Domestic Seafood Production Is Down, The Spring Of Future Farmers Is Coming!

For decades, China was the world's largest seafood exporter, but after growing imports, it has become a net importer, heralding key changes in the global seafood industry.

Gorjan Nikolik, senior seafood analyst at Rabobank, says he has been tracking the global seafood trade for nearly 20 years and has compiled new statistics, but he has found the most significant change to date and one that could affect the direction of the global seafood industry.

First, short-term drivers of import growth

According to Gorjan Nikolik, the growth in China's seafood imports last year (a large part of which was shrimp), most of which came from Ecuador (564,597 tons) and India (136,838 tons), was mainly influenced by the opening up of the food service sector in the Chinese market, which has been affected since the outbreak of COVID-19.

However, the relaxation of the rules in 2022, coupled with allowing proper Chinese New Year celebrations for the first time since the pandemic, has led many importers to fill their inventories and prepare for a big play.

Gorjan Nikolik explains: "Seafood demand has been depressed for two years and importers expect ordinary consumers to be eager to celebrate this year."

Although Gorjan Nikolik believes it is too early to draw conclusions, the results suggest that more Chinese are returning to restaurants, paving the way for a strong recovery in seafood demand, which after a two-year lull is expected to continue in China as a net seafood import market.

Second, the long-term trend behind import growth

In addition to the surge in shrimp imports, Gorjan Nikolik was surprised to see basa fish imports from Vietnam - up 109% year-on-year in volume (147% by value). This growth indicates the popularity of Vietnamese basa fish with consumers and may also indicate a change in habits among Chinese consumers.

Gorjan Nikolik stressed: "This is very surprising because China is a large producer and exporter of freshwater fish and the world's largest exporter of tilapia, but ended up importing a lot of basa. This suggests basa has an advantage and may reflect the growing demand for convenient seafood products among the younger urban generation, who may not have time to cook traditional seafood meals."

"It's an interesting phenomenon: both because China is the largest tilapia producer and because we always thought they had no real interest in basa, they bought more basa in 2022 than the US and Europe combined."

At the same time, according to Gorjan Nikolik, factors that could help drive a long-term increase in China's seafood imports include an aging population and rising per capita income.

"This means less seafood is produced at home, but more seafood is consumed. Especially in this context, people are moving to produce higher value products, and many people are already moving from the seafood industry to producing batteries, or electric cars and other products with high value and high export potential, which is also the natural development of the economy. In addition, a significant factor affecting the reduction of domestic seafood production in China includes the retirement of most of the pelagic fishing fleet."

"The combination of these factors suggests that this is a trend that is long overdue, and they are likely to follow the European and US patterns: The EU has a seafood trade deficit of $28 billion and the US $25 billion. Although both regions have fewer people and more resources, they still import most seafood, and in a rich economy, farmed fish and shrimp are rarely an option for high-income people."

Still, Gorjan Nikolik believes China's domestic seafood market, especially for carp and tilapia, is likely to remain strong.

"China still produces about 1.5 million tons of tilapia a year, but 10 years ago, 90 percent of that would be exported, now it's only 20 percent. Self-sufficiency may still be a policy to some extent, but being a net seafood exporter seems to be changing."

Gorjan Nikolik says he is keen to assess the impact on global seafood if China does follow the same pattern as Europe and the United States. But the basic fact is that the seafood deficit in each of these markets has grown by more than $1 billion a year since the outbreak began.

Third, global impact

"This creates a huge opportunity on a global scale. China's net seafood exports were $11 billion in 2017, but are now negative -- meaning other countries will have to capture the $11 billion market within five years. If this trend continues and China's net seafood imports soar in the next five years, other parts of the world, most likely traditional seafood exporters such as Chile, Norway, Vietnam and Ecuador, will have a chance to meet this demand. Because if tilapia is fed on soybeans imported from Brazil and then raised on expensive land using expensive labor, does it make sense to raise tilapia in China and then export it?"

Gorjan Nikolik published a report at the beginning of 2018, and it turns out that his prediction seems to have been borne out: There are huge opportunities for seafood exporting countries in the coming years. Gorjan Nikolik predicts that while demand for salmon, shrimp and freshwater fish varieties is likely to keep growing in China, demand for other, more niche seafood is also likely to increase. Especially after the epidemic, China's seafood imports may increase significantly.