China Seafood Industry Report
Glitnir Seafood Team
China Seafood Industry Report November 2006
Glitnir Seafood Industry Report - China
Contents • Foreword and Report’s Main Findings ...............................................
3-4
• China – Investment Considerations ..................................................
5
• China Overview .............................................................................
6-9
• China – Seafood Industry 1) 2) 3) 4)
Seafood Seafood Seafood Seafood
Production ............................................................ Processing ............................................................ Consumption ........................................................ Sales and Trade ....................................................
10 20 23 27
-
19 22 26 32
• Investment Opportunity in Focus 5) Tilapia Culture & Processing ................................................
33 - 40
• Glitnir Seafood Stockwatch .............................................................
41 - 42
• Glitnir Bank – General Information ..................................................
43 - 44
• Glitnir Bank – Global Seafood Team .................................................
45 - 47
2
Glitnir Seafood Industry Report - China
Foreword Dear Reader, It is our pleasure to present the latest issue of Glitnir's Seafood Industry Report. In this issue we focus on the Seafood Industry in China. We are now in our third year of publication and are grateful for the good feedback we have received from our industry partners. We will issue 5 reports altogether this year, focusing on one country or region in each report. In March 2006 Íslandsbanki (ISB) became Glitnir in a global group rebranding, unifying our national and international operations under one brand. In China, fish is a sign of affluence. As one decade of marvelous economic growth brings China unprecedented prosperity, its significance in the global seafood industry has also reached a new height. Today, China is by far the world’s largest supplier of aquatic products, both by means of capture and aquaculture. At the same time, China is also one of the most important consumer markets for seafood, with a fast growing appetite for exotic and high-end seafood products. Its seafood processing industry continues to attract substantial investments from around the world. In short, the vastness of Chinese seafood industry presents many opportunities to foreign investors, in virtually all of its sectors. This report aims to give an analytical overview of the current Chinese seafood industry and present our understanding of its likely future developments. We trust you find this report of benefit. We at Glitnir are proud of our strong team of seafood industry experts and look forward to working with you in our quest to make the seafood industry even more dynamic, efficient and profitable. You can contact the seafood team via [email protected] and www.glitnir.is/seafood Best regards, Glitnir Seafood Team 3
Glitnir Seafood Industry Report - China
Main Findings • China is the largest producer of seafood in the world, representing some 35% of the total global seafood production.
• Freshwater and seawater species represent 44% and 56%, respectively of all aquatic production in China. • Total aquatic production in China stood at 49 MMT in 2004, approx. 64% of this volume comes from aquaculture farming. This makes China the largest aquaculture nation in the world and the only country in the world where farmed fish production exceeds wild catch. In 2004 farmed freshwater species represented 59% of all farming in China while seawater species accounted for 41%.
• Main farming species are shellfish (seawater) and carp (freshwater). • Shandong province receives the largest portion of foreign investment in seafood processing, the majority of which comes from Japan and Korea.
• Japan is the major export destination for Chinese aquatic product exports, taking more than half of all China’s seafood exports in recent years.
• All three sectors of the Chinese food market (retail, wholesale and foodservice) has experienced significant growth in recent years and we believe that this development will continue as purchasing power increases.
• Seafood consumption is expected to increase substantially in coming years. Seafood consumption in China was 25 kg per capita in 2004 and is expected to reach 36 kg per capita in 2020.
• Looking into the future, tilapia is likely to surpass other cultured species in importance. • Production of tilapia worldwide is likely to expand robustly in coming years, as a result of strong investment in that sector.
• China continues to be the world’s main producer of tilapia and the main export market for Chinese tilapia is the U.S. 4
Glitnir Seafood Industry Report - China
Investment in the Chinese Seafood Industry The purpose of Glitnir’s China Seafood Report is to assist our current and potential clients in creating value by making sound investment decisions in the seafood industry in China. The value-chain of the industry is shown below:
Supply of Raw Materials Catch / Culture
Processing
Primary / Secondary
Distribution
Retail
Trading / Import & Export
Consumers / Marketing & Sales
A business may choose to devote its effort to one, several or all of the sectors in this chain. A sound investment decision, however, must always be based on a clear understanding of each sector in which the value is created. The first part of the Report is dedicated to this purpose. It provides a general overview of the development and current status in aquatic catch and culture, seafood processing, distribution and retail in China. Based on this understanding, a section in this Report named “Investment Opportunity in Focus” aims to identify potential investment opportunities in various sectors of the Chinese seafood industry. In each issue, Glitnir’s China Seafood Report focuses on different investment potentials in the industry. In this issue, the focus is on the culture and processing of tilapia in China.
5
Glitnir Seafood Industry Report - China
China Overview
6
Glitnir Seafood Industry Report - China
Economy at a Glance • Area: 9,596,960 sq km • Population: 1,313,973,713 (July 2006 est.) • Administrative Divisions: 23 provinces, 5 autonomous regions, and 4 municipalities
• GDP (PPP): $8.859 trillion (2005 est.) – Ranked the second in the world
• GDP composition by sector: agriculture: 12.5%, industry: 47.3%, services: 40.3%
• GDP per capita: $6,800 (2005 est.), ranked 117th in the world • Inflation Rate (Consumer Prices): 1.8% (Q2 2006) • Unemployment: 9% official registered unemployment in urban areas in 2004.
• Exchange Rate: CNY per USD – 7.98 (2006e) 8.1943 (2005), 8.2768 (2004), 8.277 (2003), 8.277 (2002), 8.2771 (2001)
• Real GDP growth (%): 10.7 (2006e), 9.9 (2005) • Country risk rating (EIU CRS)*: Sovereign (BBB stable) Currency (BBB stable), Banking Sector (B stable), Political (B), Economic structure (BBB)
• Foreign trade ($m Q2 2006): export fob 231,360; import cif 193,396
• FDI ($bn): 14.2 (Q2 2006), 14.3 (Q1 2006), 17.1 (Q4 2005), 14.7 (Q3 2005), 15.2 (Q2 2005), 13.4 (Q1 2005)
Source: CIA World Factbook, the EIU *the Economist Intelligence Unit Country Risk Services
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Glitnir Seafood Industry Report - China
Recent Economic Development • Central bank introduced flexibility to the RMB in 2005 allowing its appreciation against major currencies.
2000-2005 GDP, FDI & Consumption
(USD 10bn)
Household Consumption
FDI
• Shift of focus starting in 2006 from an investment-driven economy to a consumption-driven one.
Looming fears of overinvestment still present -
-
Investment partially boosted by rise in money supply and thus in the available funds for lending. Efforts to curb overheating such as interest rate & reserve requirement hikes have been unsuccessful.
Fixed asset investment in real estate slowed although rebound in total FAI has been led by investment in manufacturing (especially consumer goods), natural resource processing and export-oriented industries.
GDP
250
8 223
200
6
150
5
166 142
100
4
127
118
108
3 87
50
7
2
71
52
55
59
64
2000
2001
2002
2003
1
0
0 2004
2005
Household consumption on slow but steady rise.
• Transition from power intensive industrial focus to increased
1992-2004 Growth Rate of Consumption (Value)
emphasis on the service sector both in terms of the sector’s market share in the economy and employment.
• Inflation and interest rates on the rise but expected to stay low.
Retail Sales of C onsumer Goods
Living Exp
C onsumption
40% 35%
• Increasing emphasis on quality of growth at the expense of the growth rate for the coming years.
Emphasis on strengthening structure rather than increasing size of industries (increasing efficiency).
Heavier funding towards research and development to encourage technological innovation.
• Concentration of investment in East China begins gradual shift to Central and Western China.
30% 25% 20% 15% 10% 5% 0% 1992
1994
1996
1998
2000
2002
2004
8
Glitnir Seafood Industry Report - China
Seafood Giant of the World • China remains by far the largest producer of seafood in the world, representing some 35% of the total global seafood production.
• The country has seen a rapid growth in aquatic production in the last 25 years, averaging an annual growth rate of 15.22% from 1980 – 2004.
• Total aquatic production in China stood at 49 MMT in 2004, approx. 64% of this volume comes from aquaculture farming. This makes China the largest aquaculture nation in the world and the only country in the world where farmed fish production exceeds wild catch.
• Fish farming has grown more rapidly in recent years, at a CAGR of 6% from 1999 to 2004.
1980 – 2004 Growth in China’s Aquatic Production
(in million tonnes)
50
Millions
45
50 45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
-
-
China Capture
Peru
Indoesia
Chile
India
Aquaculture
Japan
USA
Thailand Norway Iceland Canada
19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04
Millions
2004 World’s Aquatic Supply
Inland waters
Marine waters
Source: FOA Figis database
9
Glitnir Seafood Industry Report - China
1) China Seafood Production
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
10
Glitnir Seafood Industry Report - China
China’s Aquatic Production
2004 Breakdown of China’s Aquatic Production
• Total aquatic production for 2004 was 49 million tonnes, up by 4.2% over the year
Freshw ater Products 44%
before. The industry estimates the similar growth rate for 2005 and 2006. Between 2001 and 2004, the growth rate averaged 5.3%.
• Facing depleting wild fish stocks and serious environmental damages resulted from
Seaw ater Products 56%
over fishing, the Chinese government continues to restrict marine and inland fishery and focus on development of aquaculture.
• Fresh and seawater culture production increased by 6.6% and 5.1% respectively in 2004.
• Seawater catch increased by 1.31% in 2004. Freshwater catch, however,
Wild Capture 36%
decreased by 1.72%.
• Seawater fish output decreased by 0.76%, yet freshwater fish output increased 5.53%.
2001 – 2005 Growth in Wild Capture and Aquaculture
Aquaculture 64%
Millions
(in million tonnes)
40 35 34
30
32
25
30
29
27
Seaw ater Catch 29% Freshw ater Culture 38%
20 15
17
17
17
17
17
10 Freshw ater Catch 7%
5
Seaw ater Culture 26%
2001
2002 Wild Capture
2003 Aquaculture
2004
2005
Source: USDA Foreign Agricultural Services GAIN Report 2005
11
Glitnir Seafood Industry Report - China
Shandong Province – the Largest in Seafood In 2004 No.1 Total Aquatic Production: Shandong Province (7.2 million tonnes, 6.1 million tonnes from seawaters and 1.1 million tonnes from freshwaters). No.1 Seawater Catch: Zhejiang Province (3.2 million tonnes). No. 1 Freshwater Catch: Hubei Province (393 thousand tonnes). No. 1 Seawater Culture: Shandong Province (3.4 million tonnes). No. 1 Freshwater Culture: Guangdong Province (2.7 million tonnes). 2004 Top Regions in Aquatic Production 7,2 6,6
7 5,9
6 4,9
5 4,0
4
3,7 3,0
2,7
3 1,7
2 1
1,7
1,6
1,4
0,9
H un an G ua ng do ng G ua ng xi H ai na n
ub ei H
Ji an gx i Sh an do ng
Fu jia n
nh ui A
Ji an gs u Zh ej ia ng
eb ei Li ao ni ng
0
H
million tonnes
(in million tonnes)
8
Source: Ministry of Agriculture, China
12
Glitnir Seafood Industry Report - China
Wild Capture and Marine Resources • There are over 1700 kinds of fishes and about 300 kinds of economically exploitable fishes.
• In addition, there are about 2000 kinds of seaweeds, 300 kinds of shrimp and crabs, and 200 kinds of economically exploitable molluscs.
• China’s natural marine resource is mainly divided among three sea areas.
Yellow Sea & Bohai Gulf Area East China Sea Area South China Sea Area 2004 Distribution of Wild Capture in China
Others; 8,96%
Freshwate Catch; 14,29%
Bohai Gulf; 7,39%
South China Sea; 21,29%
Yellow Sea; 18,73%
East China Sea; 29,34%
Source: USDA Foreign Agricultural Services GAIN Report 2005
13
Glitnir Seafood Industry Report - China
Decreasing Output in Seawater Catch Yellow Sea & Bohai Gulf
East China Sea
• Small yellow-fin tuna
• Hairtail
• Ling
• Big yellow-fin tuna
• Pacific herring
• Small yellow-fin tuna
• Prawn
• Cuttle fish
• Hair shrimp
• Pomfret
• Jellyfish
• Moray
• Kelp
• Shuttle crab
2001-2004 Wild Capture in Yellow Sea & Bohai Gulf
2001-2004 Wild Capture in East China Sea
3.500
25%
3.000 20% 2.500 15%
2.000
(in ‘000 tonnes)
Thousand Tonnes
Thousand Tonnes
(in ‘000 tonnes)
5.500
33%
5.400
32%
5.300 31%
5.200 5.100
1.500
10%
1.000
30%
5.000
29%
4.900 5%
500 -
0% 2001
Bohai Gulf
28%
4.800
Yellow Sea
2002
2003
Bohai Gulf % of total catch
2004 Yellow Sea % of total catch
4.700
27% 2001
2002 East China Sea
2003
2004
East China Sea % of total catch
Source: USDA Foreign Agricultural Services GAIN Report 2005
14
Glitnir Seafood Industry Report - China
Freshwater Catch on the Rise South China Sea
Freshwater (or Inland water)
• Sardine
• Redfish (northern regions only)
• Tunny
• Codfish (northern regions only)
• Bonito
• Carp
• Swordfish
• Naked carp
• Shark
• Loach 2001-2004 Wild Capture in South China Sea
2001-2004 Freshwater Catch in China
3.720
(in ‘000 tonnes)
22,20%
3.700 22,00%
3.680 3.660
21,80%
3.640 21,60%
3.620
Thousand Tonness
Thousand Tonnes
(in ‘000 tonnes)
2.500
15,00%
2.450 14,50%
2.400 2.350
14,00%
2.300 2.250
3.600
21,40%
3.580
13,50% 2.200 2.150
21,20%
3.560 3.540
21,00%
3.520
13,00%
2.100 2.050
12,50%
2.000
3.500
20,80% 2001
2002
South China Sea
2003
2004
South China Sea % of total catch
1.950
12,00% 2001
2002
Freshwater Catch
2003
2004
Freshwater % of total catch
Source: USDA Foreign Agricultural Services GAIN Report 2005
15
Glitnir Seafood Industry Report - China
Aquaculture in China 2004 Aquaculture area & production in %
• Total culture area reached 7.28 million hectares for 2004, up by 2.5 percent over 2003.
