October 5, 2016
Transformation, intensified competition in the world whitefish market
An eFeedLink Hot Topic
  • After decades of exponential growth, flat output, growing domestic demand, intensified international competition has flattened Chinese tilapia exports, caused market share losses
  • Pangasius from Vietnam, tilapia from Indonesia and Vietnam is edging out Chinese tilapia in both the world market and even in China itself
  • Over the medium terms, Vietnamese pangasius will take advantage of flattening output to undergo a growth spurt from 2016 through 2018
  • Rising whitefish production in India, Indonesia, Vietnam and Latin America will create a whitefish market where no one country or species dominates
The world market for farmed whitefish is undergoing simultaneous, multiple shifts in its production geography, consumption demand and species preference.
Nowhere is the shift in whitefish markets more obvious than in China, which used its once-booming tilapia industry to lead this species 502% global production expansion from 1990 through 2015. From half of world tilapia production or 0.55 million tonnes at the turn of the century, China's now produces 1.7 million tonnes but a smaller 28% of the world's tilapia. Its share will gradually fall towards 20% by the mid-2020s for one simple reason: After rising a compounded 9% annually from through 2015, production can only rise by no more than 1% to 2% in a good year.
At a September 2016 Global Aquaculture Alliance (GOAL) conference held in Guangzhou, China, speakers noted that the country's cultivated tilapia stocking densities and water acreage are both maxed out. The latter is particularly true in Guangdong and Hainan. Accounting for nearly 60% China's tilapia production, these two provinces also have rapidly expanding coastal urban areas, which increasingly impinge on tilapia production regions.
The consensus at GOAL was that China's tilapia production which amounted to 1.7 million tonnes in 2015, would peak at 1.8 million tonnes next year before falling back to 1.7 million tonnes in 2018. Over the long run, output can only be grown by boosting stocking densities, which are already near their maximum limit. It implies that by the middle of next decade, Chinese tilapia production will probably be around 2 million tonnes.
This is partly reflected in Chinese tilapia's large but faltering export market share, as the exponential growth years are over. From 36,000 tonnes in 2002, tilapia exports jumped 10-fold in ten years, rising by over 26% annually over this time, to 362,000 tonnes by 2012. However, from 2013 through 2016, volumes rose at an anemic 0.5% annually.
The levelling off of export volumes is due to a coincidence of slow production growth, rising tilapia consumption within China itself and a ten year, 25% rise in China's currency. The latter boosted Chinese tilapia's international price just as lower cost producers jacked up their own output.
By comparison, exports from competing tilapia producers, pangasius growers and other catfish-like species continues to rise at healthy rates. Thus, in America, which accounts for the largest share of tilapia imports, China's tilapia market share fell from 75% in 2005 to 42% in 2015.
Chinese tilapia is getting increasing competition from catfish-type species, particularly pangasius, which is widely grown throughout Southeast Asia and more recently, India.  Vietnam in particular, went from growing 100,000 tonnes of Pangasius in 2000 to approximately 1.1 million tonnes in 2015. With Vietnam accounting for a majority of output, world pangasius production jumped from under 150,000 tonnes in 2000 to 1.8 million tonnes in 2015.
When one makes an average of GOAL conference speakers' individual output estimates, Vietnam's flat pangasius output appears poised for a growth spurt over the next three years. By their estimates, it rose only a nominal 1.6% over two years, from 1.169 tonnes in 2014 to 1.188 million tonnes this year. This reflects the current oversupply of whitefish on the world market, which is depressing prices and the incentive to produce.
Going forward however, amid flat Chinese production and its higher production costs, analysts expect Vietnam to take advantage of the resulting supply vacuum to boost pangasius output by 5.3% in 2017 (to 1.252 million tonnes) and an even sharper 6.7% (to 1.335 million tonnes) in 2017.
According to Chinese seafood traders, imports of inexpensive Vietnamese pangasius have put a lid on tilapia prices, not just on the world market but even within China itself. For example, China customs reports that while its 2015 tilapia export volumes rose by approximately 1%, revenues fell by 10%. This is mostly due to a flood of pangasius imports, which depressed domestic prices for all Chinese whitefish, tilapia included.
With China mostly producing tilapia and Vietnam pangasius, it is also getting harder for China to compete abroad. On one hand, America, the world's largest whitefish market imported 3% less tilapia in 2015 at 224,000 tonnes (compared to 231,000 in 2014). On the other hand, US imports of pangasius (almost all of which came from Vietnam) rose by 8%.
Moreover, Vietnam is using more than just pangasius to take market share from China. With its lower production costs, Vietnam's 2015 tilapia export volume to the US doubled while those of China fell nominally.
Vietnam is not just crowding out Chinese whitefish on the world market; it is also doing so within China itself: The Vietnam Association of Seafood Exporters and Producers (VASEP) 2015 pangasius reports that exports to China and Hong Kong increased over 50% by volume and 42% by value over the previous year. By impacting returns and domestic Chinese prices, Vietnamese imports have played as much a factor in flattening out China's tilapia production as the maxing out of available inputs.
But Vietnam is hardly in a position to have the world whitefish market to itself: Indian production is on the increase. From almost nothing ten years ago, GOAL attendees on average expect Indian production was 435,000 metric tons in 2015.
Driven by the desire to replicate Vietnam's export, Ragnar Tveteras, business economist at the. University of Stavanger, estimates that India's pangasius output could rise 47% over three years, to 640,000 tonnes in 2018. This implies that within Asia, the end of the decade could see Vietnam's pangasius market share come under increasing competition from Indian supplies.
Alongside competition from Vietnamese and (soon) Indian pangasius, China also faces competition from rival, ascending tilapia producers, both in Asia and from the other side of the world: From a UN FAO estimated 74,000 tonnes in 2000, Indonesia grew 458,000 tonnes of tilapia in 2010 and approximately 1.046 million tonnes in 2015.

