Additional reporting by Oriana Aguillon

Argentina’s red shrimp industry has been a gold rush, but -- for the first time -- vessel operators are dealing with adverse biological conditions and a sluggish Chinese market. 

Argentina’s fisheries ministry delayed the start of the on-board frozen fishing season from mid-May to mid-June as biomass samples showed a lack of maturity. The delay in the season may help the industry as the Chinese market continues to be weak, according to traders who spoke to Undercurrent News. 

Red shrimp prices have slumped by more than 15% compared with a year ago as importers still hold unsold inventory from the 2018 season. The market for Argentina’s wild-caught shrimp has been affected to some degree by a glut of supply in farmed shrimp in China, traders said. 

“There’s been a slight drop [in prices] caused by surplus stock from the previous season, in addition to the oversupply from aquaculture,” one trader (source A) told Undercurrent. “The most affected are the frozen on-board vessels.”  

Most of Argentina’s on-board produce is sold frozen head-on, shell-on -- or HOSO -- to the Chinese and European markets. The fishing season stretches from mid-May to October in a normal year. Shrimp frozen on land, which tends to be sold as tails, is selling into a more positive market, especially as demand from the US has improved, a second trader (source B) said. 

Source A said prices for the L1 size shrimp have dropped to $6.90, while a second source quoted prices for this size between $6.75/kg and $6.90/kg on a cost and freight (CFR) basis. Prices traded in excess of $8.30/kg in the first half of August 2018. 

CFR prices traded at $6.05/kg for the L2 size category, both sources told Undercurrent. That compares with about $7.40/kg a year ago. No prices for L3 are available as the size is largely absent from the market. 

Another major challenge in the 2019 season is the threat that a lack of availability of shrimp will force authorities to shut down the season earlier than expected, a third trader (source C) said. The early closure of the season would potentially end a decade of almost uninterrupted growth in the Argentine red shrimp sector. 

Landings have surged from about 64,693 metric tons in 2009 to a record 253,255t in 2018, according to government data. 

The delay in the season pushes importers closer to two major Chinese events that tend to spur sales of Argentine shrimp: the so-called Singles Day or Guanggun Jie, and New Year, that will be celebrated Jan. 20. Singles Day, a celebration of being single -- to be held on Nov. 11 in 2019 -- spurs massive online shopping sales in China. Alibaba sold more than $25 billion of merchandise on the day in 2017, while Argentine shrimp stocks tend to run out in hours during the event. 

Argentine exports for this event need to be imminent, because the shipping time from Argentina to China is at least 60 days, one trader said. That said, Chinese importers will first run down existing inventory before buying new supply, source C said. 

"There is still stock from the 2018 season in China," source C said. "How much? That's the key question." 

Argentina’s exporters then travel in late October to the China Fisheries & Seafood Expo in Qingdao, where they typically close out terms for the Chinese New Year season. Talks to sell produce for the Chinese New Year usually begin in September. 

Argentine red shrimp is suffering from the popularity, and oversupply, of Ecuadorian shrimp in the Chinese market. Ecuador’s shrimp exports surged 26% in the first half the year to more than 300,000t, a record, according to the latest trade data. Ecuador’s direct exports to China more than tripled to 139,512t, partly as China cracked down on a smuggling route through northern Vietnam. The global farmed shrimp glut also affected prices, with the average kilo sold dropping 12% to $5.66. 

The delay to the Argentine fishing season might allow shrimp to grow to larger sizes before being caught, source B said. Even though the fishing season is at a halfway point, deals are only just beginning to be negotiated with Chinese importers, they said [...]