• About 22 percent of the total culture area is in seawaters,
Seawater 22%
78 percent is in freshwaters. However, production is divided more evenly – 41% from seawater and 59% from freshwater.
Seaw ater; 41,03% Freshw ater; 58,96%
Freshwater 78%
• Culture area expansion is expected to slow down, as the priority has been shifted to increase of productivity and efficiency, rather than expanding blindly.
Area Resources
2001-2005 Aquaculture Production in China
2001-2004 Development of China’s Aquaculture Area Resource (in ‘000 hectares)
(in million tonnes)
25 6.000
20 20
19 15
10
11
18
17
16 12
13
13
14
Thousand hectares
Million Tonnes
Production
5.000
4.000
3.000
2.000 1.345
1.286
5
5.664
5.571
5.470
5.362
1.532
1.617
1.000
-
2.001
2.002 Seawater culture
2003 Freshwater culture
2004
2005(e)
2001
2002
Freshwater
2003
2004
Seawater
Source: USDA Foreign Agricultural Services GAIN Report 2005
16
Glitnir Seafood Industry Report - China
Shellfish - the Most Cultured Product in Seawater 2004 Seawater Farming Area by Products (% of total hectares)
• The leading species are molluscs, accounting for approx. 78% of total farmed production, followed by algae (10%), crustaceans, (5.5%) and fish (4%).
8% 5% 6%
15%
• Growth in seawater farming is relatively slow. Production yield per hectare has not been improved significantly in recent years. Yet the expansion of seawater culture areas starts to result in damage to the marine eco-system. Therefore growth in seawater farming is expected to slow down further.
5%
Fish Shrimp/Prawn
61%
Crab Shellfish Algae Other
• China’s largest seawater farming area, in the terms of hectares, is
2004 Seawater Farming Area Resource by Selected Products & Regions (in ‘000 hectares)
in Liaoning province in Northern China. It is followed by Shandong province, with close to 24% of the total farming area. 2004 Total Seawater Farming Area by Regions
Algae
7% 2% 15% 16%
Crab
4% 7%
Hebei Liaoning
Shrimp
Jiangsu
Guangxi Guangdong Shangdong Fish
0
10
20
30
40
50
60 70 Thousands Hectares
26%
Zhejiang
23%
Fujian
Fujian
Shandong
Zhejiang
Guangdong
Jiangsu Liaoning Hebei
Guangxi Source: Ministry of Agriculture, China
17
Glitnir Seafood Industry Report - China
Freshwater Farming Areas • Freshwater fish farming is dominated by small and medium-sized individual farms located primarily in the provinces of Hubei, Anhui, Jiangsu, Hunan and Heillongjiang.
• Largest pond farming:
Hubei province (340,015 hectares).
• Largest lake farming:
Anhui province (193,279 hectares).
• Largest reservoir farming:
Jiangxi province (132,559 hectares).
• Largest stream farming:
Jiangsu province (113,014 hectares).
2004 China Inland Culture Area Resources by Type (percentage of total area in hectares)
2004 China Inland Culture Area Resources by Regions (Ten top provinces as percentage of total area in hectares)
3%
5% 5%
22%
34%
7% 9%
5%
23%
13%
Source: Ministry of Agriculture, China
16%
Pond Lake Reservoir Stream Rice Paddies Others
15%
9% 9%
14% 11%
Source: Ministry of Agriculture, China
Hubei Jiangsu Anhui Hunan Heilongjiang Guangdong Jiangxi Shandong Zhejiang Henan
18
Glitnir Seafood Industry Report - China
Carps - 79% of Total Freshwater Culture Output • The dominant form of freshwater farming in China is
Estimated freshwater production by farming environment
pond farming, which occupies 34% of the total freshwater farming area and produces a little over 70% of the total output.
5% 5% 6%
• Carps account for the majority of the output. They
10%
contributed more than 79% of all the output of the 1999 freshwater aquaculture output (the distribution today is deemed to be similar), which is equivalent to 47.2% of the total Chinese aquaculture output or 27.4% of the total fisheries output.
• In 1999, carps were valued at CNY74.39 billion at the
important place in the freshwater aquaculture in China. In 1999, it represented approximately 4% of the freshwater culture output (or 561,794 tonnes) and 3.61% of the total value (CNY3.61 billion). The production of tilapia is expected to increase further.
Ponds Reservoirs
71%
Lakes Rivers/canals Rice paddy Other
Source: FAO: Aquaculture development in China 2001
price of that year, representing 49.8% of the total value of China’s freshwater culture output, or 29.4% of its total fisheries output value.
• Apart from the carp family, tilapia also occupies an
3%
Freshwater culture output by species 1%
1%
9%
1% 1% 1% 3% 33%
4% 1%
9%
14% 22%
Source: FAO: Aquaculture development in China 2001
Silver carp & Bighead carp Grass carp Common carp Crucian carp Black crap Tilapia Chinese bream Eel Chinese mitten handed crab Mandarin fish Macrobrachium rosenbergii Soft shelled turtle Others
19
Glitnir Seafood Industry Report - China
2) Seafood Processing in China
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
20
Glitnir Seafood Industry Report - China
Development of Seafood Processing in China • Traditionally, most aquatic products sold in the
2002 Major Freshwater fish Products Processed (tonnes & percentage of total processed)
Chinese domestic market are fresh. In 1999, total processed aquatic products amounted to 6.2 million tonnes, accounting for only 15.1% of total aquatic production.
1296000; 21%
Dried
• In recent years, however, seafood processing industry in China has seen significant growth.
• The Chinese Ministry of Agriculture reported that in 2004 the total number of aquatic processing facilities in China was 8,745, an increased from 8,287 in 2003.
Frozen
3258000; 53%
707000; 11%
Smoked Canned
93000; 1% 632000; 10%
21000; 0%
Surimi Products Fish Meal
235000; 4% Source: FAO - Aquaculture development in China 2003
Others
• The total processing capacity reached 14.2 million tonnes, representing a 9% increase from the previous year. In 2004, approximately 10.3 million tonnes were actually processed, increased by 13.2% from 2003.
• The majority of the processed aquatic products comes from seawater; freshwater products accounted for a little less than 8% of the total processed quantity in 2004.
• Most of the processing facilities are located in the Chinese costal regions, mainly in Shandong, Zhejiang, Liaoning, Fujian and Guangdong provinces.
Marine Aquatic Products Processing (‘000 tonnes)
12.000 10.000 Processing Capacity (thousand tonnes/per year)
8.000 6.000 4.000
Total Output of Processed Product (thousand tonnes)
2.000 0 1995
1996
Source: China National Bureau of Statistics
1997
1998
1999
21
Glitnir Seafood Industry Report - China
Outsource Seafood Processing to China • As seafood processing is a labour-concentrated industry, the lower labour cost in China attracts a large amount of foreign investment into this sector. Often, tax incentives provided by the Chinese government also play a big role. The hourly pay of Chinese factory labour is estimated at $0.5 (RaboBank estimate).
• Shandong province receives the largest portion of foreign investment in seafood processing, the majority of which comes from Japan and Korea. Fujian province, ranked the second, receives foreign funds from a wider range of regions, including Taiwan, Hong Kong, Japan, Korea, the U.S., Argentina and Denmark. About Seafood Processing in China
Local Supply of Seawater Raw material for Processing
Currently, Homey Group, located in Shandong, is the largest aquatic processing company in China, with total sales of US$230 million in 2004. The joint venture between Shanfu Group and Japan Nippon Suisan is building its annual capacity toward 40,000 tonnes in 2007, with the aim of becoming one of the largest processing companies by then.
(‘000 tonnes, 1999)
Hainan Guangxi Guangdong
(RaboBank – China’s aquaculture industry 2005)
Shandong
Major U.S. fisheries, including Trident, Pacific Seafood, Premier Pacific Seafood and many more, outsource processing to China. Seafood products processed there include Salmon, Dungeness crab, Alaskan Pollock.
Fujian Zhejiang Jiangsu
(Bloomberg News – July 19, 2005)
Agreement Signed between Chinese and Icelandic companies on construction of a 150,000-ton storing house for frozen seafood at the city of Qingdao in East China's Shandong Province.
Liaoning Hebei
0 Fish
500
1000
Shrimp, Prawns, Crabs
Source: China National Bureau of Statistics
1500
2000 Shell fish
2500 3000 Thousand tonnes Algae
(Xinhua New Agency – May 22, 2005)
Other
22
Glitnir Seafood Industry Report - China
3) Seafood Trade and Sales
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
23
Glitnir Seafood Industry Report - China
China, a leading exporter of aquatic products • In recent years China’s imports and exports of seafood have seen a rapid development. The export value of aquatic products is the highest in the export of agriculture products. The growth has also been driven by growing capability of the fish processing industry.
• The export value of aquatic products mostly occur in provinces along the coast. Coast areas such as Shandong, Guangdong, Liaoning, Zhejiang and Fujian makes up 92% of the total.
• The majority of China’s exports are processed seafood products, consisting of prepared, preserved or frozen product. The leading export products are eel, processed or preserved shrimp and cuttlefish.
• Japan is the major export destination for Chinese aquatic product exports, taking over half of all China’s seafood export over the recent years.
• Given the size of China’s seafood production and its efficient processing industry, China’s accession to the WTO has had an impact on the world seafood market. Accession has allowed China to be subject to the ‘most favoured nation’ tariffs, which applies only to WTO members. This has assisted increases in seafood export from China to other WTO members, raising supply in world markets. Exports of Aquatic Products by Main Category
Exports of Aquatic Products from China by Destination
(US$ billion)
(US$ billion)
2,5 2,03
2,0
1,4
2,24
2,20
1,75
1
1,5
Source: SNF-report nb. 20/05
0,8 1,0
1,0 0,5
1,10
1,2
2,03
0,8 0,4 0,4
0,5
0,6 0,6
0,4 0,2
0,2
0,8
0,7
0,4
0,3
0,2
0,6
2000
Japan Source: SNF-report nb. 20/05
America
2001
2002
Korea
0,54
0,82
0,62
0,4 0,2
0,0 1999
0,45
1,16
2003
Hong Kong
0 Fish, frozen
Molluscs and other
Source: USDF GAIN Report, 2005
Crustaceans
Prepared or Prepared of paskaged packged fish and caviar crustaceans and mollusks
Fish, fillet
24
Glitnir Seafood Industry Report - China
Increasing Demand for Seafood in China • • • •
China was the world’s eighth largest importer of aquatic products in 2003, with an import value of $2.5 bn. China’s two main imports were cod (mainly from Russia) and Fish meal (mainly from Peru). The seafood trade surplus was $3 billion for 2003 with imports valued at about $2.5 billion and exports at $5.5 billion. Much of the imports are destined for re-export following processing in China. Beside the re-export, an increasing share of imports is destined for the domestic market, as the emerging upper class is creating demand for imported seafood.
• China has reduced its tariffs on seafood products since joining the WTO in 2001. • China also influences the demand side of the world seafood market. Lower tariff barriers have reduced import costs and resulted in greater seafood imports by China. Import of Aquatic Products into China by Origin
Import of Aquatic Products into China by Main Category
(US$ billion)
(US$ billion)
0,8
1,4
0,7
0,7
0,6 0,4
0,1
1 0,8
0,4
0,4
0,63
0,3
0,3
0,3 0,2
0,2
0,2
0,1
0,1
1,20
1,2
0,5
0,5 0,4
0,7
0,1
0,6
0,3
0,1
0,4
0,2
0,2
0,2
0,1
0,1
0,2
0,26
0,29
Molluscs and other
Crustaceans
0,11
0
0,0 1999
2000 Russia
Source: SNF-report nb. 20/05
2001 Peru
2002 America
2003
Other
Fish Meal
Fish, frozen
Japan Source: USDA GAIN Report, 2005
25
Glitnir Seafood Industry Report - China
China’s Domestic Food Market on the Rise 2000-2004 Market Structure
2004 Market Structure
(US$ billion)
Foodservice
Food Retail 13%
Food Wholesale
100
93 74
80 Foodservice 44%
Food Retail 91
74 65
60 43 40
Food Wholesale 43%
28 19
15
20 0
Source: National Bureau of Statistics of PRC Note: 100% = USD 212bn
2000
2002
2004
Source: National Bureau of Statistics of PRC
• All the three sectors of the food market have experienced a significant growth in recent years and we believe that this development will continue as purchasing power increases. Seafood consumption is expected to increase substantially in coming years. Therefore we expect that the position of seafood in the food market will be strong in the future.
• Food retail is on the rise due to consumer’s increasing willingness to spend on foods as a result of growing concerns over food safety and health.
• With urbanisation and marketisation, lifestyles become increasingly fast-paced resulting in growing convenience food and foodservice markets.
• Rapid growth in food wholesale sector could be attributed to the sudden rise of large-scale, national supermarket and hypermarket chains in food retail as well as the increasing preference of consumers to buy in bulk (facilitated by the rise in car ownership).
• Increased purchasing power in recent years has contributed to fast growth in the foodservice sector, including the seafood sector. 26
Glitnir Seafood Industry Report - China
4) China Seafood Consumption
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
27
Glitnir Seafood Industry Report - China
High Consumption of Seafood • Seafood consumption in China has increased at a high rate from 1990-1998. • Asia and the Pacific region has countries with the highest per capita consumption of fish. • Seafood consumption in China was 25.4 kg per capita in 2004. • Seafood consumption increased heavily from 1990 – 1998 but has remained relatively stable since then. 30
11.5
11.6
13.2
15.5
18.0
20.7
22.6
24.0
Per capita / kg / year
25 1,0
0,7 0,8
20 0,7
15 10 5 0
0,8 0,7 2,2
0,8 2,0
2,1
2,1
4,5
4,5
0,8 2,6
3,5
6,1
5,1
5,3
5,5
2,7
3,1
4,4
25.4
25.9
25.8
25.5
25.5
25.4
1,2
1,2
1,1
1,1
1,1
1,1
1,1
5,9
6,0
6,2
6,3
6,2
6,2
6,2
2,0
1,9
2,1
1,7
1,7
1,7
1,7
10,3
10,6
10,8
10,9
10,8
10,8
10,7
2,6
6,9
7,8
9,8
8,9
2,5
2,7
3,0
2,7
2,8
2,7
2,7
2,2
3,1
2,7
1,8
1,1
1,2
1,3
1,4 1,3
1,6
1,8
2,1
2,3
2,7
2,7
3,0
3,0
3,0
3,0
3,0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0,9
1,1
Crustaceans
1,1
Demersal fish
Total
2,6
2,4
2,3
5,5
25.2
Freshwater and diadromous fish
Marine fish, other
Molluscs
Other
Source: FAO, FAOSTAT, Rabobank
28
Glitnir Seafood Industry Report - China
Increased protein consumption • Followed by high growth in recent years protein consumption has increased substantially. • Seafood’s average historical share in consumption of red meat, poultry and seafood is 33%. The peak was in 1996 when it reached 37%. The share in 2004 was 31%.
