EP 589 | AIRED 05/16/2022
China Update: Raw Materials Shortage, Pink Salmon Short, Russia/China Payment Method
May 16th, 2022 - This week we provide a timely update on China as their Zero-COVID strategy continues to disrupt raw materials and production - all while Alaska and Russia’s Pacific Salmon season is set to start in June, where China typically processes a large portion of this Salmon.
--- Just as a quick China recap since the start of the year, in February, the primary issue was waiting for plants to reopen after Chinese New Year, March saw the industry upended overnight with the Russia/Ukraine war, and April saw China go back into lockdowns due to increased COVID-19 transmission rates.
Fast forward to May and our pulse in China is that countless plants are still not approved to resume production, and the plants that have reopened are facing a huge shortage of raw materials as most cold storages still remain closed.
Plants in Qingdao seem to be faring better than Dalian as most plants in Qingdao are running at full speed trying to catch up on last year's orders.
Most plants in Dalian have been approved to reopen but are not running at full capacity, mostly limited by access to raw materials (because cold storages are still closed).
There is a stark reality that some plants in Dalian will not survive this shutdown as it has been over 7 months since they were last operational.
As desperate times call for desperate measures, we are hearing some plants are using letters of credit from buyer’s as a deposit to get over 50 percent of the value of the LC to purchase raw materials - in this way, plants don’t require much money from their own banks to cover raw materials cost.
Moving onto the raw materials segment of this episode and processors in China are anticipating Pink Salmon supplies to be short this year, which is inline with Alaska and Russia’s Pink Salmon forecast that will see this even-year harvest about 45 percent less than last year.
In 2021, Alaska harvested 221,000 metric tonnes and Russia 423,000 metric tonnes of Pink Salmon.
And on this note, we are hearing that plants in China have already started receiving raw materials offers of Alaskan Pinks around the U.S. $1.60 to $1.80 per pound mark - lower than the $2.00 per pound that was predicted.
Our pulse in China is also advising that some plants are able to purchase Russian Longline Pacific Cod at $5100 per metric tonne USD (or $2.30/lb) which means a non-SWIFT payment method has been established with Russia, which also means as long as the US does not ban Russian origin products, it could mean business as usual this season.CHECK OUT OUR #WhatsGood CAMPAIGN
Which Seeks To Spotlight Something “Good” Happening In The Seafood World As Opposed To Unfortunate News.
Our recommendation is that in the short term, continue focusing your purchasing on products that are already in North America, and for the long term, start talking to your Tradex Foods rep about your future seafood programs for value-added asia production.
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