COMMODITIES 2025: Shrimp markets to see uneven recovery in demand

Global shrimp markets are expected to see a gradual and uneven recovery in demand in early 2025, while output is expected to stabilize near current levels, as the sector exits one of the worst periods in history, sources and market experts told S&P Global Commodity Insights.

Asian producers are poised to see gains from a recovery in demand in the United States and Europe, while Ecuadorian shrimp exporters will only partially benefit from that trend as Chinese recovery lags, according to experts.

Current trends in the shrimp industry have roots back in 2023, when western countries saw a contraction in demand, largely due to inflation and lower disposable income, according to Gorjan Nikolik, seafood analyst at Rabobank.

"These regions, which had seen a demand contraction, are now enjoying a recovery in consumption, but not all producers benefit equally from this," Nikolik said.

At the same time, prices have also entered a period of gains, benefiting from the same trend.

India's production challenges

India has two major shrimp cropping patterns in the main producing East Coast states: the dominant summer crop, with harvest in May, and a monsoon crop, with harvest by November.

India's second major crop harvest of 2024 was delayed, and market participants expect the output to be lower than the previous year, due to adverse weather conditions like flood and cyclones in the second half of the year.

According to the Society of Aquaculture Professionals (SAP), India's total shrimp production in 2023 was estimated to be 852,318 mt and the SAP's estimates show a downward trend in production since 2021.

The limited supply in the fourth quarter of 2024 has supported farmgate prices and the trend is likely to continue at least until the first quarter of 2025 or the first major crop of the year. But a persistent uptrend in prices will depend more on global output rather than India's.

"We can't expect any strengthening of shrimp prices in 2025 unless production eases globally," one trader based in Chennai said.

Global supply, in turn, is expected to remain mostly unchanged. Rabobank estimates global farmed shrimp production nearly stable in 2024 and only 2% higher in 2025. After several years reporting 2-digits increases, producers see no more room to grow.

An exporter based in Kochi noted that the relatively low level of inventories in the US after the Thanksgiving holidays, albeit from a subdued baseline, may lead to a gradual recovery in demand next year. "At least the drops (in exports) of this year should be recovered early next year," the source added.

US tariffs are long lasting

The US remains the biggest market for Indian shrimp, as the country has a wide preference for value-added product, in which India and other Asian countries are specialized.

"India has successfully maintained its production levels and gained market share in the US, while competitors like Vietnam and Indonesia have faced significant declines," Nikolik said.

Indian market participants are wary of the increase in import duties by the US. The US Department of Commerce raised the countervailing duty on Indian shrimp exporters to 5.77%, except for two export companies that saw duties fixed at 5.87% and 5.63%, respectively, Oct. 28. The preliminary CVD determination was of 4.36% only. The CVD on Ecuadorian and Indonesian exporters was lowered significantly.

The combined antidumping and countervailing rates established by the US International Trade Commission range from 3.57% to 4.41% for Ecuador, 5.63% to 5.87% for India, 0.20% to 3.90% for Indonesia and 2.84% to 221.82% for Vietnam, and they will remain in effect until at least 2027.

With the new Trump administration, exporters anticipate the tariffs to be maintained in the next revision cycle. In addition to that, Trump has suggested a 10% tariff on all imports into the US, which would result in an estimated cost of $644 million for shrimp importers, assuming 2023 levels, according to Commodity Insights analysts.

"Everybody is under the hammer now," one exporter based in Visakhapatnam said, while adding that they expect the landing prices in the US to remain higher.

"Considering current duties already applied in shrimp, Trump's proposed tariffs would add roughly $400 million in costs for importers," according to Max Bouratoglou, seafood analyst at Commodity Insights.

The higher rates against India should allow Ecuador and Vietnam to increase competition in the US in peeled and deveined shrimp, according to sources.

"Ecuador has been willing to expand value-added output, as it allows producers to be less dependent from China," Nikolik said.

One exporter based in Visakhapatnam noted that the "unit value returns for shrimps exported to US has fallen by 20%-25% over the last four years. This impact is also felt at farmgate level."

China's lagged recovery vs. EU

While the US and Europe have been facing steady demand, in China the opposite situation is seen. Chinese importers overestimated the market recovery after the coronavirus pandemic, leading to overstocking, and high inventories have been hanging in the market until now.

The situation is aggravated by the stagnant performance of the Chinese economy, which has yet to be boosted by government stimulus.

China is the largest consumer of Ecuadorian shrimp, having imported 535,781 mt of shrimp from the country from January to October 2024, down by 10% on the year, according to figures from the National Aquaculture Chamber, CNA. The value corresponds to 54% of total Ecuadorian shrimp exports, of 999,239 mt.

"The Chinese government recently introduced a stimulus package, and the People's Bank of China has cut interest rates to boost consumer demand, which is expected to enhance import levels in 2025," Bouratoglou said.

With Chinese demand now slowed, as Lunar New Year celebrations approach, suppliers are reliant on demand recovery in Europe and other regions.

While shrimp demand in the European Union has been recovering, the improvement has been unequal among sizes and presentations. European market participants saw an increase in demand for value-added products, like peeled and deveined (P&D) shrimp, driven by consumer preferences in Europe.

Looking into early 2025, a rebuild of inventories usually occurs after the New Year's celebrations, with prices expected to follow through. But sources are unsure if the uptrend will last too long, with the demand recovery being subtle.