• The average share of meat and poultry is 55% and 12%, respectively. Over this period the share of poultry has steadily increased from 9% to 14%, while meat has lost a share of 4%. 37.4
39.6
43.8
49.0
54.7
59.5
61.3
67.9
72.1
73.4
76.0
76.9
78.3
25,8
25,9
25,7
10,3
10,5
80.3
82.3
Total
80
Per capita / kg / year
70 60
24,0
50 18,0
20 10
11,5 3,3
11,6 4,0
13,2 4,5
5,5
7,3
10,9
25,3
11,1
9,0
9,8
10,6
38,2
39,6
40,7
42,1
45,9
38,0
43,9
35,6
1997
1998
1999
2000
2001
2002
2003
2004
8,3 6,1
25,4
22,6
15,4
40 30
20,8
25,1
25,5
7,3
26,1
28,1
31,9
24,0
30,6
31,4
22,6
1990
1991
1992
1993
1994
1995
1996
0
Red Meat
Poultry
Seafood
Source: FAO, FAOSTAT 29
Glitnir Seafood Industry Report - China
Regional Trends in Consumption • There is significant difference in seafood consumption between rural and urban areas in China. – In 2002, seafood accounted for 4.4% of total food consumption in rural areas while it accounted for 13.2% in urban areas.
• Consumption is higher in coastal provinces and in provinces with high level of disposable income. – The top 5 provinces that had the most expenditure on seafood products in 2004 were: Fujian, Shanghai, Zhejiang, Hainan and Guangdong.
• More expensive marine fish is consumed by the affluent population in coastal cities of China, while freshwater fish is consumed throughout China.
Source: Rabobank, GAIN, Agri-Food Trade Service
2004 Top Ten Aquatic Product Expenditure Per Capita & Disposable Income (US$ billion)
20000 500 15000
400 300
10000
200 5000 100
Aquatic Product Expenditure (in CNY)
na l at io N
Be ijin g
g
ng xi G ua
su
ni n Li ao
Ji an g
nj in Ti a
on g ng d
ai n
an G ua
H
ng jia Zh e
Sh an g
ha i
0 ia n
0 Fu j
Expenditure CNY per capita per annum
600
Income CNY per capita per annum
25000
700
Disposable Income (in CNY) Source: USDF Gain Report 2005
30
Glitnir Seafood Industry Report - China
Chinese Consumers Prefer the Fresh and Wild Captured • The Chinese consumers typically prefer live seafood product to chilled or frozen, and wild caught to farmed.
• However, ordinary Chinese consumers are price sensitive when buying seafood products.
• Farmed freshwater species such as shrimps, tilapia and carps are mainly consumed at home. Their appeals to the Chinese consumers are freshness and economic price.
• Imported high quality and therefore more expensive seafood such as salmon and crab are mainly absorbed by the food service sector.
• Consumers in China often prefer smaller fish, i.e. 200-500g. • Wet markets, where seafood is sold fresh or alive, are popular among the older generations. However, the younger and more affluent city dwellers tend to go to supermarkets nowadays for their food supply. Some of the larger modern supermarkets/hypermarkets are furnished with columns of water tanks to accommodate live seafood for sale.
Source: GAIN, Agri-Food Trade Service
• Products like fish heads and bellies, discarded else, are popular in China.
31
Glitnir Seafood Industry Report - China
Seafood Consumption: Strong Fundamentals • We expect a strong seafood consumption growth and Forecast of Seafood Consumption Trend in China and the World
a strong demand for high quality seafood. Main reasons for that are:
40
– According to FAO seafood consumption in China
– The higher consumption of seafood in urban areas, compared to rural areas, indicates that the increased urbanization will lead to increased consumption of seafood.
– Dramatic rise is expected in China’s middle class in next 5-10 years. In 2005 the middle class accounted for 90 million inhabitants but is projected to account for 650 million in 2015. Therefore, increased purchasing power is likely to result in higher seafood consumption.
Per capita / kg / year
is projected to be 35.9 kg/year per capita in 2020, an increase of 41% compared to the 2004 consumption.
36
35 30
20 15 10 5
25
24
25
13
12 6
16
16
17
1997
2004
2020e
8
0 1973
1985 China
World
– Chinese consumers are sensitive to product quality regardless of low disposable income, compared to developed countries. Demand for high quality seafood is therefore expected to increase as purchasing power increases.
Source: FAO, Rabobank, Dep. of agriculture, fisheries and forestry (Australia), Goldman Sachs
32
Glitnir Seafood Industry Report - China
5) Investment Opportunity in Focus: Culture & Processing of Tilapia in China
33
Glitnir Seafood Industry Report - China
Important Aquaculture Product of the 21st Century Tilapia is one of the most widely cultured species in the world. FAO reports production in 85 countries, including China. • Wild catch is being replaced by aquaculture. Tilapia is most often farmed in:
– – – – –
Ponds Cages Raceways, round tanks, re-circulating systems Ranching (lake releases) Freshwater, Brackish water, estuarine and marine
• Tilapia grows well in most production systems. – Polyculture with shrimp, catfish, and carp – Could be herbivorous and/or omnivorous – Good growth in fertilized ponds – Many by products can be used in prepared feeds – Simple hatchery technology – Disease resistant – Grow well at high densities • There is an established and growing market demand for tilapia. – Accepted in many national dishes – Popular in many forms (live, whole, fillets, fresh, frozen, smoked, surimi) • Tilapia will surpass other cultured species in importance. – Production constraints being reduced, and costs decreasing – Markets are still expanding – Market price is steady – Ecologically sustainable and environment friendly – Consumption not restricted by religious observances – Mild flavour preferred by many consumers – Carp: markets are limited – Salmonids and shrimps need high levels of fish meal, limited ingredients for diets – Most other species need higher water quality, competition for sites Source: Kevin Fitzsimmons, Ph.D. Tilapia Aquaculture in the 21st Century, University of Arizona
34
Glitnir Seafood Industry Report - China
Soaring Tilapia Market In the U.S. • The U.S. market is estimated to import approx.
1999 - 2005 U.S. Total Tilapia Import by Product Form
180,000 tonnes of tilapia in 2006, compared to only 40,000 tonnes in 2000.
• Since 2001, tilapia consumption has doubled in the U.S.
(‘000 tonnes)
Thousand tonnes 160 140 120
The species is now number 6 among the top ten seafood consumed by U.S. consumers.
100 80
• The EU market is still limited, but imports are expected
60
to increase, especially in the light of limited wild whitefish supplies to the market.
40 20
• Production of tilapia worldwide is likely to expand
0 1999
robustly in coming years, as a result of strong investment in this sector.
2001
2002
2003
Whole frozen
US Fresh Tilapia Fillets Import by Country of Origin
2004
2005
Jan-Jul Jan-Jul 2005 2006
Frozen fillets
Fresh fillets
US Frozen Tilapia Fillets Import by Country of Origin
(‘000 tonnes)
(‘000 tonnes)
25 Thousand tonnes
Thousand tonnes
2000
20
60
50
40
15
30 10
20 Taiwan
5
China Costa Rica
Ecuador 10
Thailand Taiwan Indonesia China
Honduras Ecuador
0 1999
2000
2001
2002
2003
2004
2005
Jan-Jul 2005
Jan - Jul 2006
0 1999
2000
2001
2002
2003
2004
2005
Jan-Jul 2005
Jan - Jul 2006
Source: Fish INFOnetwork Market Report on Tilapia
35
Glitnir Seafood Industry Report - China
Strong Growth in the Chinese Tilapia Industry • China continues to be the world’s main producer of tilapia. Total production in 2006 is expected to reach 1.07 million tonnes, representing a 10% growth from 2005.
• The value of tilapia production in China is thus exceeding $2,000 million.
• More than 80% of the tilapia is consumed in the country. Main market for Chinese tilapia is the U.S., which takes over 70% of the exports.
• The impressive increase in tilapia is caused by farmers switching from carp and shrimp to tilapia production. Some 120 plants are processing, of which 30 are specialised in this fish alone. The average retail price of tilapia in China is $1.60/kg, while the unit value of the exported fish is around $2.16/kg.
1999 – 2006 Tilapia Production in China (‘000 tonnes)
1200 1070 978
1000
897 806
800 629 600
672
707
562
400
200
0 1999
2000
2001
2002
2003
2004
2005
2006e
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
Source: Fish INFOnetwork Market Report on Tilapia
36
Glitnir Seafood Industry Report - China
Tilapia Farming is Mainly Concentrated in Guangdong Province Farming Area (ha)
Major Tilapia Producing Regions in China
Guangdong Hainan Guangxi Fujian Others National total
Production volume (ton)
55,000 13,000 13,000(e) 7,000(e) 22,000 110,000(e)
500,000 145,000 140,000(e) 80,000(e) 175,000(e) 1,040,000
Fujian Guangdong Guangxi
Hainan
Chinese Tilapia Production Distribution in 2005 6%
• Tilapia is farmed primarily in China’s warm southern provinces. In 2005
3% 3%
close to 50% of the total production is concentrated in Guangdong Province.
• Other major provinces include Hainan, Guangxi and Fujian. There is also
10%
48%
scattered production in other provinces.
15%
• Production growth is driven by strong domestic demand as well. In China – particularly the southern coastal provinces – tilapia is popular because its superior taste and quality compared to other cultured fish such as carp. Tilapia is also more affordable, compared with other highvalued, cultured species. An industry survey showed that 93.1% of consumers favour tilapia in Guangdong, 76.3% in Zhejiang and 65.2% in Shandong. Tilapia is also increasingly popular in large cities such as Beijing and Shanghai.
15%
Others Yunan Shandong Fujian Hainan Guangxi Guangdong
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
37
Glitnir Seafood Industry Report - China
Common Business Model of Tilapia Farming in China Importer / Distributor
Processing Company / Trader
Tilapia Farm
Feeds Factory
Supply feed and technical support
Tilapia Farm
Supply breeds and technological support
Sign contract and sell tilapia
quality and safe control
Sign contract and purchase tilapia
Tilapia Farm
Breeding Farm
Tilapia Farm
Contract land, pond, etc. from villages 38
Glitnir Seafood Industry Report - China
The U.S. Remains Chinese Tilapia’s Largest Customer China’s Export Mix From 2002 – 2005
• Tilapia fillet and frozen whole are the major
• Increasing tilapia exports from China bring more opportunities for the tilapia processing industry, as nearly all exported tilapia products are processed.
• This is mainly because of China’s relatively low cost
Thousand tonnes
products, accounting for almost 100% of total exported volume.
(tonnes)
100 80 60 40 20
of labour and the industry’s effort to deepen processing to add value to exported products.
0
• Fillet exports are likely to increase further while the
2002
portion of frozen whole fish is expected to continue to diminish.
paid to diversifying its export market, in particular in Europe and Middle East.
2004
2005
60 50 40 30
Hong Kong
20
Canada
10
Germany Puerto Rico
0 2002 Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
Tilapia f illet
(tonnes)
Thousand tonnes
• Industry insiders believe that more attention will be
2003
China’s Tilapia Fillet Exports by Destination
• United States remains the largest export destination for China, which on average absorbs 77% of tilapia fillet and 73% of frozen whole fish.
Frozen w hole tilapia
2003
2004
2005
Mexico United States
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
39
Glitnir Seafood Industry Report - China
Opportunities in Tilapia Culture & Processing
• Tilapia is well suited for large-scale and poly-culture farming. The unit cost of production is expected to decrease further as a result of ongoing consolidation among Chinese tilapia producers. This presents international seafood companies with the opportunity for vertical integration, in order to ensure steady supply and constant quality.
• Increasing demand for tilapia, especially tilapia fillet, in the world market encourages further growth of tilapia exports from China. This gives rise to opportunities in the tilapia processing sector. In addition, the relatively low cost of labour in China constitutes a major advantages in the labour intensive processing business.
40
Glitnir Seafood Industry Report - China
in cooperation with
Glitnir Seafood Stockwatch (1) in million USD Company
Ticker
2006
52 w change
In local currency
Country
Aker Seafoods
AKS.NO
Norway
Alfesca hf. (form. SIF hf.)
A.IR
Iceland
Asian Seafoods Coldstorage PCL
ASIAN.TB
Thailand
Austevoll Seafood ASA
AUSS.NO
Norway
Austral Group SA
AUST/C.PE
Peru
Bahtera Adimina Samudra Tbk PT
BASS.IJ
Indonesia
Cermaq
CEQ.NO
Norway
China Fishery Group Ltd.
CFG SP
Clearwater Seafoods Income Fund
CLR-U CN
CNFC Overseas Fishery Co Connor Bros. Income Fund
M.cap Revenues 218 350
EV/ EBITDA 13.7
P/E 39.5
Price 52 w high 30.0 47.0
52 w low 24.3
-18.70
421
700
n/a
n/a
4.9
5.2
3.5
8.95
30
141
20.3
22.1
3.1
5.1
2.4
-36.10
1,040
n/a
n/a
n/a
39.0
44.0
35.0
n/a
149
118
9.8
n/a
0.3
1.2
0.1
126.36
n/a
2,146
n/a
n/a
n/a
n/a
n/a
n/a
1,066
803
5.7
6.8
77.0
99.0
44.0
75.00
China
704
91
19.4
19.3
3.1
3.7
1.3
n/a
Canada
140
0
23.0
9.2
5.4
5.7
3.4
36.48
000798.CH
China
119
19
nmf
nmf
3.0
3.1
1.9
31.31
CBF.UN
Canada
513
881
9.4
10.6
11.2
12.5
8.9
-5.09
Daerim Corp
003960.KS
S-Korea
142
196
n/a
11.9
25,750.0
45,850.0
15,700.0
34.12
Domstein ASA
DOM.NO
Norway
54
259
n/a
n/a
5.2
7.9
5.0
-11.03
Empresa Pesquera Eperva S.A.
