2021 Four Seasons all in winter – Summary of China’s Vannamei Import in 2021

Frozen winter has silently arrived, as it should be at the end of the year 2021. However, Vannamei importers might feel numb because they have been too long in winter. The whole year of 2021 seems like only one season-winter. Covid waves hit different cities without signs of ending, making the import of frozen seafood more severe and complex.

Brief recall of 2021

Since the outbreak of COVID-19 in 2020, imported aquatic products have been misinterpreted as COVID carriers, and even once the world thought that the source of the virus was aquatic products, since the first case was found in a seafood market in Wuhan. At the beginning of the year, food markets in many and cities were prohibited to sell imported seafood. Many containers piled up at the port waiting for the PCR test. And bills of port fee and expenses drifted down like snowflakes, ten thousand, twenty thousand, fifty thousand, and the highest reached eighty thousand for just one container. Simply just to clear the container at customs and get their goods to sell, seafood importers grit their teeth and endure, after all, they could not miss the Spring Festival peak season.

Just as the Spring Festival approached, the epidemic broke out one after another, restaurants and other entertainment venues were forced to close, and gatherings and dinners were banned. The main channel of seafood -catering and restaurants consumption was simply gone… The peak season did not rise, the goods were difficult to sell, the funds were difficult to collect. Many seafood importers and distributors vanished in this business.

As in a usual Vannamei price cycle, the price should drop after CNY in Feb and March

Thus, it should be a good time to purchase shrimps at good prices and supplement the stock. The market picked up slightly, the order volume began to increase, followed by some local outbreaks and high COVID detection rates from frozen Vannamei, importers had to face the high risk of rejections from Chinese Customs. Fortunately, the policy in China helps the importers in the way that the container can be opened for COVID test first. If the test result is negative, the balance then will be paid. If there is no such policy, probably no one wants to touch the high risk of importing frozen seafood. In April and May, imports were slightly better. It became normal to have a certain rate of COVID positive rejections. Many overseas exporters gradually abandoned the Chinese market because the risk was way too high.

The situation dramatically changed in June

A sudden outbreak of the epidemic occurred in Zhanjiang. The city is known as the shrimp capital of China, with the main entry port for import. On June 18th, the Zhanjiang port operation was suspended until the end of August. Importers had to amend the destination port. Some chose Beihai and Qinzhou because they were the nearest port, but their software and hardware could not keep up and serve all the suddenly arrived many containers.

The custom clearance took long time

Many importers had to transit to some other ports which were thousands of kilometers away, some even more than 20,000 kilometers away in Tianjin, only to accelerate the clearance process, because the inland freight is between 10,000 to 20,000 yuan, but it is still cost-effective compared to the long clearance period and unpredicted expenses in Qingzhou and Beihai. It was costly but at least manageable. Successively, many good overseas processing plants were banned for two weeks, and some have been directly blacklisted

China's Vannamei import

In September, the sales of frozen shrimps usually started to get better in this month. But a good situation did come as expected. The selling price began to decline. The distribution price in China started to be even lower than the purchase price.

The peak season after the Mid-Autumn Festival did not come as in previous years. Most small and medium-sized distributors chose to stop purchasing future products from overseas and hold no inventory. They would rather make less profit than gamble on the price trend. Meanwhile, the shortage of empty containers occurred outside China too. Overseas suppliers were telling that the price would rise, but it didn’t happen at all. Ecuadorian shrimp prices fell rapidly, followed by India’s HLSO Vannamei.

The shrimp sales did not prosper in Nov and Dec. The latest news is that Zhanjiang port will be closed again on January 10. Alternative ports are also full of uncertainties. A new season of Vannamei harvest has already derived, and the price would go down again. What should the importers do about it? After the whole year, many distributors have abandoned Vannamei permanently.

Short sum up of China’s Vannamei Import in 2021:

1.     Vulnerable to policy

The authorities maintain strict control over imported aquatic products. Imported seafood had been simply banned many times without truly identifying if COVID was contagious from their packaging. Frequently, PCR tests were imposed on the imported items. Many cold stores were locked up for a month. So no goods could be sold during the ban. The media kept describing that imported seafood was risky for COVID infection. As a result, many Chinese refused to consume exotic shrimp.

2.     High risk at custom clearance

If the epidemic breaks out in the port city, all the clearance will be suspended till zero cases are found. If the shrimps are from COVID rampant countries, the PCR test is often positive, therefore the container will be rejected and returned.

3.     High operation cost

Containers are piled up at the port, coming along with so many fees, such as demurrages, port fees, detention fees, sanitation fees, etc. The average extra expense per container is at least 20000 yuan more than usual.

4.     Longer period of the whole supply chain

The inventory turnover rate and cash flow turnover rate decline rapidly. The current ocean voyage is 1.5-3 times more than usual. Many containers will be postponed at the transit port. The clearance takes more than 30 days in China. So the cash flow turnover rate turns out to be extremely low.

5.     Price continues to drop, and importers are facing heavy losses

FMCG sales shall be swift and repetitive. Importers often choose low-profit moods with high turnover rates. But currently, the supply chain cycle is much longer than usual, this strategy is no more workable. Once the goods can be sold, the overseas quotation is far lower than the purchased price. As soon as the market receives such information, importers had to lose profit just to replenish their cash flow. If the quality of the shrimp goes wrong, probably the only solution for the importers is to offer a big discount with further loss.

6.     The Direct impact of the COVID pandemic

If the virus breaks out in any city, all the restaurants in that area will be forced to stop their business, which is the main distribution and consumption channel of the imported seafood. The suspension usually lasts more than 4 weeks till zero cases are confirmed. The tourism, catering, and entertainment industry have been significantly affected by the epidemic. Meanwhile, the volume of retailing and online sales does not increase rapidly, maintaining the overall volume. In a word, the overall sale of imported Vannamei has declined significantly.

7.     Slow economic growth

The situation of Vannamei import could not represent the status of China’s economy, it still shows the general consumption level. There is too much to say about the current economic situation in China. Inflation, wage cuts, and too many bankruptcies all link to the economic downturn. All the increasing cost of the importation eventually passes to consumers. Consumers can either switch to more economic products or simply not buy. After all, Vannamei is not an item of necessity in daily life. There are tons of substitutes.

China's Vannamei

Chinese culture is broad and profound. There has been a good sentence in all textbooks, that is “nothing is absolute”. Just like the word “crisis” in Chinese is consists of two parts, half is danger, and the other half is opportunity. There definitely will be a series of new economic stimulus policies in 2022, which might be interest rate decrease, or cost reduction, and eventually monetary ease. China’s government will surely control and improve the economic situation. They might ensure the funds are entering people’s livelihood, rather than being injected into the stock and real estate market. There are always heroes rising in chaos. Who shall be brave enough to be the game-changer? In 2022, we shall find out.

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