The unprecedented shutdown in China following the coronavirus pandemic will lead to global price correction and affect Indian companies with high exposure to the Chinese markets, according to a report.
Global shrimp prices are expected to face pressure over the next few months, as global trade adjusts to the changing demand dynamics in China, a key importer and consumer of farmed shrimp, which will affect the entire value chain, rating agency Icra said in a report.
The sizable domestic production (estimated at over 10.0 lakh tonne) and consumption of shrimp in China, makes it a key price-mover in global markets.
In fact, China was a market stabiliser during 2019, when global demand from the US, EU and Japan went down, it said.
China and Vietnam together now account for 25 per cent of shrimp exports from India (in value terms), while 45 per cent plus of India's exports are shipped to the US.
"The rapidly spreading novel coronavirus (COVID-19) pandemic, which originated in Wuhan, China, is believed to be zoonotic and since has been transmitted human-to-human. The reactionary unprecedented massive shutdown in China will lead to contraction in Chinese demand for seafood, leading to a supply glut in the global market," Icra Vice President and Sector Head Pavethra Ponniah said.
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She said, besides the reduced demand, disruption in China's internal logistics - unloading, storing and further processing - will play havoc with all types of seafood, the impact of which will be felt along the entire value chain, leading up to the farmers.
In terms of global trade, the US has traditionally been the largest importer of shrimp, with imports of 6.98 lakh tonne of frozen shrimp in 2019, closely followed by China with imports of 6.5 lakh tonne.
This is despite China being the largest producer globally, the report added.
During the second half of 2019, China overtook the US to become the largest shrimp importer globally.
The European Union, Japan and Vietnam are the other key shrimp importing countries.
The European Union and Japan have reported largely flat shrimp imports over the past five years, while imports by Vietnam crashed during 2019.
Vietnam, more a re-exporter, was the largest conduit for unreported shrimp imports into China until 2019.
With China cracking down on imports via Vietnam, India's direct exports to China jumped in FY2020.
For China, the key sources of frozen shrimp imports are Ecuador (50.7 per cent during 11 months 2019), India (24 per cent) and Vietnam and Thailand (9.6 per cent each).
Typically, Q3 and Q4 account for over 60 per cent of shrimp imported from China annually.
Demand peaks in December and January of each year, before falling to seasonal lows in February, post the Chinese New Year.