EPERV.CI
Chile
166
21
n/a
30.6
280.0
307.0
249.0
3.70
Fishery Products International (FPI) Ltd
FPL.CN
Canada
71
743
12.7
n/a
5.5
6.8
4.1
-16.03
Fleury Michon
FLE.FP
France
283
535
5.2
15.0
44.0
51.0
39.4
8.67
Frosta
NLM.GR
Germany
121
339
5.5
11.4
15.2
17.1
11.5
16.92
Guangdong Hualong Groups Ltd Co
600242.SS
China
46
1
n/a
n/a
2.1
2.4
1.4
0.48
Hainan Huandao Industry Co
000691.SS
China
76
27
n/a
49.3
2.3
3.7
1.3
28.73
Hansung Enterprise Co
003680.KS
S-Korea
36
152
n/a
n/a
6,650.0
9,640.0
4,820.0
-29.63
Hanwa Co., Ltd.
8078.JP
Japan
771
9,057
10.5
9.3
432.0
552.0
403.0
-0.92
HB Grandi HF
GRND.IR
Iceland
300
159
18.0
n/a
12.0
12.3
9.2
28.50
High Liner Foods Inc
HLF.CN
Canada
81
232
17.3
n/a
8.9
9.8
8.1
-10.15
Icelandic Group PLC
IG.IR
Iceland
340
1,515
15.0
23.9
8.0
9.8
7.4
-15.79
Kyokuyo Co Ltd
1301.JP
Japan
231
1,205
19.0
17.0
251.0
343.0
237.0
-5.99
Leroy Seafood Group ASA
LSG.NO
Norway
666
601
6.1
7.0
104.0
133.0
49.6
105.94
Nichirei Corp.
2871.JP
Japan
1,637
131
34.1
75.8
625.0
666.0
477.0
24.50 41
Glitnir Seafood Industry Report - China
in cooperation with
Glitnir Seafood Stockwatch (2) in million USD Company Nichiro Corp Nippon Suisan Kaisha Ltd Niraeus Oceana Group Ltd Oyang Fisheries Co Pacific Andes PAN Fish ASA Pescanova SA Pesquera Iquique-Guanaye S.A. (Igemar) Pesquera Itata SA Sajo Industries Co Ltd Sanford Ltd. Saudi Fisheries Company Selonda Aquaculture S.A. Sociedad Pesquera Coloso S.A. Tassal Group Thai Union Frozen Foods Group
Ticker 1331.JP 1332.JP NIR.GA OCE.SJ 006090.KS 1174.HK PAN.NO PVA.SM IQUIQUE.CI ITATA.CI 007160.KS SAN.NZ 6050.SE SELO.GA COLOSO.CI TGR.AU TUF.TB
2006
52 w change
In local currency
Country Japan Japan Greece S-Africa S-Korea Hong Kong Norway Spain Chile Chile S-Korea New Zealand Saudi Arabia Greece Chile Australia Thailand
M.cap 274 1,460 199 254 33 218 2,848 432 274 232 45 293 694 100 335 141 605
Revenues EV/ EBITDA 1,409 37.8 2,796 n/a 79 11.8 342 n/a 111 n/a 791 8.3 295 14.0 1,261 9.9 72 n/a 87 7.5 520 n/a 245 14.6 21 n/a 49 12.9 144 11.2 94 17.0 1,443 10.1
P/E nmf 34.8 12.5 14.7 n/a 7.7 19.7 18.9 20.2 19.7 n/a 14.6 n/a 8.8 15.4 17.5 11.9
Price 198.0 625.0 3.9 1,650.0 11,200.0 1.4 5.5 26.3 40.0 200.0 8,570.0 4.7 130.0 2.7 901.0 1.6 25.8
52 w high 346.0 727.0 4.3 1,700.0 15,700.0 2.0 7.7 32.0 40.0 200.1 10,100.0 5.2 430.0 2.9 901.1 1.7 32.0
52 w low 190.0 418.0 1.7 1,400.0 9,130.0 1.3 1.7 21.5 23.8 131.0 4,920.0 3.7 24.3 1.1 635.0 1.0 22.0
-24.43 42.05 86.60 13.79 -26.32 11.02 219.19 4.20 0.25 49.14 -7.95 11.43 171.64 111.72 28.90 66.16 -13.45
Tipiak SA
TIPI.FP
France
88
157
8.3
15.3
79.8
84.0
69.9
0.63
United Fisheries Of Kuwait Uoriki Co., Ltd. Vinnslustodin HF Yokohama Gyorui Co., Ltd.
FISH.KK 7596.JP VNST.IR 7443.JQ
Kuwait Japan Iceland Japan
202 174 104 27
19 201 65 351
n/a 6.6 9.6 n/a
4.1 23.2 40.9 nmf
380.0 1,410.0 4.5 505.0
770.0 1,570.0 4.6 609.0
250.0 1,216.0 3.8 450.0
-11.63 15.29 5.88 7.45
13,7
20,0
Average
24,8
Sources: Bloomberg, individual Stock Exchanges, Annual and Quarterly Reports Revenues and EBITDA figures for the Norwegian and Icelandic companies are calculated estimates for the year 2006. Companies ranked alphabetically. Date as of October 23, 2006, "nmf" = not meaningful, "n/a" = not available. Disclaimer: The companies on the list have been selected randomly. Glitnir banki hf. hereby disclaims liability and does not accept any responsibility for such information or is giving any advice in relation to investments in the companies.
42
Glitnir Seafood Industry Report - China
About Glitnir Glitnir’s total loan portfolio USD18.5bn *
• Home markets are Iceland and Norway. • Focus on niche segments worldwide. – Seafood / Food Industry – Sustainable Energy – Shipping - Offshore Supply Vessels • Strong focus on the seafood industry since 1904.
Manf. Commerce Other 3% 5% constr. 8%
Seafood 10%
• Today 10% of the bank’s loan portfolio is in the seafood
Property companies 30%
industry.
• Credit ratings: A1 / P-1 (Moody’s), A / F1 (Fitch) and A-/A-2 (Standard and Poor’s)
Services 20%
Households 24%
Services include: Credit facilities – Term loan facilities – Working capital facilities – Syndicated loans – Vessel financing – Bridge loans
* as of December 31, 2005
Capital Markets – – – –
Bond issuances FX dealings Forward contracts Options
Mergers & acquisitions – – – – – – –
Financial advisory Acquisitions Disposals Minority investments MBOs / LBOs / MBIs Private Placements Strategic reviews
Other services – Risk management advisory – Equity participation
43
Glitnir Seafood Industry Report - China
Glitnir’s International Platform Luxembourg
United Kingdom London Branch
• • •
41 Lothbury, London City
• •
• •
Corporate Finance Centre of Excellence
• •
Corporate Banking Centre of Excellence •
•
Food industry
Leveraged Finance Corporate Finance
Real Estate Private Banking
Structured Finance Loan Syndication 534 Rue de Neudorf, Lux.
Norway
BNbank: Munkegata 21, Trondheim Dronningens gate 40, Oslo Glitnir Bank: St. Olavsplass 1, Alesund Glitnir Securities: Haakon VII’s gate 10, Oslo
Copenhagen Branch
Glitnir Luxembourg
Corporate Banking
•
Denmark
BNbank • Corporate and retail mortgage Glitnir Bank • Full service bank, trad. indust. • Centre of Excellence • Shipping/ Offshore supply vessels • Subsidiaries: • Glitnir Factoring Glitnir Securities Union Group Norsk Privatøkonomi ASA
Frederiksgade 19, Copenhagen
Canada
Iceland
Kirkjusandur, Reykjavik
Headquarters
Glitnir Canada
• •
Corporate Banking
Representative Office Halifax
Centres of Excellence
•
• • •
•
Global seafood
•
Sustainable energy
•
International core customers
1718 Argyle Street, Halifax
Structured Finance Capital Markets Corporate Finance
China Glitnir China
Sweden
Representative Office Shanghai
•
Fischer Partners
•
Hovslagargatan, Stockholm
Opened April 2006
Opening Fall 2006
Equity Trading & Brokerage
Level 8, CitiGroup Tower 33, Hua Yuan Shai Qiao Road Pudong, Shanghai
44
Glitnir Seafood Industry Report - China
Glitnir Seafood Team Websites:
www.glitnir.is/Seafood
Global Seafood Stockwatch:
www.glitnir.is/Stockwatch
Management:
Analysts:
Magnús Bjarnason Managing Director Region Asia & Americas Direct line: +354 440 4523 Mobile: +354 844 4523 [email protected]
Helgi Anton Eiríksson Global Seafood Director
Ásmundur Gíslason Direct line: +354 440 4768 Mobile: +354 844 4768 [email protected]
Alexander Richter Direct line: +354 440 4766 Mobile: +354 844 4766 [email protected]
Valdimar Halldórsson Direct line: +354 440 4638 Mobile: +354 844 4638 [email protected]
Henning Lund Direct line: +47 22 01 63 47 Mobile: +47 952 55 839 [email protected]
Direct line: +354 440 4518 Mobile: +354 844 4518 [email protected]
45
Glitnir Seafood Industry Report - China
Glitnir Seafood – Regional Teams North America Jonathan Logan Executive Director North America US: +1 (203) 979 5275 (cell) Iceland: +354 844 4521 (cell) [email protected]
Joe Fillmore Director Canada phone: +1 (902) 429 3114 mobile: +1 (902) 237 2114 [email protected]
Hjálmur Nordal Director Canada phone: +1 (902) 429 3113 mobile: +1 (902) 237 2112 [email protected]
Michael Richard Director United States
Kristján Th. Davídsson Managing Director Corporate Banking, Iceland Direct line: +354 440 4517 Mobile: +354 844 4517 [email protected]
Ola Övrelid Bank Executive | Glitnir Bank Seafood Credit, Norway phone: +47 7010 2026 mobile: +47 9133 6733 [email protected]
Hafliði Sævarsson Analyst Glitnir Representative Office China Direct line: +86 21 6101 0191 Mobile: +354 844 4569
Bjartur Logi Ye Shen Analyst Glitnir Corporate Banking Direct line: +354 440 4560 Mobile: +354 844 4560 [email protected]
mobile: +1 (508) 878 0171 [email protected]
Europe/ Nordic Kjartan Ólafsson Director Glitnir Bank Direct line: +47 7010 2015 Mobile: +47 9592 6015 [email protected]
Ragnar Gudjónsson Director Corporate Banking, Iceland Direct line: +354 440 4550 Mobile: +354 844 4550 [email protected]
Asia Jiang Zhu Director Glitnir Representative Office China Direct line: +86 21 6101 0190 Mobile: +86 139 0161 1875 [email protected]
Grace Liu Executive Assistant Glitnir Representative Office China Direct line: +86 21 6101 0191 Mobile: +86 136 6166 1660 [email protected]
[email protected]
South America Jón Gardar Gudmundsson Director Business Management Direct line: +354 440 4516 Mobile: +354 844 4516 [email protected]
Greta Marín Pálmadóttir Administrative Assistant Corporate Banking Direct line: +354 440 4746 Mobile: +354 844 4746 [email protected]
Anna Rósa Róbertsdóttir Analyst Corporate Banking Direct line: +354 440 4554 Mobile: +354 844 4554 [email protected]
46
Glitnir Seafood Industry Report - China
Glitnir Seafood Team – Other Members Timothy H. Spanos Director International Corporate Banking Direct line: +354 440 4777 Mobile: +354 844 4777 [email protected]
Tim Owen Executive Director Head of Corporate Finance, UK Direct line: +44(0) 20 7710 9130 Mobile: +44(0) 7843 512 092 [email protected]
Gudmundur Ragnarsson Senior Manager Corporate Banking, Iceland Direct line: +354 440 4547 Mobile: +354 844 4547 [email protected]
Gísli Sigurgeirsson Senior Manager International Corporate Banking Direct line: +354 440 4765 Mobile: +354 844 4765 [email protected]
Atli Rafn Björnsson Associate Corporate Finance, UK Direct line: +44(0) 20 7710 9135 Mobile: +44(0) 788 798 2201 [email protected]
Eiríkur R. Eiríksson Senior Manager Corporate Risk Advisory Direct line: +354 440 4565 Mobile: +354 844 4565 [email protected]
Hjörtur Thor Steindorsson Credit Manager International Corporate Banking Direct line: +354 440 4503 Mobile: +354 844 4503 [email protected]
Kyrre Dale Credit Manager | Glitnir Bank Seafood Credit, Norway Direct line: +47 7011 2034 Mobile: +47 9137 6551 [email protected]
Ingi Rafnar Júlíusson Executive Director Capital Markets Direct line: +354 440 4459 Mobile: +354 844 4459 [email protected]
Snorri Arnar Vidarsson Credit Manager International Corporate Banking Direct line: +354 440 4771 Mobile: +354 844 4771 [email protected]
Rúnar Jónsson FX Brokerage Capital Markets Direct line: +354 440 4489 Mobile: +354 844 4489 [email protected]
Stefán Eiríks Stefánsson FX Brokerage Capital Markets Direct line: +354 440 4483 Mobile: +354 844 4483 [email protected] 47
Glitnir Seafood Industry Report - China
Legal Disclaimer All opinions and analyses represent the views of Glitnir at the time of writing and are subject to change without notice. Glitnir and its employees cannot be held responsible for any trading conducted on the basis of the information and views presented here. Glitnir may at any time have vested interests in individual companies, for example as an investor, creditor or service provider, but its opinions and analyses are produced independently by Glitnir Region Asia & Americas, based on publicly available information on the company in question.
This Seafood Industry Report is written by Ásmundur Gíslason – Glitnir – Region Asia & Americas [email protected] Bjartur Logi Ye Shen – Glitnir – Region Asia & Americas [email protected] Valdimar Halldórsson – Glitnir – Research [email protected]
48
www.glitnir.is/seafood
China Seafood Industry Report November 2006
Glitnir Seafood Industry Report - China
Contents • Foreword and Report’s Main Findings ...............................................
