After an exceptional year in 2018, pangasius producers who invested heavily in expansion now find themselves facing much more difficult conditions as full inventories and trade restrictions slow the markets.
Farmed pangasius production in the world’s leading supplier, Viet Nam, will reach record levels in 2019 following heavy investment and expansion across the Mekong Delta. Total harvests are expected to surpass 1.3 million tonnes. Exceptionally high price levels last year are reported to have been the primary cause behind an estimated 18 percent increase in farming area and a total increase in capacity of around 10–15 percent. Although core markets are still well supplied with 2018 product and prices have fallen sharply, good availability of cheap fingerlings and persisting optimism
have largely offset any dampening effect on stocking activities. However, challenges are now mounting for independent farmers, as larger integrated companies with both farming and processing operations have been focusing on supply from their own ponds in an attempt to bring down the cost of raw material. Many producers are now struggling to sell sufficient volumes at acceptable prices. In response, some have been delaying harvests to the point where fish harvest weights are up to 50 percent higher than last year’s averages.
Although Viet Nam dominates international supply, output growth in other producing countries is also contributing to the widespread availability of pangasius. Indonesia, which produces mainly for its domestic market, is seeing rapid growth in pangasius harvest volumes, while pangasius farming development continues to gather pace in China. The productivity of Chinese operations is still some way behind that of their Vietnamese counterparts, who benefit from decades of experience, established infrastructure and a better climate. Chinese farmers have the advantage of having a large market in close proximity. The sector there is now focusing on developing the practices and technologies necessary to support the industry, starting with high-quality fingerlings and feed. Growth is also being seen in India, where pangasius farming competes with the much larger shrimp aquaculture sector for resources and investment, although the export industry remains very underdeveloped.
After a year of elevated prices and good sales in core markets, the Vietnamese industry is now faced with a situation in which inventories in important markets, such as the United States of America and China, are well-stocked with high-priced raw material. In the US market in particular, most packers at present are only interested in making smaller purchases to top-up supplies where needed. Some are even discounting their unsold inventories from last year. This subdued demand, combined with various trade-related obstacles that Vietnamese exporters must contend with, means there is a growing incentive to reduce their reliance on the US market. Given the lingering resistance to pangasius still evident in the majority of EU28 countries, markets in Southeast Asia, including Thailand, Malaysia and Singapore, are now attracting an increasing amount of attention from the pangasius sector in Viet Nam.
Expansion in China remains a key objective of the industry as a whole, despite a keen awareness of the risk represented both by the unpredictability of Chinese regulatory changes and future potential of Chinese domestic supply. Vietnamese pangasius is now well accepted by Chinese consumers, both as a cheaper commodity whitefish and as a more high-end product. The species has become important for the Chinese food service sector and is selling well through e-commerce channels, where the penetration of fillets has also increased.
After exceptional export performance in 2018, a less active US market saw Vietnamese export revenues decline in the first half of 2019. According to the Vietnamese Association of Seafood Exporters and Producers (VASEP), total export revenue fell by 4.1 percent in the first six months of the year, compared with the same period in 2018.
Full inventories, anti-dumping duties and a downgrade on the US Trafficking in Persons (TIP) report are among the key factors behind the decline in Viet Nam’s pangasius exports to the United States of America, which represent over 95 percent of US imports in value terms. The combined effect of these developments on demand have more than offset any potential gains represented by the introduction of tariffs on competing species in the whitefish segment, such as tilapia, as part of the trade war between China and the United States of America. VASEP’s figures put the cumulative
value of pangasius exports to the United States of America in the first half of 2019 at USD 141.9 million, down by 27.9 percent.
The value of exports to China including Hong Kong SAR, which now represents 26.4 percent of Viet Nam’s total export market in value terms, grew by 1.2 percent, a substantially slower growth than that observed over the last few years. China has been cracking down on illegal seafood trade between the two countries and recently issued import bans to Vietnamese companies, two of which are pangasius exporters, although no specific reason was given for the bans. Viet Nam provides almost the entirety of China’s external pangasius supply.
Elsewhere, Vietnamese exports to the Association of Southeast Asian Nations (ASEAN) bloc continue to grow as the region takes on increasing importance as a target for market development.
In the EU28, a number of large markets, including Germany and the United Kingdom, registered significant increases in imports of frozen pangasius fillets from Viet Nam in the first half of 2019.
With inventory backlogs, expanding farming areas and trade restrictions all exerting downward pressure, pangasius prices have fallen steeply from the record levels observed in 2018. For the third quarter of 2019, average prices for fillets FOB Ho Chi Minh were around USD 2.35 per kg, contrasting markedly with quotes of USD 3.20 per kg reported at the same time last year. At farm level, fish prices have fallen as low as USD 0.80–0.85 per kg, which are unprofitable levels for many farmers.
Market conditions are expected to remain challenging for the remainder of 2019, with subdued buying activity in both the United States of America and China. However, there is some optimism amongst some farmers in the Mekong Delta that this is the bottom of what will be a temporary price lull. There have been some positive developments for Vietnamese exports to balance the negative news to some extent, including the progress made in the ASEAN region and the signing of a trade deal with the European Union (Member Organization), which will see EU28 import tariffs removed on Vietnamese pangasius within three years. On the production side, key areas of focus will be improving fingerling production and management techniques and coordinating sustainable industrywide production growth.