China shrimp: domestic prices could double in first half of 2017 : December 9, 2016
Louis Harkell : Undercurrentnews
An Undercurrent News analysis of historical shrimp prices from 30 different Chinese regional markets points to the high likelihood of prices doubling in the first half of 2017.
In the past six years, shrimp prices in markets all across China have experienced significant price rises, sometimes up to 145%, in the first few months of the new year, compared with prices during their lowest point during the 12 months prior.
The price hike illustrates the huge impact Chinese New Year demand has on domestic shrimp prices, with supply and demand highly volatile shortly before and after the two-three-week-long holiday.
The annual cycle of price boom and bust backs assertions that the country could play an important role in global markets in H1 of next year, as reported by Undercurrent on Nov. 29.
In addition, findings from the price analysis show that:
- Although demand tends to tail off after Chinese New Year, low shrimp stocks can see domestic prices stay well above yearly averages until April, before the arrival of the next shrimp harvest, which usually arrives in late July or August, causes prices to stabilize again.
- Regional differences in prices can be significant during the first few months of the year, but tend to converge during the second half of the year amid peak supply.
- Chinese domestic shrimp prices in 2013-2016 have been significantly higher compared with 2010-2012 during the peak in seasonal production – from August to November – when processors are doing most of their buying. This points to possible structural changes in supply and demand.
As the world’s largest shrimp producer, China has a vast number of wholesale markets for shrimp, from Hainan Province in the south to Hebei Province in the north.
Undercurrent analyzed vanamei shrimp prices from 30 different regional markets in six Chinese provinces. The prices were sourced from Chinese trade websites and various industry associations.
Among the most important markets is in Zhanjiang, Guangdong Province. Located near the southern-most point of China, Zhanjiang has been dubbed China’s “shrimp capital”.
China’s largest shrimp processor, Zhanjiang Guolian Aquatic Products, takes its name from the area. Although other regions have their own local markets, sometimes shrimp will be transported to Zhanjiang for sale.
In three of the past six years, at points during the first few months of the year, monthly average vannamei shrimp prices in Zhanjiang were more than double the lowest monthly average price point during the twelve months prior. In the three other years, when prices did not double, prices were still never less than 60% higher.
By the volatile standards of previous years, Zhanjiang shrimp prices were especially volatile in 2016.
In 2016, Chinese New Year fell on Feb. 8, relatively early. In the few weeks prior, Zhanjiang shrimp prices jumped by 45% to CNY 84.00/kg ($12.17/kg at today’s exchange rate). In March, they fell slightly to CNY 83.00/kg, but rose again in April by 8% to CNY 90/kg. Only in May did they drop to more normal levels – down to CNY 54.0/kg.
By July of this year, with the new harvest coming to market, prices dropped to CNY 39/kg – a full CNY 51/kg cheaper compared with three months prior.
At the beginning of this month, prices were relatively stable at CNY 42/kg.
In 2010 and 2013, price rises were less pronounced due lower peaks in prices around Chinese New Year, when highs of just CNY 44.7/kg and CNY 42.7/kg respectively were recorded.
Nevertheless, the overall picture is one of high price volatility. It is a picture repeated throughout China and for different shrimp sizes.
However, during this period when price volatility is highest, there can be significant differences in prices between the regions.
During Chinese New Year in 2016, for instance, shrimp prices in Hainan were quite significantly lower than in Zhanjiang and Pearl River.
Source: CAPPMA, Fish First
While prices rose across all three regions during the first three months of this year, in Hainan, prices in February were CNY 13.00/kg and CNY 16.00/kg lower than in Zhanjiang and Pearl River respectively.
Interestingly, prices do not always rise and fall in tandem, either. During this year’s Chinese New Year, Zhanjiang and Pearl River saw prices move in opposite directions, pointing to regional dynamics of supply and demand.
Once abundant supply returns to the market during the summer months, prices across all regions tend to settle and converge.