3-4
• China – Investment Considerations ..................................................
5
• China Overview .............................................................................
6-9
• China – Seafood Industry 1) 2) 3) 4)
Seafood Seafood Seafood Seafood
Production ............................................................ Processing ............................................................ Consumption ........................................................ Sales and Trade ....................................................
10 20 23 27
-
19 22 26 32
• Investment Opportunity in Focus 5) Tilapia Culture & Processing ................................................
33 - 40
• Glitnir Seafood Stockwatch .............................................................
41 - 42
• Glitnir Bank – General Information ..................................................
43 - 44
• Glitnir Bank – Global Seafood Team .................................................
45 - 47
2
Glitnir Seafood Industry Report - China
Foreword Dear Reader, It is our pleasure to present the latest issue of Glitnir's Seafood Industry Report. In this issue we focus on the Seafood Industry in China. We are now in our third year of publication and are grateful for the good feedback we have received from our industry partners. We will issue 5 reports altogether this year, focusing on one country or region in each report. In March 2006 Íslandsbanki (ISB) became Glitnir in a global group rebranding, unifying our national and international operations under one brand. In China, fish is a sign of affluence. As one decade of marvelous economic growth brings China unprecedented prosperity, its significance in the global seafood industry has also reached a new height. Today, China is by far the world’s largest supplier of aquatic products, both by means of capture and aquaculture. At the same time, China is also one of the most important consumer markets for seafood, with a fast growing appetite for exotic and high-end seafood products. Its seafood processing industry continues to attract substantial investments from around the world. In short, the vastness of Chinese seafood industry presents many opportunities to foreign investors, in virtually all of its sectors. This report aims to give an analytical overview of the current Chinese seafood industry and present our understanding of its likely future developments. We trust you find this report of benefit. We at Glitnir are proud of our strong team of seafood industry experts and look forward to working with you in our quest to make the seafood industry even more dynamic, efficient and profitable. You can contact the seafood team via [email protected] and www.glitnir.is/seafood Best regards, Glitnir Seafood Team 3
Glitnir Seafood Industry Report - China
Main Findings • China is the largest producer of seafood in the world, representing some 35% of the total global seafood production.
• Freshwater and seawater species represent 44% and 56%, respectively of all aquatic production in China. • Total aquatic production in China stood at 49 MMT in 2004, approx. 64% of this volume comes from aquaculture farming. This makes China the largest aquaculture nation in the world and the only country in the world where farmed fish production exceeds wild catch. In 2004 farmed freshwater species represented 59% of all farming in China while seawater species accounted for 41%.
• Main farming species are shellfish (seawater) and carp (freshwater). • Shandong province receives the largest portion of foreign investment in seafood processing, the majority of which comes from Japan and Korea.
• Japan is the major export destination for Chinese aquatic product exports, taking more than half of all China’s seafood exports in recent years.
• All three sectors of the Chinese food market (retail, wholesale and foodservice) has experienced significant growth in recent years and we believe that this development will continue as purchasing power increases.
• Seafood consumption is expected to increase substantially in coming years. Seafood consumption in China was 25 kg per capita in 2004 and is expected to reach 36 kg per capita in 2020.
• Looking into the future, tilapia is likely to surpass other cultured species in importance. • Production of tilapia worldwide is likely to expand robustly in coming years, as a result of strong investment in that sector.
• China continues to be the world’s main producer of tilapia and the main export market for Chinese tilapia is the U.S. 4
Glitnir Seafood Industry Report - China
Investment in the Chinese Seafood Industry The purpose of Glitnir’s China Seafood Report is to assist our current and potential clients in creating value by making sound investment decisions in the seafood industry in China. The value-chain of the industry is shown below:
Supply of Raw Materials Catch / Culture
Processing
Primary / Secondary
Distribution
Retail
Trading / Import & Export
Consumers / Marketing & Sales
A business may choose to devote its effort to one, several or all of the sectors in this chain. A sound investment decision, however, must always be based on a clear understanding of each sector in which the value is created. The first part of the Report is dedicated to this purpose. It provides a general overview of the development and current status in aquatic catch and culture, seafood processing, distribution and retail in China. Based on this understanding, a section in this Report named “Investment Opportunity in Focus” aims to identify potential investment opportunities in various sectors of the Chinese seafood industry. In each issue, Glitnir’s China Seafood Report focuses on different investment potentials in the industry. In this issue, the focus is on the culture and processing of tilapia in China.
5
Glitnir Seafood Industry Report - China
China Overview
6
Glitnir Seafood Industry Report - China
Economy at a Glance • Area: 9,596,960 sq km • Population: 1,313,973,713 (July 2006 est.) • Administrative Divisions: 23 provinces, 5 autonomous regions, and 4 municipalities
• GDP (PPP): $8.859 trillion (2005 est.) – Ranked the second in the world
• GDP composition by sector: agriculture: 12.5%, industry: 47.3%, services: 40.3%
• GDP per capita: $6,800 (2005 est.), ranked 117th in the world • Inflation Rate (Consumer Prices): 1.8% (Q2 2006) • Unemployment: 9% official registered unemployment in urban areas in 2004.
• Exchange Rate: CNY per USD – 7.98 (2006e) 8.1943 (2005), 8.2768 (2004), 8.277 (2003), 8.277 (2002), 8.2771 (2001)
• Real GDP growth (%): 10.7 (2006e), 9.9 (2005) • Country risk rating (EIU CRS)*: Sovereign (BBB stable) Currency (BBB stable), Banking Sector (B stable), Political (B), Economic structure (BBB)
• Foreign trade ($m Q2 2006): export fob 231,360; import cif 193,396
• FDI ($bn): 14.2 (Q2 2006), 14.3 (Q1 2006), 17.1 (Q4 2005), 14.7 (Q3 2005), 15.2 (Q2 2005), 13.4 (Q1 2005)
Source: CIA World Factbook, the EIU *the Economist Intelligence Unit Country Risk Services
7
Glitnir Seafood Industry Report - China
Recent Economic Development • Central bank introduced flexibility to the RMB in 2005 allowing its appreciation against major currencies.
2000-2005 GDP, FDI & Consumption
(USD 10bn)
Household Consumption
FDI
• Shift of focus starting in 2006 from an investment-driven economy to a consumption-driven one.
Looming fears of overinvestment still present -
-
Investment partially boosted by rise in money supply and thus in the available funds for lending. Efforts to curb overheating such as interest rate & reserve requirement hikes have been unsuccessful.
Fixed asset investment in real estate slowed although rebound in total FAI has been led by investment in manufacturing (especially consumer goods), natural resource processing and export-oriented industries.
GDP
250
8 223
200
6
150
5
166 142
100
4
127
118
108
3 87
50
7
2
71
52
55
59
64
2000
2001
2002
2003
1
0
0 2004
2005
Household consumption on slow but steady rise.
• Transition from power intensive industrial focus to increased
1992-2004 Growth Rate of Consumption (Value)
emphasis on the service sector both in terms of the sector’s market share in the economy and employment.
• Inflation and interest rates on the rise but expected to stay low.
Retail Sales of C onsumer Goods
Living Exp
C onsumption
40% 35%
• Increasing emphasis on quality of growth at the expense of the growth rate for the coming years.
Emphasis on strengthening structure rather than increasing size of industries (increasing efficiency).
Heavier funding towards research and development to encourage technological innovation.
• Concentration of investment in East China begins gradual shift to Central and Western China.
30% 25% 20% 15% 10% 5% 0% 1992
1994
1996
1998
2000
2002
2004
8
Glitnir Seafood Industry Report - China
Seafood Giant of the World • China remains by far the largest producer of seafood in the world, representing some 35% of the total global seafood production.
• The country has seen a rapid growth in aquatic production in the last 25 years, averaging an annual growth rate of 15.22% from 1980 – 2004.
• Total aquatic production in China stood at 49 MMT in 2004, approx. 64% of this volume comes from aquaculture farming. This makes China the largest aquaculture nation in the world and the only country in the world where farmed fish production exceeds wild catch.
• Fish farming has grown more rapidly in recent years, at a CAGR of 6% from 1999 to 2004.
1980 – 2004 Growth in China’s Aquatic Production
(in million tonnes)
50
Millions
45
50 45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
-
-
China Capture
Peru
Indoesia
Chile
India
Aquaculture
Japan
USA
Thailand Norway Iceland Canada
19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04
Millions
2004 World’s Aquatic Supply
Inland waters
Marine waters
Source: FOA Figis database
9
Glitnir Seafood Industry Report - China
1) China Seafood Production
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
10
Glitnir Seafood Industry Report - China
China’s Aquatic Production
2004 Breakdown of China’s Aquatic Production
• Total aquatic production for 2004 was 49 million tonnes, up by 4.2% over the year
Freshw ater Products 44%
before. The industry estimates the similar growth rate for 2005 and 2006. Between 2001 and 2004, the growth rate averaged 5.3%.
• Facing depleting wild fish stocks and serious environmental damages resulted from
Seaw ater Products 56%
over fishing, the Chinese government continues to restrict marine and inland fishery and focus on development of aquaculture.
• Fresh and seawater culture production increased by 6.6% and 5.1% respectively in 2004.
• Seawater catch increased by 1.31% in 2004. Freshwater catch, however,
Wild Capture 36%
decreased by 1.72%.
• Seawater fish output decreased by 0.76%, yet freshwater fish output increased 5.53%.
2001 – 2005 Growth in Wild Capture and Aquaculture
Aquaculture 64%
Millions
(in million tonnes)
40 35 34
30
32
25
30
29
27
Seaw ater Catch 29% Freshw ater Culture 38%
20 15
17
17
17
17
17
10 Freshw ater Catch 7%
5
Seaw ater Culture 26%
2001
2002 Wild Capture
2003 Aquaculture
2004
2005
Source: USDA Foreign Agricultural Services GAIN Report 2005
11
Glitnir Seafood Industry Report - China
Shandong Province – the Largest in Seafood In 2004 No.1 Total Aquatic Production: Shandong Province (7.2 million tonnes, 6.1 million tonnes from seawaters and 1.1 million tonnes from freshwaters). No.1 Seawater Catch: Zhejiang Province (3.2 million tonnes). No. 1 Freshwater Catch: Hubei Province (393 thousand tonnes). No. 1 Seawater Culture: Shandong Province (3.4 million tonnes). No. 1 Freshwater Culture: Guangdong Province (2.7 million tonnes). 2004 Top Regions in Aquatic Production 7,2 6,6
7 5,9
6 4,9
5 4,0
4
3,7 3,0
2,7
3 1,7
2 1
1,7
1,6
1,4
0,9
H un an G ua ng do ng G ua ng xi H ai na n
ub ei H
Ji an gx i Sh an do ng
Fu jia n
nh ui A
Ji an gs u Zh ej ia ng
eb ei Li ao ni ng
0
H
million tonnes
(in million tonnes)
8
Source: Ministry of Agriculture, China
12
Glitnir Seafood Industry Report - China
Wild Capture and Marine Resources • There are over 1700 kinds of fishes and about 300 kinds of economically exploitable fishes.
• In addition, there are about 2000 kinds of seaweeds, 300 kinds of shrimp and crabs, and 200 kinds of economically exploitable molluscs.
• China’s natural marine resource is mainly divided among three sea areas.
Yellow Sea & Bohai Gulf Area East China Sea Area South China Sea Area 2004 Distribution of Wild Capture in China
Others; 8,96%
Freshwate Catch; 14,29%
Bohai Gulf; 7,39%
South China Sea; 21,29%
Yellow Sea; 18,73%
East China Sea; 29,34%
Source: USDA Foreign Agricultural Services GAIN Report 2005
13
Glitnir Seafood Industry Report - China
Decreasing Output in Seawater Catch Yellow Sea & Bohai Gulf
East China Sea
• Small yellow-fin tuna
• Hairtail
• Ling
• Big yellow-fin tuna
• Pacific herring
• Small yellow-fin tuna
• Prawn
• Cuttle fish
• Hair shrimp
• Pomfret
• Jellyfish
• Moray
• Kelp
• Shuttle crab
2001-2004 Wild Capture in Yellow Sea & Bohai Gulf
2001-2004 Wild Capture in East China Sea
3.500
25%
3.000 20% 2.500 15%
2.000
(in ‘000 tonnes)
Thousand Tonnes
Thousand Tonnes
(in ‘000 tonnes)
5.500
33%
5.400
32%
5.300 31%
5.200 5.100
1.500
10%
1.000
30%
5.000
29%
4.900 5%
500 -
0% 2001
Bohai Gulf
28%
4.800
Yellow Sea
2002
2003
Bohai Gulf % of total catch
2004 Yellow Sea % of total catch
4.700
27% 2001
2002 East China Sea
2003
2004
East China Sea % of total catch
Source: USDA Foreign Agricultural Services GAIN Report 2005
14
Glitnir Seafood Industry Report - China
Freshwater Catch on the Rise South China Sea
Freshwater (or Inland water)
• Sardine
• Redfish (northern regions only)
• Tunny
• Codfish (northern regions only)
• Bonito
• Carp
• Swordfish
• Naked carp
• Shark
• Loach 2001-2004 Wild Capture in South China Sea
2001-2004 Freshwater Catch in China
3.720
(in ‘000 tonnes)
22,20%
3.700 22,00%
3.680 3.660
21,80%
3.640 21,60%
3.620
Thousand Tonness
Thousand Tonnes
(in ‘000 tonnes)
2.500
15,00%
2.450 14,50%
2.400 2.350
14,00%
2.300 2.250
3.600
21,40%
3.580
13,50% 2.200 2.150
21,20%
3.560 3.540
21,00%
3.520
13,00%
2.100 2.050
12,50%
2.000
3.500
20,80% 2001
2002
South China Sea
2003
2004
South China Sea % of total catch
1.950
12,00% 2001
2002
Freshwater Catch
2003
2004
Freshwater % of total catch
Source: USDA Foreign Agricultural Services GAIN Report 2005
15
Glitnir Seafood Industry Report - China
Aquaculture in China 2004 Aquaculture area & production in %
• Total culture area reached 7.28 million hectares for 2004, up by 2.5 percent over 2003.
