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November 17, 2003

 

 

China Fishmeal Market Weekly Report - Dismal Demand Kept China's Fishmeal Prices Low During Week Ended November 16

 

An eFeedLink Exclusive Report

 

1. Market overview

 

Due to the overall fall in the prices of raw materials for feed production across China, compounded by depressed demand, local fishmeal market for the week ended November 16 was unusually dismal, with CIF quotes of imported fishmeal dropping generally by RMB 100-150/ton, compared to the previous week's prices.

                                                             

Currently, 64% protein FAQ imported fishmeal at Dalian and Tianjin ports was quoted at RMB5650-5700/ton, and transacted at RMB5600-5650/ton. At Shanghai port, 64% protein FAQ imported fishmeal was quoted at RMB5650/ton and transacted at around RMB5600/ton.  At Huangpu port, FAQ imported fishmeal (over 64% protein) was quoted at RMB5700/ton and transacted at RMB5600-5650/ton. According to market participants, prices of newly arrived fishmeal at Chinese ports are about RMB50/ton higher than those of the current inventories.                     

 

Meanwhile, prices of locally produced fishmeal during the week remained basically stable. In Shandong province, higher-grade locally produced fishmeal was generally transacted at close to RMB5100/ton, while lower-grade locally produced fishmeal in other regions transacted at between RMB4900-5000/ton.    

 

2. Market Supply and Demand

 

In terms of supply, most of the fishmeal arrivals during the week were container shipment, and there were no full shipload of fishmeal arriving at Chinese ports this week. It is reported that the first shipment of fishmeal for the new season has already left Peru for China, and is expected to reach Chinese ports in early December. At present, fishmeal inventories at major Chinese ports stood at a modest 75,000-80,000 tons, with about 32,000 tons at Shanghai port and 25,000 tons at Guangzhou's Huangpu port.

 

In terms of demand, a considerable fall in fishmeal consumption due to the increasingly cold weather in most parts of the country, coupled with the general lukewarm response towards fishmeal price movement as a result of the sustained low soymeal prices, the demand for fishmeal have been negatively affected, leading to light transaction in the market during the week.

 

3. Overseas Markets                                                                             

                                                                                                                      

The ban on fishing in the Peruvian seawaters from Paita to Chicama has been lifted on November 11.  Recent Peru's daily fish haul was between 20,000-30,000 tons.

 

With the improved fish haul in Peru lately, prices of FAQ fishmeal during the week have begun to fall correspondingly. Currently, FAS prices of FAQ imported fishmeal ranged between US$560-565/ton, showing a fall of US$5-10/ton compared to the previous week's prices.

                           

4. Outlook Analysis

 

One key reason for the sustained fall in fishmeal prices in China market during the week was the lower demand for fishmeal by the aquaculture industry lately. As temperatures in most of the southern regions of China fell, consumption and demand by the aquaculture industry also dropped considerably. For instance, daily departures of fishmeal at Shanghai and Guangzhou ports have reduced significantly, compared to earlier weeks.

                  

In addition, most feed millers have built up a considerable reserve during the period when fishmeal prices were still high. As many feed millers are attuned to the practice of "buying before further price hikes and hold purchase when prices are falling", their tendency now is to adopt a "wait-and-see" stance towards the current downward price correction of fishmeal. This also explained why the fishmeal market was so quiet during the week. Besides, the overall falling prices of raw materials for feed production, such as soymeal and lysine, also influenced the downward movement of fishmeal prices during the week.

 

At present, market participants are still not confident about an increase, if any, in fishmeal prices in the nearby term, given the presence of uncertainty in the fishmeal market in the weeks ahead. These uncertainties are analyzed as follows:  

    • Firstly, the situation of Peru's fish haul after the lifting of the fishing ban remains uncertain. Peru's fish haul for week 44 of this year totaled 329,800 tons, an increase of 47.9% from the 223,000 tons in week 43. Despite the increase in fish haul, the relatively higher proportion of young fish in Peru's seawaters means that the fish haul for the following months remains uncertain;  
    • Secondly, it is still unclear if soymeal prices will continue to drop in the coming weeks. Although prices of soymeal this week have fallen by a considerable extent, it is still too early to affirm that soymeal prices have taken on a downward path, as CBOT and Dalian soymeal prices are currently still at a high level. Moreover, a favorable soybean market situation has been reported in USDA production report on Wednesday; 
    • Thirdly, it is still difficult to determine the continual effectiveness of the price alliance by some major Chinese fishmeal suppliers in the face of the recent falling fishmeal prices.

It should be noted that livestock and aquaculture industries' demand for fishmeal continues to be the key determinant of fishmeal prices for the near future. Current dismal demand is believed to be only a short-term setback. With the continually rising poultry meat and egg prices, and the foreseen requirement for fishmeal driven by increased livestock and poultry production to meet demand during the holiday season in January, demand for fishmeal will pick up again with the approaching of the New Year's Day and Chinese New Year holidays.

 

In short, with the recent slowdown in local fishmeal market activity, it is possible for China's fishmeal prices to fall continually in the short term. Nevertheless, as a result of the projected high demand by the livestock and poultry industries before the festive season in January, the downslide in fishmeal prices in China for the near future is expected not to be too considerable, if any.

 

Fishmeal prices at China's major ports

Date: Week Ended November 16                                                                      Unit: RMB/ton

Destination

Origin

Protein

Previous week's price

This week's price

Rise/fall

Dalian port

Peru

64%

5750

5650

­-100

Tianjin port

Peru

64%

5750

5650

-100

Shanghai port

Peru

64%

5750

5600

-150

Huangpu port

Peru

64%

5750

5650

-100

 

            Remark: Prices refer to port transaction prices and are for reference only.

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