Albeit this year in Hainan, during August and September, prices were still around CNY 9.00/kg lower than in Zhanjiang and Pearl River. This was possibly due to the good summer harvest there.
From this price analysis, evidently Chinese New Year volatility can determine the fortune (or ruin) of China’s shrimp industry.
But, the increase in Chinese shrimp prices during the period of peak supply – from August to November – as identified by Undercurrent, is another important development for the industry.
This development points to potential changes in supply and demand on a structural level, as it is the period when most shrimp is bought and sold. The increase in prices is evident across all of China.
For the purposes of this article, Undercurrent looked specifically at Zhanjiang and Hainan markets.
Between 2010-2012, during the peak supply months of July-December, Zhanjiang shrimp was traded within a price band of CNY 25/kg to CNY 38/kg.
The arithmetic average price was CNY 31.5/kg and range was CNY 13/kg, with prices trending upwards towards the end of the year.
During the same three-year period in Hainan, the price band was similar – CNY 24/kg to CNY39/kg (arithmetic average CNY 31.5/kg, range CNY 15/kg) – with the same end of year upwards trend.
On the other hand, between 2013-2016, the price band in Zhanjiang was CNY 39/kg to CNY 56/kg (arithmetic average CNY 47.5/kg, range CNY 17/kg), while the price band in Hainan was CNY 35/kg to CNY 56/kg (arithmetic average CNY 45.5/kg, range CNY 21/kg).
This equates to an increase in arithmetic average prices of 51%, or CNY 16/kg, in Zhanjiang, and 44%, or CNY 14/kg, in Hainan. The range in prices has also increased, up from CNY 13/kg and CNY 15/kg to CNY 17/kg and CNY 21/kg for the respective areas.
Therefore, Chinese domestic shrimp processors have been paying significantly more for shrimp in 2013-2016 compared with 2010-2012, and facing greater price volatility to boot.
Over the next few days, Undercurrent will publish additional findings from our analysis of shrimp prices from 30 different regional markets, as well as comment from industry.
Regular price updates of Chinese shrimp will also start to be published under our prices section soon.
Chinese price volatility explained
China’s shrimp season is from June to November. “The peak harvest time in China is from August-October. From July and August, large-scale buying activity takes place. Processors will store it in their own cold stores, building up stock through to November,” said Landy Chow, general manager of Siam Canadian China.
“In January, because of Chinese New Year, prices will definitely be high. After Chinese New Year, prices will perhaps fall. But, after Chinese New Year there’s no shrimp being caught. Towards the end of June or beginning of July, stocks are quite low,” he said.
“From May prices will definitely start to fall because the harvest is about to arrive. Therefore, in May and June, prices will drop, because in July, new product will arrive onto the market,” said Chow.
“Sometimes in Chinese New Year demand will be low, and prices won’t be high. One year, Guolian lost about CNY 200m because of low demand during Chinese New Year. But usually prices will be higher,” he said.
When a harvest comes to market buyers often “rush” to get hold of product, which Chow said will cause prices to jump. Each region’s harvest tends to arrive at different times – the country’s large size means different regions have different climates.
“Zhejiang [Province] can be very cold, and they may have just one shrimp season. They transfer the shrimp fry in June, and in September or October, they’ll take in the nets, just one time,” he said.
“Whereas Zhanjiang is more tropical, as well as Hainan [Province]. They can have two-three harvests in a year. Harvest is usually in August, the third is roughly in October. Zhuhai has perhaps two harvests. Fujian [Province] and Zhejiang typically have just one harvest.”
Shrimp production in China has moved as far north as Shandong Province and Hebei Province in the north, but as with Fujian and Zhejiang, these areas tend to have just one harvest.
“[In Shandong and Hebei] they probably transfer shrimp fry to the ponds in June, maybe late May, when it’s above 20 degrees. Then in September they will harvest.”
But overall, differences of a few yuan per kilo are frequent and have nothing to do with differences in quality, said Chow.