• About 22 percent of the total culture area is in seawaters,
Seawater 22%
78 percent is in freshwaters. However, production is divided more evenly – 41% from seawater and 59% from freshwater.
Seaw ater; 41,03% Freshw ater; 58,96%
Freshwater 78%
• Culture area expansion is expected to slow down, as the priority has been shifted to increase of productivity and efficiency, rather than expanding blindly.
Area Resources
2001-2005 Aquaculture Production in China
2001-2004 Development of China’s Aquaculture Area Resource (in ‘000 hectares)
(in million tonnes)
25 6.000
20 20
19 15
10
11
18
17
16 12
13
13
14
Thousand hectares
Million Tonnes
Production
5.000
4.000
3.000
2.000 1.345
1.286
5
5.664
5.571
5.470
5.362
1.532
1.617
1.000
-
2.001
2.002 Seawater culture
2003 Freshwater culture
2004
2005(e)
2001
2002
Freshwater
2003
2004
Seawater
Source: USDA Foreign Agricultural Services GAIN Report 2005
16
Glitnir Seafood Industry Report - China
Shellfish - the Most Cultured Product in Seawater 2004 Seawater Farming Area by Products (% of total hectares)
• The leading species are molluscs, accounting for approx. 78% of total farmed production, followed by algae (10%), crustaceans, (5.5%) and fish (4%).
8% 5% 6%
15%
• Growth in seawater farming is relatively slow. Production yield per hectare has not been improved significantly in recent years. Yet the expansion of seawater culture areas starts to result in damage to the marine eco-system. Therefore growth in seawater farming is expected to slow down further.
5%
Fish Shrimp/Prawn
61%
Crab Shellfish Algae Other
• China’s largest seawater farming area, in the terms of hectares, is
2004 Seawater Farming Area Resource by Selected Products & Regions (in ‘000 hectares)
in Liaoning province in Northern China. It is followed by Shandong province, with close to 24% of the total farming area. 2004 Total Seawater Farming Area by Regions
Algae
7% 2% 15% 16%
Crab
4% 7%
Hebei Liaoning
Shrimp
Jiangsu
Guangxi Guangdong Shangdong Fish
0
10
20
30
40
50
60 70 Thousands Hectares
26%
Zhejiang
23%
Fujian
Fujian
Shandong
Zhejiang
Guangdong
Jiangsu Liaoning Hebei
Guangxi Source: Ministry of Agriculture, China
17
Glitnir Seafood Industry Report - China
Freshwater Farming Areas • Freshwater fish farming is dominated by small and medium-sized individual farms located primarily in the provinces of Hubei, Anhui, Jiangsu, Hunan and Heillongjiang.
• Largest pond farming:
Hubei province (340,015 hectares).
• Largest lake farming:
Anhui province (193,279 hectares).
• Largest reservoir farming:
Jiangxi province (132,559 hectares).
• Largest stream farming:
Jiangsu province (113,014 hectares).
2004 China Inland Culture Area Resources by Type (percentage of total area in hectares)
2004 China Inland Culture Area Resources by Regions (Ten top provinces as percentage of total area in hectares)
3%
5% 5%
22%
34%
7% 9%
5%
23%
13%
Source: Ministry of Agriculture, China
16%
Pond Lake Reservoir Stream Rice Paddies Others
15%
9% 9%
14% 11%
Source: Ministry of Agriculture, China
Hubei Jiangsu Anhui Hunan Heilongjiang Guangdong Jiangxi Shandong Zhejiang Henan
18
Glitnir Seafood Industry Report - China
Carps - 79% of Total Freshwater Culture Output • The dominant form of freshwater farming in China is
Estimated freshwater production by farming environment
pond farming, which occupies 34% of the total freshwater farming area and produces a little over 70% of the total output.
5% 5% 6%
• Carps account for the majority of the output. They
10%
contributed more than 79% of all the output of the 1999 freshwater aquaculture output (the distribution today is deemed to be similar), which is equivalent to 47.2% of the total Chinese aquaculture output or 27.4% of the total fisheries output.
• In 1999, carps were valued at CNY74.39 billion at the
important place in the freshwater aquaculture in China. In 1999, it represented approximately 4% of the freshwater culture output (or 561,794 tonnes) and 3.61% of the total value (CNY3.61 billion). The production of tilapia is expected to increase further.
Ponds Reservoirs
71%
Lakes Rivers/canals Rice paddy Other
Source: FAO: Aquaculture development in China 2001
price of that year, representing 49.8% of the total value of China’s freshwater culture output, or 29.4% of its total fisheries output value.
• Apart from the carp family, tilapia also occupies an
3%
Freshwater culture output by species 1%
1%
9%
1% 1% 1% 3% 33%
4% 1%
9%
14% 22%
Source: FAO: Aquaculture development in China 2001
Silver carp & Bighead carp Grass carp Common carp Crucian carp Black crap Tilapia Chinese bream Eel Chinese mitten handed crab Mandarin fish Macrobrachium rosenbergii Soft shelled turtle Others
19
Glitnir Seafood Industry Report - China
2) Seafood Processing in China
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
20
Glitnir Seafood Industry Report - China
Development of Seafood Processing in China • Traditionally, most aquatic products sold in the
2002 Major Freshwater fish Products Processed (tonnes & percentage of total processed)
Chinese domestic market are fresh. In 1999, total processed aquatic products amounted to 6.2 million tonnes, accounting for only 15.1% of total aquatic production.
1296000; 21%
Dried
• In recent years, however, seafood processing industry in China has seen significant growth.
• The Chinese Ministry of Agriculture reported that in 2004 the total number of aquatic processing facilities in China was 8,745, an increased from 8,287 in 2003.
Frozen
3258000; 53%
707000; 11%
Smoked Canned
93000; 1% 632000; 10%
21000; 0%
Surimi Products Fish Meal
235000; 4% Source: FAO - Aquaculture development in China 2003
Others
• The total processing capacity reached 14.2 million tonnes, representing a 9% increase from the previous year. In 2004, approximately 10.3 million tonnes were actually processed, increased by 13.2% from 2003.
• The majority of the processed aquatic products comes from seawater; freshwater products accounted for a little less than 8% of the total processed quantity in 2004.
• Most of the processing facilities are located in the Chinese costal regions, mainly in Shandong, Zhejiang, Liaoning, Fujian and Guangdong provinces.
Marine Aquatic Products Processing (‘000 tonnes)
12.000 10.000 Processing Capacity (thousand tonnes/per year)
8.000 6.000 4.000
Total Output of Processed Product (thousand tonnes)
2.000 0 1995
1996
Source: China National Bureau of Statistics
1997
1998
1999
21
Glitnir Seafood Industry Report - China
Outsource Seafood Processing to China • As seafood processing is a labour-concentrated industry, the lower labour cost in China attracts a large amount of foreign investment into this sector. Often, tax incentives provided by the Chinese government also play a big role. The hourly pay of Chinese factory labour is estimated at $0.5 (RaboBank estimate).
• Shandong province receives the largest portion of foreign investment in seafood processing, the majority of which comes from Japan and Korea. Fujian province, ranked the second, receives foreign funds from a wider range of regions, including Taiwan, Hong Kong, Japan, Korea, the U.S., Argentina and Denmark. About Seafood Processing in China
Local Supply of Seawater Raw material for Processing
Currently, Homey Group, located in Shandong, is the largest aquatic processing company in China, with total sales of US$230 million in 2004. The joint venture between Shanfu Group and Japan Nippon Suisan is building its annual capacity toward 40,000 tonnes in 2007, with the aim of becoming one of the largest processing companies by then.
(‘000 tonnes, 1999)
Hainan Guangxi Guangdong
(RaboBank – China’s aquaculture industry 2005)
Shandong
Major U.S. fisheries, including Trident, Pacific Seafood, Premier Pacific Seafood and many more, outsource processing to China. Seafood products processed there include Salmon, Dungeness crab, Alaskan Pollock.
Fujian Zhejiang Jiangsu
(Bloomberg News – July 19, 2005)
Agreement Signed between Chinese and Icelandic companies on construction of a 150,000-ton storing house for frozen seafood at the city of Qingdao in East China's Shandong Province.
Liaoning Hebei
0 Fish
500
1000
Shrimp, Prawns, Crabs
Source: China National Bureau of Statistics
1500
2000 Shell fish
2500 3000 Thousand tonnes Algae
(Xinhua New Agency – May 22, 2005)
Other
22
Glitnir Seafood Industry Report - China
3) Seafood Trade and Sales
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
23
Glitnir Seafood Industry Report - China
China, a leading exporter of aquatic products • In recent years China’s imports and exports of seafood have seen a rapid development. The export value of aquatic products is the highest in the export of agriculture products. The growth has also been driven by growing capability of the fish processing industry.
• The export value of aquatic products mostly occur in provinces along the coast. Coast areas such as Shandong, Guangdong, Liaoning, Zhejiang and Fujian makes up 92% of the total.
• The majority of China’s exports are processed seafood products, consisting of prepared, preserved or frozen product. The leading export products are eel, processed or preserved shrimp and cuttlefish.
• Japan is the major export destination for Chinese aquatic product exports, taking over half of all China’s seafood export over the recent years.
• Given the size of China’s seafood production and its efficient processing industry, China’s accession to the WTO has had an impact on the world seafood market. Accession has allowed China to be subject to the ‘most favoured nation’ tariffs, which applies only to WTO members. This has assisted increases in seafood export from China to other WTO members, raising supply in world markets. Exports of Aquatic Products by Main Category
Exports of Aquatic Products from China by Destination
(US$ billion)
(US$ billion)
2,5 2,03
2,0
1,4
2,24
2,20
1,75
1
1,5
Source: SNF-report nb. 20/05
0,8 1,0
1,0 0,5
1,10
1,2
2,03
0,8 0,4 0,4
0,5
0,6 0,6
0,4 0,2
0,2
0,8
0,7
0,4
0,3
0,2
0,6
2000
Japan Source: SNF-report nb. 20/05
America
2001
2002
Korea
0,54
0,82
0,62
0,4 0,2
0,0 1999
0,45
1,16
2003
Hong Kong
0 Fish, frozen
Molluscs and other
Source: USDF GAIN Report, 2005
Crustaceans
Prepared or Prepared of paskaged packged fish and caviar crustaceans and mollusks
Fish, fillet
24
Glitnir Seafood Industry Report - China
Increasing Demand for Seafood in China • • • •
China was the world’s eighth largest importer of aquatic products in 2003, with an import value of $2.5 bn. China’s two main imports were cod (mainly from Russia) and Fish meal (mainly from Peru). The seafood trade surplus was $3 billion for 2003 with imports valued at about $2.5 billion and exports at $5.5 billion. Much of the imports are destined for re-export following processing in China. Beside the re-export, an increasing share of imports is destined for the domestic market, as the emerging upper class is creating demand for imported seafood.
• China has reduced its tariffs on seafood products since joining the WTO in 2001. • China also influences the demand side of the world seafood market. Lower tariff barriers have reduced import costs and resulted in greater seafood imports by China. Import of Aquatic Products into China by Origin
Import of Aquatic Products into China by Main Category
(US$ billion)
(US$ billion)
0,8
1,4
0,7
0,7
0,6 0,4
0,1
1 0,8
0,4
0,4
0,63
0,3
0,3
0,3 0,2
0,2
0,2
0,1
0,1
1,20
1,2
0,5
0,5 0,4
0,7
0,1
0,6
0,3
0,1
0,4
0,2
0,2
0,2
0,1
0,1
0,2
0,26
0,29
Molluscs and other
Crustaceans
0,11
0
0,0 1999
2000 Russia
Source: SNF-report nb. 20/05
2001 Peru
2002 America
2003
Other
Fish Meal
Fish, frozen
Japan Source: USDA GAIN Report, 2005
25
Glitnir Seafood Industry Report - China
China’s Domestic Food Market on the Rise 2000-2004 Market Structure
2004 Market Structure
(US$ billion)
Foodservice
Food Retail 13%
Food Wholesale
100
93 74
80 Foodservice 44%
Food Retail 91
74 65
60 43 40
Food Wholesale 43%
28 19
15
20 0
Source: National Bureau of Statistics of PRC Note: 100% = USD 212bn
2000
2002
2004
Source: National Bureau of Statistics of PRC
• All the three sectors of the food market have experienced a significant growth in recent years and we believe that this development will continue as purchasing power increases. Seafood consumption is expected to increase substantially in coming years. Therefore we expect that the position of seafood in the food market will be strong in the future.
• Food retail is on the rise due to consumer’s increasing willingness to spend on foods as a result of growing concerns over food safety and health.
• With urbanisation and marketisation, lifestyles become increasingly fast-paced resulting in growing convenience food and foodservice markets.
• Rapid growth in food wholesale sector could be attributed to the sudden rise of large-scale, national supermarket and hypermarket chains in food retail as well as the increasing preference of consumers to buy in bulk (facilitated by the rise in car ownership).
• Increased purchasing power in recent years has contributed to fast growth in the foodservice sector, including the seafood sector. 26
Glitnir Seafood Industry Report - China
4) China Seafood Consumption
Supply of Raw Materials Catch / Culture
Processing Primary / Secondary
Distribution Trading / Import & Export
Retail Consumers / Marketing & Sales
27
Glitnir Seafood Industry Report - China
High Consumption of Seafood • Seafood consumption in China has increased at a high rate from 1990-1998. • Asia and the Pacific region has countries with the highest per capita consumption of fish. • Seafood consumption in China was 25.4 kg per capita in 2004. • Seafood consumption increased heavily from 1990 – 1998 but has remained relatively stable since then. 30
11.5
11.6
13.2
15.5
18.0
20.7
22.6
24.0
Per capita / kg / year
25 1,0
0,7 0,8
20 0,7
15 10 5 0
0,8 0,7 2,2
0,8 2,0
2,1
2,1
4,5
4,5
0,8 2,6
3,5
6,1
5,1
5,3
5,5
2,7
3,1
4,4
25.4
25.9
25.8
25.5
25.5
25.4
1,2
1,2
1,1
1,1
1,1
1,1
1,1
5,9
6,0
6,2
6,3
6,2
6,2
6,2
2,0
1,9
2,1
1,7
1,7
1,7
1,7
10,3
10,6
10,8
10,9
10,8
10,8
10,7
2,6
6,9
7,8
9,8
8,9
2,5
2,7
3,0
2,7
2,8
2,7
2,7
2,2
3,1
2,7
1,8
1,1
1,2
1,3
1,4 1,3
1,6
1,8
2,1
2,3
2,7
2,7
3,0
3,0
3,0
3,0
3,0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0,9
1,1
Crustaceans
1,1
Demersal fish
Total
2,6
2,4
2,3
5,5
25.2
Freshwater and diadromous fish
Marine fish, other
Molluscs
Other
Source: FAO, FAOSTAT, Rabobank
28
Glitnir Seafood Industry Report - China
Increased protein consumption • Followed by high growth in recent years protein consumption has increased substantially. • Seafood’s average historical share in consumption of red meat, poultry and seafood is 33%. The peak was in 1996 when it reached 37%. The share in 2004 was 31%.
