May 28, 2013
The general rate increases being implemented across most shipping lines is putting additional strain on seafood traders dealing into or out of Asia, industry players told Undercurrent News.
With the lines still struggling with overcapacity, rate increases are being brought in on many global routes in a bid to restore profitability. While for a lot of companies the affect of this is minor, those exporting from Asia feel the pinch.
“It’s been difficult, it’s another cramp,” Jim Gulkin, managing director of Siam Canadian Group, told Undercurrent.
“Raw material prices for shrimp have been moving extremely high this year because of the major shortages caused by EMS [early mortality syndrome] in Thailand, Vietnam and China. Everybody is getting squeezed, and the shipping companies have added additional pressure,” he said.
The economic climate in the EU and the flat market in the US mean customers have not been able to absorb the higher costs, he explained. Seafood trade consumption is dropping, sales are relatively flat, and higher prices do nothing to encourage retailers or restaurant chains to promote shrimp.
This resistance, plus the higher shipping prices, adds to the price for an exporter like Siam Canadian, which is based in Thailand and has offices throughout Asia.
“Everybody is getting squeezed – the importers are getting squeezed by higher prices; the end users don’t want to pay higher prices so squeeze importers’ margins down, and processors’ are squeezed by the farmers for higher raw material prices.”
The impact would not be felt to such a degree if raw material prices were lower, he added. The increases could be spread out through the chain and absorbed by end users.
Still, the freight rate increases themselves are not too bad for a relatively expensive commodity such as shrimp. For lower-priced species such as pangasius, pollock or tilapia, it has more of an impact, he said.
It is not only difficult for those exporting from Asia. French deep sea fishing operator Sapmer exports 90% of its products globally, and has felt the impact of freight rate increases.
“In 2012 we exported over 400 containers. At an increased rate of $1,500 per container, you can work out the impact on our business,” said Paul David, commercial manager for Sapmer.
“This cost is very difficult for us to pass on to our clients in an ever-difficult market, slow economy and weakening yen (70% of our processed products go to Japan),” he continued.
“As we work on raw material, the prices are always fluctuating so we do not necessarily work on a fixed catalog price list. An additional freight cost is even more difficult to integrate in our costing.”
Dutch trader Seafood Connection has experienced price increases for shipping amounting to just a few US cents per kilogram, though for its trade to and from Asia, which it does mainly with Vietnam, this was an added issue.
“Passing on price increases to customers is clearly difficult, and impossible to increase for current contracts, but for new contracts we have no other opportunity but to pass it on to our customers,” Frans Zeeman, purchase manager for Seafood Connection, told Undercurrent.
Last time shipping lines announced a general rate increase it proved difficult to implement, as competition for business meant some lines only raised their price slightly. One source, an executive with a Chinese salmon processor, said this would likely be the case again.
“[The] lines here are talking about raising the ocean freight again. However, facing the decreasing volume of cargoes to EU and US, this [increase] is groundless,” he said.
“Competition pressure means some shipping lines are willing to accept lower prices, which will void the price hike before very long.”
He did acknowledge the impact the rises would have on margins in the meantime, citing the difficulty in passing on increases to end users given that quotations were based on now out-of-date freight levels.
Global Fresh Foods, on the other hand, has seen little impact from freight rate increases. It ships salmon from Chile to Asia, the US and Europe and, as of June, barramundi from Vietnam to the US’ west coast, all by ocean liner in its technologically-advanced packaging.
Rate increases have had only the slightest of impacts for the company, said its CEO Mark Barnekow, amounting to little more than a “penny per pound movement”.
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