Pavethra Ponniah, Vice President and Sector Head, ICRA Ltd said, “The rapidly spreading novel coronovirus (COVID-19) pandemic, which originated in Wuhan, China, is believed to be zoonotic and since has been transmitted human-to-human. The reactionary unprecedented massive shutdown in China will lead to contraction in Chinese demand for seafood, leading to a supply glut in the global market. Apart from the reduced demand, disruption in China’s internal logistics: for unloading, storing and further processing, will play havoc with all types of seafoods, impact of which will be felt along the entire value chain, leading up to the farmers. Port clearance for seafood containers in Chinese ports would be difficult in the current environment, effectively cutting off the supply pipeline temporarily.”
In terms of global trade, USA has traditionally been the largest importer of shrimp, with imports of 6.98 lakh MT of frozen shrimp in CY2019. China closely followed USA, with imports of 6.5 lakh MT; this is despite China being the largest producer globally. During the second half of CY2019, China overtook USA to become the largest shrimp importer globally, with its increasing domestic consumption far surpassing disease hit domestic production. The European Union, Japan and Vietnam are the other key shrimp importing countries. The European Union and Japan have reported largely flat shrimp imports over the past five years while imports by Vietnam crashed during CY2019. Vietnam, more a re-exporter than a consumer, was the largest conduit for unreported shrimp imports into China until FY2019. With China cracking down on imports via. Vietnam, India’s direct exports to China jumped in FY2020. China and Vietnam together now account for 25% of shrimp exports from India (in value terms) while 45% plus of India’s exports are shipped to the USA.
For China, the key sources of frozen shrimp imports are Ecuador (50.7% during 11M CY2019); India (24%); and Vietnam and Thailand (at a cumulative 9.6%). Typically, Q3 and Q4 account for over 60% of the shrimp imported by China annually. Demand peaks in December and January of each year, before falling to seasonal lows in February, post the Chinese New Year. The Chinese New Year in January is a critical period of heightened consumption in local Chinese markets which clears the channel inventory, leading to fresh buying by March, which will not be curtailed.
Impact on Indian Shrimp Exports
Over the years, India’s shrimp exports have increased at a steady rate and stood at 6.7 lakh MT in CY2019 (Exhibit 1).
EXHIBIT 1: Indian shrimp export trends (historical)
EXHIBIT 2: India’s shrimp export trends
On a related note China is a key market for live seafood from India and this limited shelf-life market is already facing the brunt of the heightened Chinese regulations on live markets. Live and chilled seafood accounts for about Rs.1,000 crores of exports from India and this includes items like crabs, lobsters, whelks etc.
“India, like all other large exporters, including Ecuador would have to wait-and-watch for the spread and severity of the pandemic and the impact on demand in China, post the Chinese lunar holiday in February 2020. While a confluence of factors like the ability to find alternative markets, reduction in supply over the next 3-4 months, early harvesting, and delayed stocking will determine how the dynamics play out, the immediate term correction in shrimp prices is a given,” adds Ms. Ponniah.