• The average share of meat and poultry is 55% and 12%, respectively. Over this period the share of poultry has steadily increased from 9% to 14%, while meat has lost a share of 4%. 37.4
39.6
43.8
49.0
54.7
59.5
61.3
67.9
72.1
73.4
76.0
76.9
78.3
25,8
25,9
25,7
10,3
10,5
80.3
82.3
Total
80
Per capita / kg / year
70 60
24,0
50 18,0
20 10
11,5 3,3
11,6 4,0
13,2 4,5
5,5
7,3
10,9
25,3
11,1
9,0
9,8
10,6
38,2
39,6
40,7
42,1
45,9
38,0
43,9
35,6
1997
1998
1999
2000
2001
2002
2003
2004
8,3 6,1
25,4
22,6
15,4
40 30
20,8
25,1
25,5
7,3
26,1
28,1
31,9
24,0
30,6
31,4
22,6
1990
1991
1992
1993
1994
1995
1996
0
Red Meat
Poultry
Seafood
Source: FAO, FAOSTAT 29
Glitnir Seafood Industry Report - China
Regional Trends in Consumption • There is significant difference in seafood consumption between rural and urban areas in China. – In 2002, seafood accounted for 4.4% of total food consumption in rural areas while it accounted for 13.2% in urban areas.
• Consumption is higher in coastal provinces and in provinces with high level of disposable income. – The top 5 provinces that had the most expenditure on seafood products in 2004 were: Fujian, Shanghai, Zhejiang, Hainan and Guangdong.
• More expensive marine fish is consumed by the affluent population in coastal cities of China, while freshwater fish is consumed throughout China.
Source: Rabobank, GAIN, Agri-Food Trade Service
2004 Top Ten Aquatic Product Expenditure Per Capita & Disposable Income (US$ billion)
20000 500 15000
400 300
10000
200 5000 100
Aquatic Product Expenditure (in CNY)
na l at io N
Be ijin g
g
ng xi G ua
su
ni n Li ao
Ji an g
nj in Ti a
on g ng d
ai n
an G ua
H
ng jia Zh e
Sh an g
ha i
0 ia n
0 Fu j
Expenditure CNY per capita per annum
600
Income CNY per capita per annum
25000
700
Disposable Income (in CNY) Source: USDF Gain Report 2005
30
Glitnir Seafood Industry Report - China
Chinese Consumers Prefer the Fresh and Wild Captured • The Chinese consumers typically prefer live seafood product to chilled or frozen, and wild caught to farmed.
• However, ordinary Chinese consumers are price sensitive when buying seafood products.
• Farmed freshwater species such as shrimps, tilapia and carps are mainly consumed at home. Their appeals to the Chinese consumers are freshness and economic price.
• Imported high quality and therefore more expensive seafood such as salmon and crab are mainly absorbed by the food service sector.
• Consumers in China often prefer smaller fish, i.e. 200-500g. • Wet markets, where seafood is sold fresh or alive, are popular among the older generations. However, the younger and more affluent city dwellers tend to go to supermarkets nowadays for their food supply. Some of the larger modern supermarkets/hypermarkets are furnished with columns of water tanks to accommodate live seafood for sale.
Source: GAIN, Agri-Food Trade Service
• Products like fish heads and bellies, discarded else, are popular in China.
31
Glitnir Seafood Industry Report - China
Seafood Consumption: Strong Fundamentals • We expect a strong seafood consumption growth and Forecast of Seafood Consumption Trend in China and the World
a strong demand for high quality seafood. Main reasons for that are:
40
– According to FAO seafood consumption in China
– The higher consumption of seafood in urban areas, compared to rural areas, indicates that the increased urbanization will lead to increased consumption of seafood.
– Dramatic rise is expected in China’s middle class in next 5-10 years. In 2005 the middle class accounted for 90 million inhabitants but is projected to account for 650 million in 2015. Therefore, increased purchasing power is likely to result in higher seafood consumption.
Per capita / kg / year
is projected to be 35.9 kg/year per capita in 2020, an increase of 41% compared to the 2004 consumption.
36
35 30
20 15 10 5
25
24
25
13
12 6
16
16
17
1997
2004
2020e
8
0 1973
1985 China
World
– Chinese consumers are sensitive to product quality regardless of low disposable income, compared to developed countries. Demand for high quality seafood is therefore expected to increase as purchasing power increases.
Source: FAO, Rabobank, Dep. of agriculture, fisheries and forestry (Australia), Goldman Sachs
32
Glitnir Seafood Industry Report - China
5) Investment Opportunity in Focus: Culture & Processing of Tilapia in China
33
Glitnir Seafood Industry Report - China
Important Aquaculture Product of the 21st Century Tilapia is one of the most widely cultured species in the world. FAO reports production in 85 countries, including China. • Wild catch is being replaced by aquaculture. Tilapia is most often farmed in:
– – – – –
Ponds Cages Raceways, round tanks, re-circulating systems Ranching (lake releases) Freshwater, Brackish water, estuarine and marine
• Tilapia grows well in most production systems. – Polyculture with shrimp, catfish, and carp – Could be herbivorous and/or omnivorous – Good growth in fertilized ponds – Many by products can be used in prepared feeds – Simple hatchery technology – Disease resistant – Grow well at high densities • There is an established and growing market demand for tilapia. – Accepted in many national dishes – Popular in many forms (live, whole, fillets, fresh, frozen, smoked, surimi) • Tilapia will surpass other cultured species in importance. – Production constraints being reduced, and costs decreasing – Markets are still expanding – Market price is steady – Ecologically sustainable and environment friendly – Consumption not restricted by religious observances – Mild flavour preferred by many consumers – Carp: markets are limited – Salmonids and shrimps need high levels of fish meal, limited ingredients for diets – Most other species need higher water quality, competition for sites Source: Kevin Fitzsimmons, Ph.D. Tilapia Aquaculture in the 21st Century, University of Arizona
34
Glitnir Seafood Industry Report - China
Soaring Tilapia Market In the U.S. • The U.S. market is estimated to import approx.
1999 - 2005 U.S. Total Tilapia Import by Product Form
180,000 tonnes of tilapia in 2006, compared to only 40,000 tonnes in 2000.
• Since 2001, tilapia consumption has doubled in the U.S.
(‘000 tonnes)
Thousand tonnes 160 140 120
The species is now number 6 among the top ten seafood consumed by U.S. consumers.
100 80
• The EU market is still limited, but imports are expected
60
to increase, especially in the light of limited wild whitefish supplies to the market.
40 20
• Production of tilapia worldwide is likely to expand
0 1999
robustly in coming years, as a result of strong investment in this sector.
2001
2002
2003
Whole frozen
US Fresh Tilapia Fillets Import by Country of Origin
2004
2005
Jan-Jul Jan-Jul 2005 2006
Frozen fillets
Fresh fillets
US Frozen Tilapia Fillets Import by Country of Origin
(‘000 tonnes)
(‘000 tonnes)
25 Thousand tonnes
Thousand tonnes
2000
20
60
50
40
15
30 10
20 Taiwan
5
China Costa Rica
Ecuador 10
Thailand Taiwan Indonesia China
Honduras Ecuador
0 1999
2000
2001
2002
2003
2004
2005
Jan-Jul 2005
Jan - Jul 2006
0 1999
2000
2001
2002
2003
2004
2005
Jan-Jul 2005
Jan - Jul 2006
Source: Fish INFOnetwork Market Report on Tilapia
35
Glitnir Seafood Industry Report - China
Strong Growth in the Chinese Tilapia Industry • China continues to be the world’s main producer of tilapia. Total production in 2006 is expected to reach 1.07 million tonnes, representing a 10% growth from 2005.
• The value of tilapia production in China is thus exceeding $2,000 million.
• More than 80% of the tilapia is consumed in the country. Main market for Chinese tilapia is the U.S., which takes over 70% of the exports.
• The impressive increase in tilapia is caused by farmers switching from carp and shrimp to tilapia production. Some 120 plants are processing, of which 30 are specialised in this fish alone. The average retail price of tilapia in China is $1.60/kg, while the unit value of the exported fish is around $2.16/kg.
1999 – 2006 Tilapia Production in China (‘000 tonnes)
1200 1070 978
1000
897 806
800 629 600
672
707
562
400
200
0 1999
2000
2001
2002
2003
2004
2005
2006e
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
Source: Fish INFOnetwork Market Report on Tilapia
36
Glitnir Seafood Industry Report - China
Tilapia Farming is Mainly Concentrated in Guangdong Province Farming Area (ha)
Major Tilapia Producing Regions in China
Guangdong Hainan Guangxi Fujian Others National total
Production volume (ton)
55,000 13,000 13,000(e) 7,000(e) 22,000 110,000(e)
500,000 145,000 140,000(e) 80,000(e) 175,000(e) 1,040,000
Fujian Guangdong Guangxi
Hainan
Chinese Tilapia Production Distribution in 2005 6%
• Tilapia is farmed primarily in China’s warm southern provinces. In 2005
3% 3%
close to 50% of the total production is concentrated in Guangdong Province.
• Other major provinces include Hainan, Guangxi and Fujian. There is also
10%
48%
scattered production in other provinces.
15%
• Production growth is driven by strong domestic demand as well. In China – particularly the southern coastal provinces – tilapia is popular because its superior taste and quality compared to other cultured fish such as carp. Tilapia is also more affordable, compared with other highvalued, cultured species. An industry survey showed that 93.1% of consumers favour tilapia in Guangdong, 76.3% in Zhejiang and 65.2% in Shandong. Tilapia is also increasingly popular in large cities such as Beijing and Shanghai.
15%
Others Yunan Shandong Fujian Hainan Guangxi Guangdong
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
37
Glitnir Seafood Industry Report - China
Common Business Model of Tilapia Farming in China Importer / Distributor
Processing Company / Trader
Tilapia Farm
Feeds Factory
Supply feed and technical support
Tilapia Farm
Supply breeds and technological support
Sign contract and sell tilapia
quality and safe control
Sign contract and purchase tilapia
Tilapia Farm
Breeding Farm
Tilapia Farm
Contract land, pond, etc. from villages 38
Glitnir Seafood Industry Report - China
The U.S. Remains Chinese Tilapia’s Largest Customer China’s Export Mix From 2002 – 2005
• Tilapia fillet and frozen whole are the major
• Increasing tilapia exports from China bring more opportunities for the tilapia processing industry, as nearly all exported tilapia products are processed.
• This is mainly because of China’s relatively low cost
Thousand tonnes
products, accounting for almost 100% of total exported volume.
(tonnes)
100 80 60 40 20
of labour and the industry’s effort to deepen processing to add value to exported products.
0
• Fillet exports are likely to increase further while the
2002
portion of frozen whole fish is expected to continue to diminish.
paid to diversifying its export market, in particular in Europe and Middle East.
2004
2005
60 50 40 30
Hong Kong
20
Canada
10
Germany Puerto Rico
0 2002 Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
Tilapia f illet
(tonnes)
Thousand tonnes
• Industry insiders believe that more attention will be
2003
China’s Tilapia Fillet Exports by Destination
• United States remains the largest export destination for China, which on average absorbs 77% of tilapia fillet and 73% of frozen whole fish.
Frozen w hole tilapia
2003
2004
2005
Mexico United States
Source: USDA Foreign Agricultural Service China’s Tilapia Production Situation 2006
39
Glitnir Seafood Industry Report - China
Opportunities in Tilapia Culture & Processing
• Tilapia is well suited for large-scale and poly-culture farming. The unit cost of production is expected to decrease further as a result of ongoing consolidation among Chinese tilapia producers. This presents international seafood companies with the opportunity for vertical integration, in order to ensure steady supply and constant quality.
• Increasing demand for tilapia, especially tilapia fillet, in the world market encourages further growth of tilapia exports from China. This gives rise to opportunities in the tilapia processing sector. In addition, the relatively low cost of labour in China constitutes a major advantages in the labour intensive processing business.
40
Glitnir Seafood Industry Report - China
in cooperation with
Glitnir Seafood Stockwatch (1) in million USD Company
Ticker
2006
52 w change
In local currency
Country
Aker Seafoods
AKS.NO
Norway
Alfesca hf. (form. SIF hf.)
A.IR
Iceland
Asian Seafoods Coldstorage PCL
ASIAN.TB
Thailand
Austevoll Seafood ASA
AUSS.NO
Norway
Austral Group SA
AUST/C.PE
Peru
Bahtera Adimina Samudra Tbk PT
BASS.IJ
Indonesia
Cermaq
CEQ.NO
Norway
China Fishery Group Ltd.
CFG SP
Clearwater Seafoods Income Fund
CLR-U CN
CNFC Overseas Fishery Co Connor Bros. Income Fund
M.cap Revenues 218 350
EV/ EBITDA 13.7
P/E 39.5
Price 52 w high 30.0 47.0
52 w low 24.3
-18.70
421
700
n/a
n/a
4.9
5.2
3.5
8.95
30
141
20.3
22.1
3.1
5.1
2.4
-36.10
1,040
n/a
n/a
n/a
39.0
44.0
35.0
n/a
149
118
9.8
n/a
0.3
1.2
0.1
126.36
n/a
2,146
n/a
n/a
n/a
n/a
n/a
n/a
1,066
803
5.7
6.8
77.0
99.0
44.0
75.00
China
704
91
19.4
19.3
3.1
3.7
1.3
n/a
Canada
140
0
23.0
9.2
5.4
5.7
3.4
36.48
000798.CH
China
119
19
nmf
nmf
3.0
3.1
1.9
31.31
CBF.UN
Canada
513
881
9.4
10.6
11.2
12.5
8.9
-5.09
Daerim Corp
003960.KS
S-Korea
142
196
n/a
11.9
25,750.0
45,850.0
15,700.0
34.12
Domstein ASA
DOM.NO
Norway
54
259
n/a
n/a
5.2
7.9
5.0
-11.03
Empresa Pesquera Eperva S.A.
