China’s 2017 fishmeal imports surge, though inventories currently falling


News   02/01/2018 - Administrator


Chinese fishmeal importers are benefiting from a stronger renminbi and lower market prices to import near record volumes of fishmeal, according to latest trade figures and industry sources.

Also, increased domestic fishmeal demand means imports aren’t just gathering dust in warehouses, but being sold to end users.

According to Undercurrent News figures from a government source, Chinese fishmeal inventories held in Chinese ports are falling fast, standing at 154,000 metric tons in week 44.

Inventories are falling from at least four-year highs reached this summer after seasonally atypical increases during the summer months -- inventories hit 214,000t in mid-September. Undercurrent had expected the increase.

So far this year, by its own huge standards, China has been on an import binge. According to latest Chinese customs figures, in the nine months between January-September of this year, the country imported 1.358 million metric tons of fishmeal.

This is 60% above levels during the same nine months last year, working out at 509,250t of additional imports over the period (see graph).

In August alone, the country imported 240,600t, according to figures compiled by Jean Francois Mittaine, a fishmeal analyst with 30 years of experience in the sector and co-editor of Fish Oil and Meal World, more than double imports in August, 2016.

According to International Trade Center, the value of imports in the first six months was a huge $1.08 billion.

Wang Meng, senior China analyst at the Marine Ingredients Organization (IFFO), said particularly favorable market conditions have driven the increase in imports. Importers'  buying power is up, as are domestic demand and international supply, he said.

First, he said, the US dollar index -- a measure of the value of the dollar against a basket of foreign currencies -- has dropped by nearly 10% since the beginning of this year, contributing to a relative rise of Chinese reminibi.

With fishmeal traded in dollars, Chinese importers have effectively enjoyed a discount.

Meanwhile, production in Peru – by far China’s largest supplier – has been “very abundant”, while the US, Chile, Mauratania, Ecaudor, Russia and Mexico are also supplying significant quantities to the country.

Increased supply has driven down prices; according to Undercurrent’s fishmeal price tracker, prices for Peruvian super prime fishmeal were $1,092 per metric ton in June, compared with $1,577/t in June of last year.

Domestic demand

Besides better conditions on the supply side, importers have benefited from increased domestic demand from China's massive aquaculture sector. It's unclear, though, whether this is due to increased aquaculture production, lower domestic fishmeal supply, or a combination of both.

Quoting Chinese ministry of agriculture figures, the country's aquaculture production grew by 4.6% during the first six months of 2017, compared with the same period last year, said Wang. 

But, this contradicts what Cui He, head of China Aquatic Products Processing and Marketing Alliance, said at the China Seafood & Fisheries Expo in Qingdao last week. He said in 2017, Chinese aquaculture production would fall for the first time

However, fishmeal is also used in China's huge livestock sector, particularly in piglet feed. According to Wang, production of piglets and sow have increased by 15.5% and 10.8%, respectively. 

Perhaps more importantly, Chinese domestic fishmeal output is down by half, said Wang, thanks to an extension to China’s fishing moratorium and environmental policies this year. The moratorium was extended from three months to four months, while Chinese fishmeal production is still at a low level for environmental policy reasons, he said.

Typically around 30% of fishmeal consumed in China is produced domestically, reckons Wang, although other industry sources reckon domestic supply makes up closer to 20%. Earlier this year, sources said the moratorium would have a limited impact on domestic prices

Lower domestic supply of fishmeal has increased reliance on imports. 

Inventories

Despite increased demand, the sheer weight of imports meant that inventories increased over the summer. 

This is unusual, as the summer is the seasonal peak of Chinese aquaculture production. 

By mid-September, Chinese inventories in port were a massive 214,000t, up 60% y-o-y

However, inventories have since fallen; according to latest figures for week 44, they stand at 154,000t, although they are still relatively high compared with the past four year period (see graph). 

Prices on the up

Subsequently, prices for fishmeal traded in China are now on the up, following increasing prices at source in Peru.

According to Undercurrent’s dashboard, Peruvian super prime fishmeal in port in Shanghai in week 44 was trading at CNY 10,650/t ($1,605/t), mirroring price developments in Peru (see chart below).

Could a seasonal drop in Chinese demand as Chinese aquaculture enters the winter months limit upward price pressure? According to Wang, most demand in the fourth quarter will come from the pork sector.

However, Mittaine reckons Chinese end users will continue buying, in order to guarantee supplies until the next Peruvian shipments start coming in.

“The problem is the Peruvian fishmeal will arrive in China only at best in February or March. [So], the current port offtake we see in China is partly related to some positions that end users are taking to make sure they have stocks available at their plants over the coming months.”

“I’m moderately bullish on prices,” he concluded.