Sources: Ecuador shrimp prices to drop on lower Chinese demand : June 8, 2015
Alicia Villegas – UNDERCURRENT NEWS
With additional reporting by Tom Seaman
Ecuadorian producers recently said shrimp prices will continue to firm, but multiple sources have told Undercurrent News this situation is short-lived, as in the US prices are already stable.
Expected lower demand from China will drive Ecuadorian shrimp prices down, as there would be higher volumes to export to the US — where companies already have sufficient stocks — and to Europe, where processors are being hit the impact of the weak euro compared to the dollar.
Uncertainties on imports getting into China via the ‘backdoor’ are still ongoing, multiple sources said. This is a different picture to what Ecuadorian shrimp exporters painted at the Brussels seafood show back in April, where they said Chinese demand had re-activated as importing issues had eased.
Different sources said sales could be impacted by the Chinese crackdown on shrimp being imported to the Vietnamese port of Haiphong, in the north of the country close to the border with China, then smuggled across the border, as it happened last year.
“With the recent events in China, there may be a sudden halt in Ecuador’s exports to China via Haiphong that will pressure prices downwards, as the US and Europe cannot absorb the volumes of Chinese imports,” a shrimp processor told Undercurrent.
According to Jim Gulkin, managing director of Bangkok, Thailand-based Siam Canadian Group, Chinese shrimp imports are now lower than previous years, partly impacted by the Asian giant’s slowdown in its economy, as well as the government anti-corruption measures.
Local Chinese shrimp production — which is currently “relatively dodgy” due to weather conditions, according to one source — will have a major impact on the country’s imports development, Gulkin said.
“Chinese production is still unknown at this point, we hear about ongoing disease issues but really won’t have a clear picture of the situation until the end of June when the main harvesting begins,” he said.
Different prices among producing countries will have also an impact on the composition of Chinese’ imports.
“The Chinese will buy [shrimp from] India if prices are lower than Ecuador,” Gulkin said.
This was echoed by Adriaan de Leeuw, the co-founder of Solea International, an Antwerp, Belgium-based shrimp and seafood importer.
“China is looking for lower prices, which they, for example, can find in India,” de Leeuw said.
Another source, however, disagreed.
“Chinese perception of Ecuadorian quality is quite good actually, not quite so for Indian shrimp where price is the main argument,” he said.
“I’m not sure whether Ecuador exports to China will suffer too much as a consequence of Indian prices; first because of the quality perception and second because I wonder whether Indian prices will stay low for long,” he said, adding that Chinese orders for Ecuadorian shrimp are currently increasing.
Indian prices for head-on shell-on (HOSO) shrimp from 50 to 100 pieces per kilo were down by end of May, from a month ago (see image below).
“At the moment Vietnam and China are still the major buying countries for Indian vannamei and almost all the exporters have ample orders for smaller sizes 31/40 down of HLSO [headless, shell-on] for Vietnam and China, said Chaipat Kunapiwatkul, business development manager with Siam Canadian.
“The packers are looking forward to the comeback of US buyers this month,” Kunapiwatkul said.
Gulkin, Siam Canadian’s managing director, said he expects more business activity from the US over its major holiday season, in June and July.
However, Gulkin does not expect to see the same volume of business placed as in previous years, as US inventories “remain on the high side”.
Weak US demand
Shrimp prices in the US could fall about $10-15/lb on the back of “enough stocks” in the country, despite awakening demand seen recently, a US importer said.
Still, demand is lackluster, the source said, which has impacted prices, despite the upward pressure on prices seen about two weeks ago.
“Ecuadorians wanted to see prices up about two weeks ago, but we haven’t seen a price increase,” the importer said.
Prices for headless shrimp, FOB Guayaquil, have remained stable in the US for about a month at $5.10 per pound for 21-25 count; $4.30/lb for 26-30 count; $3.70/lb for 31-35 count; $3.35/lb for 36-40 count; $3/lb for 41-50 count and $2.75/lb for 51-60 count, the source said.
“Prices from Ecuador are not going to increase. At best. they will be unchanged,” he said.
Another source said he agreed, adding that the US may be short of larger sizes, which are “almost not available in Ecuador and mainly coming from Asia”.
The holiday season could see US shrimp demand taking off, however the market is expected to be stable in June and early July, to then see decreasing orders by end of July and August, when demand “is dead”, the importer said.
“If US shrimp inventories are high in August we will see a drop in prices,” he said.
News on Central America’s Honduras and Nicaragua having tested positive for early mortality syndrome (EMS) will not offset this downward trend in prices, the importer said.
“Nicaragua and Honduras production, all together, is less than 15% of the total Ecuadorian production,” he said.
“Prices could go up occasionally, but not to impact prices and markets,” he said.
European pressure on weak currency
The strong dollar against the euro is still impacting the European market, which “is taken in consideration in determining the right prices for this moment in Europe”, a major European shrimp processor said.
“The vannamei prices have come down over the last months around the world, and Ecuador has to follow in this as well,” the processor said.
“The euro is still weak and all market players in Europe need lower prices to move volumes in this highly competitive market,” De Leeuw, Solea International co-founder said.
In Spain, where demand has been active on the holiday season, prices seem to be slightly up from last week — about $0.10/kg on average, a source said.
Head-on shrimp FOB Guayaquil is at $7.30/kg for 40-50 count, $6.80/kg for 50-60 count and $6.40/kg for 60-70 count, a Spanish buyer said.
Another importer said these prices “seemed high”, though.
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