EPERV.CI
Chile
166
21
n/a
30.6
280.0
307.0
249.0
3.70
Fishery Products International (FPI) Ltd
FPL.CN
Canada
71
743
12.7
n/a
5.5
6.8
4.1
-16.03
Fleury Michon
FLE.FP
France
283
535
5.2
15.0
44.0
51.0
39.4
8.67
Frosta
NLM.GR
Germany
121
339
5.5
11.4
15.2
17.1
11.5
16.92
Guangdong Hualong Groups Ltd Co
600242.SS
China
46
1
n/a
n/a
2.1
2.4
1.4
0.48
Hainan Huandao Industry Co
000691.SS
China
76
27
n/a
49.3
2.3
3.7
1.3
28.73
Hansung Enterprise Co
003680.KS
S-Korea
36
152
n/a
n/a
6,650.0
9,640.0
4,820.0
-29.63
Hanwa Co., Ltd.
8078.JP
Japan
771
9,057
10.5
9.3
432.0
552.0
403.0
-0.92
HB Grandi HF
GRND.IR
Iceland
300
159
18.0
n/a
12.0
12.3
9.2
28.50
High Liner Foods Inc
HLF.CN
Canada
81
232
17.3
n/a
8.9
9.8
8.1
-10.15
Icelandic Group PLC
IG.IR
Iceland
340
1,515
15.0
23.9
8.0
9.8
7.4
-15.79
Kyokuyo Co Ltd
1301.JP
Japan
231
1,205
19.0
17.0
251.0
343.0
237.0
-5.99
Leroy Seafood Group ASA
LSG.NO
Norway
666
601
6.1
7.0
104.0
133.0
49.6
105.94
Nichirei Corp.
2871.JP
Japan
1,637
131
34.1
75.8
625.0
666.0
477.0
24.50 41
Glitnir Seafood Industry Report - China
in cooperation with
Glitnir Seafood Stockwatch (2) in million USD Company Nichiro Corp Nippon Suisan Kaisha Ltd Niraeus Oceana Group Ltd Oyang Fisheries Co Pacific Andes PAN Fish ASA Pescanova SA Pesquera Iquique-Guanaye S.A. (Igemar) Pesquera Itata SA Sajo Industries Co Ltd Sanford Ltd. Saudi Fisheries Company Selonda Aquaculture S.A. Sociedad Pesquera Coloso S.A. Tassal Group Thai Union Frozen Foods Group
Ticker 1331.JP 1332.JP NIR.GA OCE.SJ 006090.KS 1174.HK PAN.NO PVA.SM IQUIQUE.CI ITATA.CI 007160.KS SAN.NZ 6050.SE SELO.GA COLOSO.CI TGR.AU TUF.TB
2006
52 w change
In local currency
Country Japan Japan Greece S-Africa S-Korea Hong Kong Norway Spain Chile Chile S-Korea New Zealand Saudi Arabia Greece Chile Australia Thailand
M.cap 274 1,460 199 254 33 218 2,848 432 274 232 45 293 694 100 335 141 605
Revenues EV/ EBITDA 1,409 37.8 2,796 n/a 79 11.8 342 n/a 111 n/a 791 8.3 295 14.0 1,261 9.9 72 n/a 87 7.5 520 n/a 245 14.6 21 n/a 49 12.9 144 11.2 94 17.0 1,443 10.1
P/E nmf 34.8 12.5 14.7 n/a 7.7 19.7 18.9 20.2 19.7 n/a 14.6 n/a 8.8 15.4 17.5 11.9
Price 198.0 625.0 3.9 1,650.0 11,200.0 1.4 5.5 26.3 40.0 200.0 8,570.0 4.7 130.0 2.7 901.0 1.6 25.8
52 w high 346.0 727.0 4.3 1,700.0 15,700.0 2.0 7.7 32.0 40.0 200.1 10,100.0 5.2 430.0 2.9 901.1 1.7 32.0
52 w low 190.0 418.0 1.7 1,400.0 9,130.0 1.3 1.7 21.5 23.8 131.0 4,920.0 3.7 24.3 1.1 635.0 1.0 22.0
-24.43 42.05 86.60 13.79 -26.32 11.02 219.19 4.20 0.25 49.14 -7.95 11.43 171.64 111.72 28.90 66.16 -13.45
Tipiak SA
TIPI.FP
France
88
157
8.3
15.3
79.8
84.0
69.9
0.63
United Fisheries Of Kuwait Uoriki Co., Ltd. Vinnslustodin HF Yokohama Gyorui Co., Ltd.
FISH.KK 7596.JP VNST.IR 7443.JQ
Kuwait Japan Iceland Japan
202 174 104 27
19 201 65 351
n/a 6.6 9.6 n/a
4.1 23.2 40.9 nmf
380.0 1,410.0 4.5 505.0
770.0 1,570.0 4.6 609.0
250.0 1,216.0 3.8 450.0
-11.63 15.29 5.88 7.45
13,7
20,0
Average
24,8
Sources: Bloomberg, individual Stock Exchanges, Annual and Quarterly Reports Revenues and EBITDA figures for the Norwegian and Icelandic companies are calculated estimates for the year 2006. Companies ranked alphabetically. Date as of October 23, 2006, "nmf" = not meaningful, "n/a" = not available. Disclaimer: The companies on the list have been selected randomly. Glitnir banki hf. hereby disclaims liability and does not accept any responsibility for such information or is giving any advice in relation to investments in the companies.
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Glitnir Seafood Industry Report - China
About Glitnir Glitnir’s total loan portfolio USD18.5bn *
• Home markets are Iceland and Norway. • Focus on niche segments worldwide. – Seafood / Food Industry – Sustainable Energy – Shipping - Offshore Supply Vessels • Strong focus on the seafood industry since 1904.
Manf. Commerce Other 3% 5% constr. 8%
Seafood 10%
• Today 10% of the bank’s loan portfolio is in the seafood
Property companies 30%
industry.
• Credit ratings: A1 / P-1 (Moody’s), A / F1 (Fitch) and A-/A-2 (Standard and Poor’s)
Services 20%
Households 24%
Services include: Credit facilities – Term loan facilities – Working capital facilities – Syndicated loans – Vessel financing – Bridge loans
* as of December 31, 2005
Capital Markets – – – –
Bond issuances FX dealings Forward contracts Options
Mergers & acquisitions – – – – – – –
Financial advisory Acquisitions Disposals Minority investments MBOs / LBOs / MBIs Private Placements Strategic reviews
Other services – Risk management advisory – Equity participation
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Glitnir Seafood Industry Report - China
Glitnir’s International Platform Luxembourg
United Kingdom London Branch
• • •
41 Lothbury, London City
• •
• •
Corporate Finance Centre of Excellence
• •
Corporate Banking Centre of Excellence •
•
Food industry
Leveraged Finance Corporate Finance
Real Estate Private Banking
Structured Finance Loan Syndication 534 Rue de Neudorf, Lux.
Norway
BNbank: Munkegata 21, Trondheim Dronningens gate 40, Oslo Glitnir Bank: St. Olavsplass 1, Alesund Glitnir Securities: Haakon VII’s gate 10, Oslo
Copenhagen Branch
Glitnir Luxembourg
Corporate Banking
•
Denmark
BNbank • Corporate and retail mortgage Glitnir Bank • Full service bank, trad. indust. • Centre of Excellence • Shipping/ Offshore supply vessels • Subsidiaries: • Glitnir Factoring Glitnir Securities Union Group Norsk Privatøkonomi ASA
Frederiksgade 19, Copenhagen
Canada
Iceland
Kirkjusandur, Reykjavik
Headquarters
Glitnir Canada
• •
Corporate Banking
Representative Office Halifax
Centres of Excellence
•
• • •
•
Global seafood
•
Sustainable energy
•
International core customers
1718 Argyle Street, Halifax
Structured Finance Capital Markets Corporate Finance
China Glitnir China
Sweden
Representative Office Shanghai
•
Fischer Partners
•
Hovslagargatan, Stockholm
Opened April 2006
Opening Fall 2006
Equity Trading & Brokerage
Level 8, CitiGroup Tower 33, Hua Yuan Shai Qiao Road Pudong, Shanghai
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Glitnir Seafood Industry Report - China
Glitnir Seafood Team Websites:
www.glitnir.is/Seafood
Global Seafood Stockwatch:
www.glitnir.is/Stockwatch
Management:
Analysts:
Magnús Bjarnason Managing Director Region Asia & Americas Direct line: +354 440 4523 Mobile: +354 844 4523 [email protected]
Helgi Anton Eiríksson Global Seafood Director
Ásmundur Gíslason Direct line: +354 440 4768 Mobile: +354 844 4768 [email protected]
Alexander Richter Direct line: +354 440 4766 Mobile: +354 844 4766 [email protected]
Valdimar Halldórsson Direct line: +354 440 4638 Mobile: +354 844 4638 [email protected]
Henning Lund Direct line: +47 22 01 63 47 Mobile: +47 952 55 839 [email protected]
Direct line: +354 440 4518 Mobile: +354 844 4518 [email protected]
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Glitnir Seafood Industry Report - China
Glitnir Seafood – Regional Teams North America Jonathan Logan Executive Director North America US: +1 (203) 979 5275 (cell) Iceland: +354 844 4521 (cell) [email protected]
Joe Fillmore Director Canada phone: +1 (902) 429 3114 mobile: +1 (902) 237 2114 [email protected]
Hjálmur Nordal Director Canada phone: +1 (902) 429 3113 mobile: +1 (902) 237 2112 [email protected]
Michael Richard Director United States
Kristján Th. Davídsson Managing Director Corporate Banking, Iceland Direct line: +354 440 4517 Mobile: +354 844 4517 [email protected]
Ola Övrelid Bank Executive | Glitnir Bank Seafood Credit, Norway phone: +47 7010 2026 mobile: +47 9133 6733 [email protected]
Hafliði Sævarsson Analyst Glitnir Representative Office China Direct line: +86 21 6101 0191 Mobile: +354 844 4569
Bjartur Logi Ye Shen Analyst Glitnir Corporate Banking Direct line: +354 440 4560 Mobile: +354 844 4560 [email protected]
mobile: +1 (508) 878 0171 [email protected]
Europe/ Nordic Kjartan Ólafsson Director Glitnir Bank Direct line: +47 7010 2015 Mobile: +47 9592 6015 [email protected]
Ragnar Gudjónsson Director Corporate Banking, Iceland Direct line: +354 440 4550 Mobile: +354 844 4550 [email protected]
Asia Jiang Zhu Director Glitnir Representative Office China Direct line: +86 21 6101 0190 Mobile: +86 139 0161 1875 [email protected]
Grace Liu Executive Assistant Glitnir Representative Office China Direct line: +86 21 6101 0191 Mobile: +86 136 6166 1660 [email protected]
[email protected]
South America Jón Gardar Gudmundsson Director Business Management Direct line: +354 440 4516 Mobile: +354 844 4516 [email protected]
Greta Marín Pálmadóttir Administrative Assistant Corporate Banking Direct line: +354 440 4746 Mobile: +354 844 4746 [email protected]
Anna Rósa Róbertsdóttir Analyst Corporate Banking Direct line: +354 440 4554 Mobile: +354 844 4554 [email protected]
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Glitnir Seafood Industry Report - China
Glitnir Seafood Team – Other Members Timothy H. Spanos Director International Corporate Banking Direct line: +354 440 4777 Mobile: +354 844 4777 [email protected]
Tim Owen Executive Director Head of Corporate Finance, UK Direct line: +44(0) 20 7710 9130 Mobile: +44(0) 7843 512 092 [email protected]
Gudmundur Ragnarsson Senior Manager Corporate Banking, Iceland Direct line: +354 440 4547 Mobile: +354 844 4547 [email protected]
Gísli Sigurgeirsson Senior Manager International Corporate Banking Direct line: +354 440 4765 Mobile: +354 844 4765 [email protected]
Atli Rafn Björnsson Associate Corporate Finance, UK Direct line: +44(0) 20 7710 9135 Mobile: +44(0) 788 798 2201 [email protected]
Eiríkur R. Eiríksson Senior Manager Corporate Risk Advisory Direct line: +354 440 4565 Mobile: +354 844 4565 [email protected]
Hjörtur Thor Steindorsson Credit Manager International Corporate Banking Direct line: +354 440 4503 Mobile: +354 844 4503 [email protected]
Kyrre Dale Credit Manager | Glitnir Bank Seafood Credit, Norway Direct line: +47 7011 2034 Mobile: +47 9137 6551 [email protected]
Ingi Rafnar Júlíusson Executive Director Capital Markets Direct line: +354 440 4459 Mobile: +354 844 4459 [email protected]
Snorri Arnar Vidarsson Credit Manager International Corporate Banking Direct line: +354 440 4771 Mobile: +354 844 4771 [email protected]
Rúnar Jónsson FX Brokerage Capital Markets Direct line: +354 440 4489 Mobile: +354 844 4489 [email protected]
Stefán Eiríks Stefánsson FX Brokerage Capital Markets Direct line: +354 440 4483 Mobile: +354 844 4483 [email protected] 47
Glitnir Seafood Industry Report - China
Legal Disclaimer All opinions and analyses represent the views of Glitnir at the time of writing and are subject to change without notice. Glitnir and its employees cannot be held responsible for any trading conducted on the basis of the information and views presented here. Glitnir may at any time have vested interests in individual companies, for example as an investor, creditor or service provider, but its opinions and analyses are produced independently by Glitnir Region Asia & Americas, based on publicly available information on the company in question.
This Seafood Industry Report is written by Ásmundur Gíslason – Glitnir – Region Asia & Americas [email protected] Bjartur Logi Ye Shen – Glitnir – Region Asia & Americas [email protected] Valdimar Halldórsson – Glitnir – Research [email protected]
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www.glitnir.is/seafood
