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Looming recession in the US and Europe, an energy crisis in the continent and COVID-19-induced lockdowns in China threaten to thwart the Indian seafood sector’s attempt to earn a targeted $8.6 billion in exports this financial year.
Exports to the US are facing a slowdown while the energy crisis in Europe and spread of COVID-19 in China have impacted shipments to these destinations.
The first few months of the current year were good for Indian seafood exports, but trouble started in August. The industry says the weak sentiment is likely to persist in the coming months.
“Compared with last year, there is a slowdown in exports to the US. They are holding stocks and the purchases have become sluggish from August,’’ said M Nagesh, director of Nekkanti Sea Foods Ltd.
Consignments are moving now to China despite lockdowns, which Nagesh reckons could be due to higher home consumption.
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“In China, the restaurants have closed in many places because of lockdowns. But online deliveries have increased,’’ he said.
The Ecuador factor, European crisis
Yet another reason for slow purchases by the US is competition from Ecuador, which has become the largest shrimp producer in the world.
“Cost of production in Ecuador is cheaper than in India and the freight rate to the US is lower. Thus, Ecuador is able to sell shrimps at a more competitive rate than India, ‘’ pointed out Kenny Thomas, managing director of Jinny Marine Traders.
The US and China are the two top export markets for seafood from India. Europe is in the throes of an energy crisis amid distress from the impact of the Russia-Ukraine war.
“I haven’t seen such a situation in Europe in the last three decades or so. Spiralling energy bills are forcing buyers to stop buying or cancel orders. The energy bills have risen five to six times,’’ Thomas said.
Usually, the Christmas and New Year seafood shipments head out of India from October onwards. But this time the economic crisis in the global markets may hit these consignments.
“It is true that we are facing severe headwinds in the US and Europe markets. But the impact is going to be felt more in the coming months when we go into the New Year season. China is OK now. but we are not bullish about the market because of the spread of the pandemic,’’ said Rahul Kulkarni, partner, Lighthouse Seafood Advisors.
Shrimp production hit
India was hoping that exports to Russia will pick up with an increase in rupee trade. But that has not happened so far.
There is nothing much to cheer on the shrimp aquaculture front with the production set to be lower than last year.
“Inflation, diseases, rains and floods have all affected the shrimp production. We are likely to be about 10 percent short in the output this year,’’ said Ravi Kumar Yellanki, president of the All India Shrimp Hatcheries Association.
Despite pandemic-induced lockdowns, 2021 saw record production of 920,000 tonnes. But 2022 may see the production going below 900,000 tonnes, according to Yellanki. In the last few years, higher demand in the second half had galvanised production.
“But this time it won’t happen. Already shrimp broodstock imports have slowed and farm gate prices have increased. At the same time, global shrimp prices have not gone up,’’ Yellanki pointed out.
While Indian production is set to go down, Ecuador’s shimp output is expected to rise from 1 million tonnes to 1.2 million tonnes. Apart from Andhra Pradesh, which accounts for the major share of the farmed shrimp production in India, the prospects in other shrimp-producing states like Odisha, West Bengal and Gujarat are not bright.
Sunset review
“If the US demand goes up, then it may prompt farmers to produce more,’’ observed Nagesh. But in the present situation, the chances are remote. In FY22, India touched a new peak in seafood exports at $7.76 billion, achieving 97% of the targeted $7.8 billion.
Meanwhile, the US Department of Commerce has begun the third sunset review of the anti-dumping duty imposed on frozen shrimps from India, China, Thailand and Vietnam since 2005.
But the two selected exporters from India, namely Nekkanti Sea Foods and Devi Seafoods, have already opted for settlement of a fixed rate and are not participating in the review.
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