3-Minute Market Insight
EP 398 | Aired 08/06/2018
Financial Constraints Facing Chinese Processors

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August 6, 2018 -China is still the world's largest seafood producer, increasing seafood production by 1.4 percent year-to-year to almost 70 million metric tonnes in 2017.

2018 Alaska Salmon Commercial Harvest Counter
(Harvest in thousands of fish)
Tradex 2018 Alaska Salmon Commercial Harvest Counter
Updated: TUES AUG 7 2018 7:00AM (View Previous Weeks Totals)

A few years ago, financial problems hit Qingdao in the largest seafood processing region of China, Shandong.

Many of the biggest plants in the region shut down after being unable to secure loans from their banks during the financial crisis.

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We can see this now in Dalian, where banks are beginning to be extremely cautious with loans to Seafood processing plants citing the fish business as a high risk.

2 large plants went bankrupt at the beginning of this year and even large, successful plants who underwent massive expansion this year cannot increase credit lines.

For seafood plants, this means raw materials are purchased hand-to-mouth, which constricts their production capacity.

This will constrain purchases of Raw Material for all species, but it will affect Salmon in particular.

Unlike Pollock and Cod, there is just one time to secure Salmon for the entire year, so some plants will have to shut down if they cannot pay for raw materials, or they will be forced to swtich to other species.

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For seafood buyers, this means production schedules have never been tigher.

Price quotes are only valid for one to two weeks as raw materials are purchased to secure shorter production periods.

We have seen prices increase slowly and steadily every month for the last 3 months during this period of financial trouble.

China labour costs are also up as the minimum wage in the Qingdao region raised 5.8 percent in 2017 and a dramatic 17.7 percent in Dalian since the spring of 2016.

Seafood Buyers are recommended look at least 4 months in advance for contracts or inventory or opportunities will be missed.

And lastly, the proposed 25 percent tariff on Chinese seafood products into the USA from the Trump Administration could disrupt the entire supply chain.

Little is known about the effective date as discussions are still underway, but it's expected that by early September a decision will be made.

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