September 12, 2016, 9:13 am
Chinese conglomerates are looking to make deals to secure seafood supply, with Latin America and Australia likely to be focuses, according to an analyst with Dutch lender Rabobank.
After a recent trip across the country meeting companies, the Dutch lender’s senior seafood analyst, Gorjan Nikolik, wrote in a note, “it’s clear that it won’t take long before Chinese enterprises make acquisitions across the seafood world”.
Latin America and Australia are likely candidates, as these regions have growth potential and are well positioned to export to China, he said.
But any company that has access to farming or wild catch resources, or access to technology, will be considered, no matter where it’s located, he added.
As China’s economy has developed, large billion-dollar corporations have emerged, rising from the construction, metals, chemical and agriculture businesses, commented Nikolik. These are “rich with capital” and many are “already in the food industry, or even the seafood industry”.
They see the opportunities the domestic Chinese market offers and are thinking 20 years ahead, wrote the analyst. “What type of seafood will the Chinese consumer buy then? With this question in mind, the quest to internationalize the China’s domestic seafood industry begins.”
The signs of this can already be seen.
On Wednesday, it emerged that a Chinese firm is in talks to buy an Argentine shrimp fishing fleet, for $95 million.
One Chinese firm with government backing will acquire Continental Armadores de Pesca SA’s (Conarpesa) 12 vessels with freezing on board capability, local publication Revista Puerto said. The name of the firm remains a secret, the publication said.
Undercurrent sources, however, said it is thought the buyer for the Conarpesa fleet is Shanghai Fisheries General Corporation (Group), a state-owned fishing giant which claims to have turnover of over $1 billion.
Back in 2014, Shanghai Jinyou Deep Sea Fisheries Co. — a subsidiary of the Shanghai Fisheries — paid $21.5m in cash for a 100% interest in Argentina’s Altamare, giving control of shrimp fishing vessels, fishing licenses and a processing plant.
Shanghai Fisheries is also the ultimate parent of Shanghai Kaichuang Marine International, which acquired Spanish tuna canner Conservas Albo for €60.99m in cash earlier in the year.
Back in late March, Legend Holdings — a Chinese conglomerate with turnover of close to $50bn — inked a deal with Australia’s largest seafood firm, Kailis Bros.
Hong Kong-based Legend, which is the majority shareholder of PC maker Lenovo Group, announced that the seafood industry will be regarded as a core pillar in its agriculture and food segment.
The company plans to use the Kailis Bros deal as a starting point to build a “seafood industrial cluster” with the ultimate goal of the “industry leaders in [the] Asia-Pacific region and the world at large”.
Legend and the Kailis family have formed a newly-capitalized joint venture called KB Food Group. This is 90% owned by Legend and 10% owned by the Kailis family. The Kailis family injected KB Seafoods Company — which includes Kailis Bros along with National Fisheries Company, and its operation in New Zealand and Asia — into the new venture.
Love of seafood
The driver for these deals, invariably, is the love China’s growing middle class has for seafood.
“China is the land of big numbers. In population terms, the country has a larger population than the EU, Russia, North America, Brazil and Australia combined. But with a strong preference for fish and seafood, the Chinese consume more seafood per capita than, for example, Americans, Australians or Germans,” wrote Nikolik.
However, China only has a small fraction of the arable land area, grains availability or marine exclusive economic zone compared to these regions. “Given the high consumption and the relatively low resource availability, it’s remarkable that China is self-sufficient when it comes to seafood,” he wrote.
“Not only is China self-sufficient; it’s the world’s leading seafood exporter, while the EU-28 and the US are the leading importers. The reason for this: the bulk of Chinese seafood consumption consists of freshwater species such as carp or extensively farmed molluscs,” added Nikolik.
Both of which — due to their extensive production techniques — can be produced with very limited input of land or grains.
“In fact, for some 2,000 years, aquaculture in China has evolved to perfectly suit the local environment and local raw material availability,” he wrote.
This evolved out of necessity, as China didn’t have plentiful grains, pasture lands and marine fishing grounds, at least in relation to its population size.
“But with the rise of Chinese wealth, global logistics and trade, the Chinese consumer is no longer limited to consuming seafood produced locally with local resources,” wrote the analyst.
“It’s taking time, but gradually, consumers in China are discovering seafood products common in other parts of the world. This transition has even been accelerated by numerous domestic food scandals,” he added.
“Exporters from Canada, Norway, Argentina, Ecuador, Chile and Australia, among others, are rapidly seeing growing sales of lobsters, salmon, shrimp, scallops and other seafood to the Chinese market,” wrote the analyst. “For some, China has already become their biggest market. However, growing imports are the just the first new dynamics we’re seeing in the seafood industry—dynamics caused by China.”
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