February 27, 2017

Certain sources within the pangasius sector feel that, faced with the possible difficulties of meeting US Department of Agriculture (USDA) import requirements, Vietnam could look to take advantage of growing Chinese demand this year.

US Congress has considered repealing the change to the US farm bill which shifted regulation of catfish from the Food and Drug Administration (FDA) to the USDA.

But, in December 2016, Republican House leadership decided the decision would remain, by choosing not to allow a vote on the subject – despite 230 House of Representatives members stating they wanted it repealed, said John Connolly, president of the US National Fisheries Institute (NFI), during the value whitefish panel at the Global Seafood Market Conference (GSMC). 

“I’m scared,” one executive with a pangasius producer, who claimed to have met with the Vietnamese government in January, told Undercurrent News.

“USDA equivalency needs to be in place by Sept. 2 – for both the farms, and the country as a whole,” he said. “It’s not an easy thing to achieve, and I would say that when I met them, the government has not been quick to wake up to this. We might see trade with the US halt.”

He did acknowledge that companies were working hard to meet the USDA standards, and that it was too early to tell if the country would achieve equivalency.

A second source – an importer based in the US – told Undercurrent he was concerned at both the decision to have pangasius imports regulated by the USDA, and that the new US administration looked fairly anti-import.

“There is a new-found Chinese market for swai [pangasius] and the fact that we are only consuming 20% of their swai [23% of Vietnam’s pangasius was sold to the US in 2016] leads to a concern that the needed efforts to reach that very high bar of ‘UDSA equivalency’ might not be made,” he said.

China is one of Vietnam’s biggest buyers. EU sales decreased for most exporters in 2016, and so far China’s been taking that up in 2017. They need different products, but we can – and have – shifted sales there from the US

“Recall that we booted them from the US market in 2003 with the beginning of the anti-dumping, so they went on to build the EU market.”

Vietnam’s pangasius goes to a huge number of markets globally, and this source worries that producers will look to others come September.

China to overtake?

“China is one of Vietnam’s biggest buyers,” said the first source, based in Vietnam. “EU sales decreased for most exporters in 2016, and so far China’s been taking that up in 2017. They [China] need different products, but we can – and have – shifted sales there from the US.”

The country’s largest exporters have representatives in China already, or are working with distributors, he said, following high levels of activity at 2016’s China Fisheries & Seafood Expo.

“China prefers butterfly, bone-in, head-off gutted products. It’s less specific on certifications, there’s no need for ASC [Aquaculture Stewardship Council certification].”

The lower quality demands tend to mean lower selling prices, but greater volumes, said the Vietnam-based source.

In 2016, 18% of Vietnam’s pangasius went to China and Hong Kong. This was second only to the US, which received 23%, with the EU (15%) and Latin America (14%) other key markets.

Another source, trading pangasius from Vietnam to a variety of markets, confirmed the Chinese market played “an important role for importing pangasius fish” in 2016. Then in 2017 “volumes of exports there significantly increased. Definitely, the demand is expected to grow even more”.

[Vietnam] has been expanding new markets for pangasius all over the world, and China is one of them. We do not think that it has to be a shift from the US to China

A salesperson with exporter Mekong Connection agreed that for it too, China was quickly becoming a larger pangasius market, and one it is targeting for sales.

According to one seafood trader, the Chinese market for pangasius is disparate and fragmented. “It is literally a penny business, one cent makes the difference between making a sale or not,” he said.

“Quality is all over the place, there are huge differences in glazing, chemical treatment, water content and so on.” He suggested as much of 70% of the pangasius sold from Vietnam to China goes directly from the pond to traders, to be processed in basic facilities in China.

Several sources also noted that the apparent re-surfacing of negative perceptions of pangasius in Europe might also make China a more appealing market. However, each of them agreed that those European retailers which have stopped buying pangasius represent only a few thousand metric tons of sales, and that most remained happy to purchase Aquaculture Stewardship Council-certified fish.

Vinh Hoan ‘not evading’ US market

Vinh Hoan Coporation – which sent around 58% of its pangasius to the US in 2016, and 16% to the EU – told Undercurrent it has no intention of shifting away from either market, as promising as China may be.

“The company has been expanding new markets for pangasius all over the world, and China is one of them. We do not think that it has to be a shift from the US to China,” said CEO Nguyen Ngo Vi Tam.

“Europe [too] is one of the key and big markets for the fish. We will surely keep working on opportunities of market expansion.”

Speaking on an analysts’ conference call in February 2017, Tam spoke of her confidence that sales from Vietnam to the US would not have to halt in the face of the equivalency process.

She told listeners that Vinh Hoan would not seek to evade the US market, bu that each market has its own characteristics, and that each would be allocated a target growth rate based on potential.

“China has the fastest growth potentials… [but] we are not escaping from the US, it’s just that its growth speed is slower than China’s.”

She noted the attractiveness of the Chinese market, citing strong purchasing power thanks to its high population, increasing GDP, and a new two-child policy. Even though the Chinese government is now encouraging its fish producers to serve the domestic market, supply remains short, she said.

Chinese cuisine is diverse, and a variety of recipes can be developed for pangasius, she added. As a fish its ease in cooking also suits this market.

Plus, of course, “there is no other fish as competitive as pangasius in China, in terms of pricing. It’s very cost-efficient when using pangasius as the main ingredient in industrial meals, school meals prepared by foodservice and in restaurant chains.”

In China, sales to foodservice are stronger than any other channel, she said.

Tam noted selling prices in China vary depending on product, but in some cases can surpass even those to the EU. “In general the margin is lower in China. It makes sense as we are forging into the market, so the price policy is more competitive.”

While many of Vietnam’s companies want to take advantage of the huge potential, she feels there is room for each, with their own sales channels, price points and quality.