China’s feed industry must face a period of massive consolidation, according to the senior spokesman of the country’s key seafood lobby group.
The top ten domestic fishmeal producers are producing only 18 percent of the country’s domestic fishmeal output. “Chinese fish meal companies on average have annual production capacity of only 2,000 metric tons (MT) and this in not sustainable in the long run…the barriers to entry have been too low. China is now consuming an average 2.6 million MT of fish meal annually, of which 1.3 million MT is imported,” said Cui He, vice secretary general of China Aquatic Products Promotion and Marketing Association (CAPPMA). Speaking at a recent aquatic feeds conference in Beijing, Cui compared China’s position to Peru, where the top seven players account for 80 percent of output “…and the largest one can produce 350,000 MT a year.”
Cui said the clustering of domestic feed companies in certain cities is also creating environmental challenges. Provincial officials in Shandong province are angry that over 180 fishmeal producers in the cities of Rizhao and Rongcheng — the largest of which mills 50,000 MT a year — have polluted local waters and angered owners of homes in upmarket real estate developments, angry over the smell from feed plants.
Pollution problems are also triggering consolidation. The fishmeal factories in Rizhao (Shandong province) have caused “a lot of damages and pollution” according to a report by CAPPMA. Last April, the municipal environmental protection department in Rizhao started to crack down on the pollution, forcing 13 factories to pay fines. The 13 have since been merged into two factories.
Other centers for fishmeal production, such as Dalian city in Liaoning province and the easterly city of Zhoushan will face similar pressures, predicts Cui He. Meanwhile, aquatic feed is also an increasingly profitable option for China’s feed producers. One of the country’s largest producer of feeds, Tongwei in 2012 produced 8.19 million tons, with plans to boost that to 10 million tons by 2014. The firm has also constructed an aquafeed plant in Vietnam. Tongwei has said the share of its profits from pig feed — its core business — went from 42 percent to 15 percent between 2008 and 2013 while the share of profits contributed from aquatic feeds rose from 45 percent in 2008 to 55 percent in 2013.
Facing extra demand and rising input costs, China’s aquafeed companies earlier this year said they’d upped 2013 prices for feed, with shrimp feed up by as much as CNY 400 per ton and feed for freshwater fish up by between CNY 50 (USD 8.14, EUR 6.2) and CNY 100 (USD 16.28, EUR 12.4) per ton, according to several sources, including feed vendors.
Tongwei plans to capitalize on demand for aquatic feeds to increase its revenue from CNY 15.7 billion (USD 2.56 billion, EUR 1.95 billion) in 2013 to CNY 21.4 billion (USD 2.5 billion, EUR 2.7 billion) in 2015. Meanwhile, a recent report by the China Industrial Feed Association shows how an increase in the scale of pig farms is driving up demand and prices for inputs like corn, soy and wheat — “all of which are used to varying degrees in poultry feed and aquafeed pellets in China,” according to the report.
