By Louis Harkell Sep. 9, 2019 10:09 BST
Photo Credit: Chuner Groups processing factory in Shanghai. Credit: Louis Harkell/Undercurrent News
SHANGHAI, China -- China will consume much less salmon than estimated by industry organizations who have predicted it could consume 20% of present-day global farmed salmon output by 2025, one of China’s largest salmon importers said.
China will consume 100,000 metric tons less salmon annually in 2025 than industry projections even on the lower end of the scale, Dennis Cai, chief operating officer of Chuner Group, which supplies Alibaba Group’s Hema, told Undercurrent News. In 2018, China imported 80,000t of fresh salmon.
“I think imports will grow 10% annually or less. But that's very much dependent on [global] salmon prices and the total tax rate [import and value-added tax],” he said.
China has been tipped to drive future global salmon consumption growth. The Norwegian Seafood Council expects the country will consume 240,000t of salmon annually by 2025, including frozen salmon (14,000t in imports in 2018), or about 12% of current global farmed salmon output. It is pushing hard for a free trade agreement (FTA) between Norway and China to eliminate import tariffs.
Last November, Arild Aakre, head of global sales and marketing at Cermaq Group, said by 2025 China could increase consumption to 300,000-400,000t a year, supply permitting, and could go beyond 200,000t “easily”. Qiao Chen, who leads Asia sales for Norway’s Bravo Seafood, an exporter, said at the time 240,000t was her prediction for 2025.
These forecasts include caveats, such as availability of supply and global salmon prices.
But these estimates are overly optimistic, reckons Cai. Currently, China’s fresh salmon imports are on track to hit 140,000t-155,000t by 2025, by his growth estimates.
“It’s still not an everyday product because of its high price compared with local seafood. Salmon is mainly consumed raw in Japanese style. You serve salmon if you are inviting guests,” he said.
“If global salmon production grows and international prices fall, and if China can secure FTAs with all the producing countries, then salmon consumption in China could explode. But this won’t happen for another 10 or 20 years.”
Growth in imports
At his firm’s new processing factory in Shanghai, Cai told Undercurrent China has the potential to be a salmon-consuming giant.
Annual per capita consumption is just 60 grams, he notes, compared with around 2.0kg per capita in Europe. If every Chinese consumed one kilogram of salmon a year, the world would need to produce an additional 1.4 million metric tons, or around 70% of current global farmed output.
Imports have been growing at a good clip. Between 2015-2018, in absolute volume terms, China was the second-fastest-growing export market for fresh salmon behind the US, according to Aakre, who was presenting at the Salmon Industry Development Forum during the 2019 World Seafood Expo (SIFSE) in Shanghai on Aug. 28, organized by Chinese industry publication Seafood Guide.
n the first six months of 2019, China imported 5,000t more fresh salmon than during the same period last year, he said.
But China’s imports will need to grow much faster to meet industry’s forecasts. According to Cai – who was also presenting at SIFSE – unless prices come down that will be a challenge.
(To view slides from presentations by Aakre and Cai at the Salmon Industry Development Forum see the photo gallery below this article.)
High costs along supply chain
Cai underlined some of the challenges hindering the development of China’s salmon market. For starters, farmed salmon prices are globally high, which makes it difficult to develop a new market. Secondly, China is far from key areas of production, and all fresh salmon must be imported by airfreight.
Depending on the origin, airfreight adds $1-2 per kilogram to the cost of imported fresh salmon, said Cai. Long transportation times also reduce shelf-life, which retailers who incur losses from greater wastage of unsold product offset by charging higher prices.
At a store in Shanghai, for instance, a pack of fresh salmon typically has a shelf-life of just three or four days, said Cai.
Furthermore, transporting fresh salmon to China’s interior is costly, hindering market development outside Shanghai, Beijing and Guangzhou and their immediate vicinities. These regions account for 80% of Chinese salmon consumption, said Cai (see diagram in gallery).
“We sometimes send fresh salmon by airfreight from Shanghai to cities within China because it’s cheaper and quicker than sending it by other means. That adds another $1/kg in airfreight costs,” he said.
Preference for large sizes
China’s preference for large-sized fish also adds to end prices. The preference is magnified by the elevated status of head chefs in China who control buying decisions at hotels and restaurants, said Cai.
Just 10% of global production is of fish six kilograms or larger, according to data presented by Aakre (see chart in gallery). Currently, prices stand at $2/kg above prices for 4-5kg fish, according to data from Aakre.
In addition, because of the instability of supply of 6kg plus-sized fish, rather than rely on supply contracts, most Chinese importers buy raw material on spot markets. This adds to the price of salmon due to higher brokerage costs.
“We are trying to get them [chefs] to change their ways but they are not easy to be convinced,” said Cai.
Aakre said China’s preference for large sizes “needs to come down” for China’s market to develop. Retailers whose main priority is low price are more open to small-sized fish, however.
According to data from Aakre, around 90% of salmon in China is consumed by the foodservice sector.
Photo Credit : Chuner Group produces raw smoked salmon at its Shanghai processing plant, a new product launched this year. Credit: Louis Harkell/Undercurrent News
High import duties
On top of long transport times and preference for large-sized fish, importers must pay China’s hefty import duties, further adding to costs. According to Cai, import tax for fresh salmon is 10%, while sales tax is 9.5%.
China has signed FTAs with salmon-producing countries like Chile, Australia, and Iceland, allowing them to send salmon to China tariff-free. Norway is still yet to secure an FTA. It also stands as a reminder of how trade relations can be soured by politics.
Once China's largest salmon supplier, after the Chinese dissident Liu Xiaobo was awarded the Nobel Peace in 2010, China blocked fresh salmon imports from Norway. According to Cai, importers of Norwegian salmon are still able to access just 50% of Norway’s farmed salmon production because of current import restrictions relating to Chinese veterinary rules.
The rules – which require that salmon must come from areas which have remained free of infectious salmon anaemia (ISA) and pancreas disease for two years -- apply to Norway only. Cai said his firm imports from all the main producing countries in the world to help ensure a stable, year-round supply.
High raw material prices, hefty import duties for salmon from certain origins, airfreight costs, margins and costs of importers, processors, distributors and logistics companies, not to mention the end retailer, all add up to the final cost of salmon for the end consumer.
Hence, at a Hema store in Shanghai, a 200g portion of chilled salmon belly retails for CNY 65.90 ($9.21), the same as it charges online. By comparison in Tesco's, the UK's largest retailer, a 260g fresh Scottish salmon fillet retails at £3.85 ($4.72).
Pound-for-pound, this means shoppers in the UK pay 40% of the price of fresh salmon paid by shoppers in China.
Ref: https://www.undercurrentnews.com/2019/09/09/chinese-salmon-consumption-forecasts-wide-of-the-mark/