According to data presented by Ragnar Tveteras at GOAL China, Indonesia's tilapia output will rise another 21% over three years, totaling 1.333 million tonnes by 2018. With a reputation for quality and low levels of drug residuals, it is taking market share away from China in the US and Mexican markets while commanding a significantly higher price.
Alongside pangasius from India and Vietnam, Indonesian tilapia will slowly chip away at China's whitefish market dominance in Asia. In the America's however, another story is developing: From an FAO estimated 220,000 tonnes in 2007, Latin America's tilapia production more than doubled to a Rabobank-estimated 457,000 tonnes in 2012, 660,000 tonnes in 2016. Rabobank projects it to rise to over 1.0 million tonnes in 2020 and 1.5 to 2.0 million tonnes by 2025.
Aside from having far lower feed costs than China, Latin America's proximity to the US also gives it significantly lower transport costs, along with the capability to for fresh exports, whereas China is limited to frozen or processed tilapia.
All this implies that while China transitions from being an international supplier to domestic tilapia self-sufficiency, wider changes are underway. The world looks to increasingly be carved up between pangasius exports from India and Vietnam, which alongside Indonesian tilapia, will increasingly end up on Eurasian dinner plates.

A new paradigm for raising white fish?


Alongside the changes in tilapia's production centers and import demand, this widely traded whitefish has significant health and safety issues hanging over it. In America, industry surveys show that tilapia is the only species which consumers know is widely farmed –and in many cases shunned for exactly that reason. But health problems and legal issues trump even these marketing considerations.

Tilapia was the top species rejected entry into the United States. According to US FDA reports, from January 2015 through August 2016, 84 shipments were rejected entry into America for having abnormally high residues of antibiotics or the presence of banned substances.

These high antibiotic levels however, reflect an issue that is also increasingly seen in maturing lines like shrimp: The inability to safely manage maximized stocking densities: At the 2016 GOAL conference in Guangzhou, China, Hamish Rodger of FishVet Group estimates that two Streptococcosis strains, S. iniae and S. agalactiae, cost the industry around US$250 million –a sum equal to approximately 5% of its US$5 billion world sales volume. 

The bad news is that both of these bacterial strains are capable of causing human infections, are becoming increasingly antibiotic resistant and genetically related to antibiotic resistant bacteria found in livestock operations. This growing resistance to antimicrobials is one reason why producers had to boost dosing levels and (inevitably) had a rising proportion of their imports rejected due to antibiotic residues. These pathogens are also made problematic by the fact that alongside the expected fish-to-fish transmission, S. iniae and S. agalactiae can also piggy-back on the sperm and eggs from which new tilapia are hatched, making for virtually pre-destined losses during early to middle growth stages.

The good news is that new vaccines against these bacteria will make it unnecessary to use high antibiotic levels to control these diseases –but with an important condition: According to Rodger, the bad news is that unless the fish are grown in proper conditions, the vaccines will not be effective. For example, whereas antibiotics can 'cover up' for unsanitary growing conditions, foul water conditions can result in fungal blooms. The mycotoxins produced by the latter can then compromise tilapia immune systems, preventing vaccines from working properly. 

For this reason, Rodger recommends that tilapia growers take a new, comprehensive approach to raising their fish: Not only redesigning farm management routines to keep ponds cleaner but also by using probiotics and higher quality feed to boost tilapia immune systems.

In many ways, this need for a new tilapia farming paradigm is very similar to what is being already undertaken in the world shrimp market, where stocking densities, disease outbreaks and import rejections due to high antibiotic residues coincided in a catastrophic way. Tilapia are hardier than shrimp and all this does not foreshadow that the industry will suffer catastrophic pathogenic outbreaks in the future –but even so, one of the biggest market changers of recent years has been the rejection of Chinese tilapia and Vietnamese pangasius by importing countries due to high antibiotic levels. 

With countries from Indonesia to Latin America are now able to grow these whitefish at lower stocking densities and in a more sustainable manner. Hence, these emerging tilapia health and human food safety issues these changes generate may transform the world whitefish market as much as the maxing of Chinese production or emergence of new producers.

On the other side of the world, Latin America's prolific warm water coastline, low feed costs and proximity to the Americas makes it likely to become an important tilapia supplier to North America and perhaps even Europe from the early 2020s onwards. While the relative fortunes of Latin American, Indonesian and Vietnamese producers depend on their luck over the next decade, one thing is for sure: We are moving from a Chinese dominated whitefish market to a multipolar arrangement where no one country dominates world supplies.


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