Further increases in global production of pangasius are expected this year, led by the dominant supplier, Viet Nam. The near-optimal market conditions of 2018 have deteriorated and prices are now off their recent record heights.

Production

Current estimates for Vietnamese production in 2019 stand at around 1.5 million tonnes of pangasius, although some reports point to a shortage of fingerlings early in the year that could see the figure revised downwards. This follows what was a record year in 2018 for Vietnamese production in terms of harvests, which touched around 1.3 million tonnes. In addition, pangasius farming area and exports reached new records. High price levels throughout 2018 translated into exceptionally good profits for Vietnamese pangasius farmers, serving as a catalyst for widespread investment and expansion projects.

The outlook has worsened in 2019, however, following a steep decline in prices that has continued since the start of the year, and a general increase in production costs.Feed prices are higher, labour shortage has driven up labour costs and the price of electricity, an important consideration for aquaculture operators as well as processors and feed producers, was increased by 8.4 percent in March 2019. These cost increases combined with the sharp price decline in early 2019 pushed some previously profitable producers in the Mekong Delta into the red. In response, industry leaders have called for renewed focus and investment in key areas that will ensure a higher proportion of Viet Nam’s pangasius production meets the quality, food safety and traceability requirements of the more lucrative markets in the EU28 and the United States of America.

Aside from Viet Nam, other pangasius producing countries make up 55 percent of global production, but most of this production is absorbed by domestic markets. Chinese production is still relatively low, but a growing consumer base, currently supplied primarily by Viet Nam, is driving expansion. Some 20 pangasius processing factories are thought to be operating in China as of March 2019, with a production capacity of 30 000 tonnes per year.

Markets

Vietnamese pangasius marketers in the EU28 have been struggling against poor consumer perception in recent years, as well as stringent product requirements and regulatory issues. Despite the challenges, efforts to ensure and communicate the sustainability, quality and safety of Vietnamese pangasius have been met with success in some EU28 markets. Campaigns to establish pangasius fillets as a premium (rather than discount) whitefish option have been particularly effective in the United Kingdom. Meanwhile, while the challenges Viet Nam has encountered in exporting to the United States of America have continued into 2019, the US government has recently purchased large amounts of American catfish to “encourage the continued domestic consumption of these products by diverting them from the normal channels of trade and commerce”. The government placed orders worth USD 2.7 million worth of domestic catfish for child nutrition and other related domestic food assistance programmes. The suppliers will deliver the fish between July and December 2019.

In China, although waning demand has been reported in early 2019, market conditions are more positive from longer term perspective. Import tariffs have been removed on multiple seafood products from Viet Nam, including pangasius and companies have reported increased penetration of fillets as well as whole fish in the Chinese market. Acceptance of highquality pangasius fillets from Viet Nam by Chinese consumers is also allowing Vietnamese suppliers to latch onto the upward trend in online seafood purchases in China.

Trade

According to Viet Nam’s Association of Fish Exporters and Processors (VASEP), Viet Nam exported pangasius worth USD 472 million in the first quarter of 2019, up by 7.8 percent compared with the same period last year. Viet Nam’s exports to both China and the United States of America dropped for the first time in 3 years. The decline in exports to the United States of America was particularly sharp, with year-on-year drops of 22.8 and 44.4 percent in February and March, respectively.

While the recent recognition that control systems of pangasius production in Viet Nam are equivalent to those in the United States of America represents significant progress for the Vietnamese industry, others are now cropping up. In mid-June 2018, the US authorities released their Trafficking in Persons (TIP) report, which saw Viet Nam downgraded to Tier 2 watchlist. A further downgrade to Tier 3 in the future would have significant impact on trade negotiations, international financial assistance and sourcing decisions by US retailers.

In addition, the US Department of Commerce in late April imposed higher anti-dumping taxes than expected on Vietnamese pangasius imports, following the results of the 14th review period. Increases in exports to the EU28 combined with good growth in the Association of Southeast Asian Nations (ASEAN) region and some other markets such as Mexico helped Vietnamese exporters continue their revenue gains in the first three months of 2019, despite the decrease in exports to China and the United States of America. In particular, the United Kingdom has continued a growth trajectory that has seen the value of Viet Nam’s UK-destined exports increase by 800 percent over the last decade or so. Elsewhere in the EU28, however, buyers remain somewhat wary of Vietnamese seafood, in part due to the EU28 authorities’ decision to issue a ‘Yellow Card’ to Viet Nam in October 2017 as a warning to take action on Illegal, Unreported and Unregulated (IUU) fishing.

Prices

Over the first six months of 2019 prices fell by 35 percent compared with the record levels achieved in 2018. Export prices of USD 2.35 (FOB Ho Chi Minh) per kg for fillets were being quoted in mid-June, marking a steep decline from the peak of USD 3.40 per kg reached towards the end of 2018. Most traders have attributed this drop to slowdown in orders from China and the United States of America, combined with the additional supply volumes in 2019.

Outlook

Expectations for any sustained recovery in pangasius prices in the second half of 2019 are limited due to the increased supply volumes and the reduction in purchasing activity in the important Chinese and US markets. Profitability at the farm level will consequently be much reduced. Regulatory obstacles to market access in the EU28 and the United States of America remain a significant challenge to Vietnamese exporters. The expanding Vietnamese industry will continue to pursue a dual strategy of market diversification and investment into infrastructure and institutions that facilitate industry-wide compliance. Ongoing development of markets in the ASEAN bloc and other regions should allow exporters to reduce their dependence on traditional markets, while efforts to improve quality, safety, traceability and supply chain efficiency can be expected to continue.