After its inclusion in the latest USD 200 billion dollar list of tariffs put forward by the US President Trump’s administration, tilapia from China has been subject to a 10 percent duty as of 24 September, rising to 25 percent in January 2019. The US market for tilapia is the largest in the world and China is the largest supplier, so the implications for the wider market are potentially significant.

Global tilapia production is expected to rise 3–4 percent in 2018, reaching around 6.3 million tonnes. Around 30 percent of this volume comes from China, although the majority of production growth is concentrated in smaller producing countries. Ongoing private and public investment into tilapia aquaculture in Latin America and Africa is expected to see this trend continue in the future. The relative importance of the large traditional players is also diminishing on the market side as tilapia consumption is declining in the United States of America and demand becomes more geographically diversified. Consumer appetite for the species in markets such as Mexico, Saudi Arabia, Canada, Côte d’Ivoire and the Russian Federation, is driving an increasing proportion of international trade.

Global tilapia prices have been declining steadily since early 2015 as the US market has faltered. However, the additional demand from emerging markets has been helping to hold tilapia prices marginally above last year’s levels so far in 2018, despite the disruption resulting from the imposition of the new tariff regime in the United States of America. The price of frozen whole tilapia imports into the United States of America averaged USD 1.81 per kg (CIF) in the first 6 months of the year, compared with USD 1.70 in the same period in 2017, while prices for frozen fillet were flat at USD 3.40 per kg (CIF). Prices for fresh tilapia fillet in the United States of America were up around 2 percent for the same period, to USD 6.63 per kg (CIF), compared to last year.

Asia

A survey of Global Aquaculture Alliance members estimated China’s total tilapia production at 1.75 million tonnes in 2018, approximately on par with 2017. China’s dependence on the US market continues to decline. In the first quarter of 2018, volumes destined to the United States of America accounted for around 33 percent of the total value of Chinese tilapia exports. This proportion has been steadily decreasing since 2015, when it was around 50 percent. A weaker yuan in the second half of 2018 is unlikely to prevent a further drop in volumes directed to the United States of America resulting from the tariffs that Chinese exporters must now contend with. Markets in Latin America, Africa and the Middle East are now absorbing a higher share of Chinese production. Higher wages and increased domestic production are also contributing to an overall drop in Chinese export volume while a reduction in export subsidies is also having an effect. Exporters in China benefit from VAT rebates (VAT paid in production, distribution and sales) for exported products including tilapia, and a reduction in VAT rates in May this year equates to a reduction in these rebates.

Meanwhile, Indonesia is expected to see a small decline in production volumes in 2018, to around 830?000 tonnes, the vast majority of which will be sold on the domestic market. Smaller Asian producers such as Viet Nam, the Philippines, Thailand and India are expected to register a net increase in harvests.

United States of America

The major concern for tilapia importers in the United States of America at present is how consumers will react as tariff costs are passed down the supply chain. Demand amongst US consumers has been suffering in recent years due to negative public perception of the species and the market is unlikely to react well to a price hike. While frozen tilapia from China still constitutes a major proportion of US imports of tilapia, there is a growing number of alternatives for US buyers. Taiwan Province of China and Indonesia supply frozen tilapia, while premium fresh fillets are provided by Honduras, Colombia and Costa Rica. The US market already absorbs the vast majority of the production from these countries and it seems that some price increase at the consumer level as a result of the tariffs cannot be avoided. While this effect may be dampened by the high price of directly competing products such as pangasius, there is a threshold where consumers will shift to alternative proteins such as chicken.

Latin America

Tilapia production continues to increase in Latin American countries. Tilapia ranks second in terms of the number of aquaculture establishments in Brazil, according to preliminary data from the survey of the Brazilian Institute of Geography and Statistics (IBGE). There are 110?072 sites in total, concentrated in particular in the South (55.6 percent) and Southeast (23 percent). Tilapia is the most commercialized aquacultured species and the potential offered by plentiful water resources in Brazil has seen it grow to become the fourth largest producer globally.

Colombia surpassed Honduras and became the main supplier of fresh fillets to the United States of America. According to the National Oceanic and Atmospheric Administration (NOAA), Honduras exported USD 24.1 million to the United States of America between January and June of this year, 9 percent less compared to the same period of last year. The Colombian Ministry of Agriculture is actively promoting tilapia internationally and sales abroad rose 37.6 percent over this period. In Honduras, lower rainfall has created favourable conditions for tilapia production, both for domestic consumption and export. The Honduran industry is targeting tilapia exports worth USD 50 million in 2018.

Aquaculture production in Mexico is growing at a rate of 13 percent per year, well above the worldwide average rate of 6 percent, according to the National Commission of Aquaculture and Fisheries (CONAPESCA). Half of the 9?000 aquaculture sites operating in Mexico are tilapia farms. Nevertheless, local producers are concerned about the “unfair competition” represented by the imported product from China. While Mexican tilapia is sold in the market at 60 pesos per kg, the imported product is sold at 40 pesos per kg, and according to farmers glazing exceeds 30 percent.

European Union (Member Organization)

The EU28 market for tilapia continues stagnant and a stronger euro versus the yuan has failed to stimulate importer demand. Total EU28 imports in the first half of 2018 were 6 percent less than in the same period in 2017, even as average euro prices of those imports fell by 8 percent. The majority of tilapia sold in the EU28 is cheaper frozen tilapia from China, but some retailers have turned to premium tilapia products in order to try to regain some of the market.

Outlook

Tilapia trade between China and the United States of America picked up sharply since mid-2018, the peak production season in China, as exporters scrambled to ship volumes before the effective dates of the new tariffs (6 July). After the new regime of further tariff increases comes into force in September and January, however, US imports will likely fall back and resume their declining trend, while the Chinese industry will increase its focus on alternative markets and domestic consumption. Any other producers not already entirely dependent on the United States of America will see this as an opportunity. Meanwhile, upward trends in production and consumption in emerging economies in Latin America, Africa and Asia will lead overall growth in the sector. Total production growth in the medium term is likely to remain positive but slow compared with the relatively rapid rate of expansion observed in the last five years or so.