business is so bad, they need support, not only economic but also in marketing. [International] seafood companies made good profits [in China] in recent years. Now is a good time to support them,” he said.

Photo courtesy of Kobby Dagan/Shutterstock