Whereas China is the key driver of the world’s seafood industry, by the end of a decade of growing affluence among its population, the country’s role will have changed dramatically, bringing wholesale changes to global prices of most major premium seafood species, as well as fishmeal and fish oil.
According to a significant new report by Rabobank on the impact of China’s evolving seafood industry and consumption on global seafood markets, the country’s farmers and processors will increasingly focus on domestic demand, while Western and other producers will seek their fortune by supplying new, more affluent consumers in China with salmon, scallops and lobster.
Ruling the waves
In all, the country has the potential to become a US$20bn import market, which will lead to price increases for premium seafood across the globe.
“The race for control of primary production assets, like fishing quotas and farming licences will further intensify,” say the report’s author, Gorjan Nikolik. “The changing role of China will bring about a wave of opportunities as well as risks for companies across the global seafood industry.”
Accounting for one-quarter of the world’s seafood consumption, China is not only the largest market for seafood but also the biggest producer, accounting for 40% of global seafood production and an significant 60% of global aquaculture production, according to Rabobank calculations. In addition, China is a key processing hub and is the world’s leading seafood exporter with exports of over US$16bn in 2011.
There is no denying the country’s economic growth, which in turn is developing a burgeoning middle-class. These new premium consumers are showing a ravenous taste for the consumption of expensive, imported foods. High-income elasticity of demand for seafood is far higher than for meat in China, and this can be illustrated by salmon imports from Europe growing from virtually nothing in 2000 to more than 12,000 tonnes last year, and this growth is expected to continue.
Exports to fall
But the flip-side of China’s economic success is its rising wages, which put pressure on the country’s competitive advantage as a processor for re-export.
“The current dynamics in China are affecting virtually every facet of the global marine protein industry, with implications for every seafood company and seafood consumer in China, the rest of Asia, Europe, the United States, Japan and Africa,” the report states.
However, Rabobank suggests that the Chinese re-exporting industry can seek to strengthen its position in the value chain through vertical integration by acquiring Western processors of the final product or by controlling raw material supplies.
“While there is additional opportunity to diversify into new markets such as Russia and Brazil, in the long-term, Rabobank expects the industry to focus on developing the domestic market for processed frozen seafood.”
While there is no doubt that China will remain the leading exporter for many years to come, its seafood export growth is expected to slow down in the near-term, due to resource constraints and the unfavourable macroeconomic dynamics in Western markets.
“From a very strong compound annual growth rate of 15% over the last decade, we expect this to decline to low single digits in the next few years,” the report concluded.