Why is China spending over $400 million to import a Vietnamese product, despite record-high prices?

Fish meal is the product that China spends hundreds of millions of USD to import from Vietnam. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), in 2023, China imported 1.65 million tons of fish meal from countries around the world, a decrease of 9% compared to 2022. Among them, China imported nearly 262 thousand tons of fish meal from Vietnam, with a value of 425 million USD, an increase of 24% in quantity and 48% in value. According to China Customs, Vietnam is the second largest supplier of fish meal to the populous country, after Peru.

Fish meal is a popular animal feed, playing an important role in livestock, poultry, and aquaculture activities. Less commercial fish or fish parts such as head, tail, scales, and viscera, along with some other by-products and additives, are the main sources for fish meal production.

China increases fish meal imports from Vietnam

Source: China Customs/Chart: MH

The reason why China is increasing fish meal imports from Vietnam and other sources such as Russia, Thailand, and India is due to the decrease in imports from Peru. According to Undercurrent News, in 2023, fish meal imports from Peru to China decreased by 51%, reaching 430 million USD. The reason is the prolonged El Nino phenomenon, which greatly reduced the biomass of anchovy in Peru. Therefore, China, the world’s largest fish meal consumer market, has to increase imports from other sources to meet the growing domestic demand.

The decline of Peru allows major fish meal producers like Vietnam, Russia, Thailand, and India to fill the market gap. In fact, in 2023, besides Peru, China imported a record high of nearly 1.2 million tons of fish meal from other countries.

According to Jean-Francois Mittaine, a seafood analyst, the demand for protein in China was already high but now it is even higher. The demand for fish meal in China continues to rise, making fish meal processing one of the “hottest” professions in the world.

With a price of 1,766 USD per ton, this is the highest average import price for China since 2000. The sharp increase in fish meal prices in 2023 has become a driving force and inspiration for aquafeed manufacturers to conduct research to reduce the volume while preserving the nutritional value.

Currently, although fish meal and fish oil are considered the foundation of aquaculture feed, improvements in understanding the nutritional needs of different farmed fish can contribute to reducing dependency on fish meal.

In reality, alternative products like soy protein or poultry meal often lack the digestibility or amino acid balance. This keeps the demand for fish meal high.

However, Mr. Mittaine believes that “I think China’s fish meal import is approaching the maximum level. The country is seeking a common source from many countries around the world, but can they continue to accept the increasing prices?“

According to the forecast of scientists, in April – May 2024, the El Nino phenomenon will be at a neutral level and by June – July, it will completely change to La Nina. This means that Peruvian anchovy can recover. However, other fish meal producing countries will not give up the newly gained market share in China. These markets will compete with each other. In fact, India, one of the 5 fish meal suppliers to China, currently has fish meal that is $100 cheaper than Peru’s and the quality of their products is also improving.

References: VASEP, Undercurrent News, IFFO