Lower US duties on shrimp bullish for Ecuador market, but challenges remain: market

Ecuador-based shrimp producers had a mostly bullish market outlook after the US Department of Commerce announced Oct. 22 it would reduce its duties on shrimp imports from the South American country effective Oct. 28, but price negotiations remain difficult, according to market sources.

The US' decision came as a relief to many exporters in Ecuador who have been facing tight margins and lower-than-expected demand in major buying markets, but some sources saw limited upside from to the decision.

"Just because the US reduced shrimp consumption in the past doesn't mean they buy twice as much today," a market source said Oct. 25.

The US Commerce's final decision set duties on shrimp imports from Ecuador at 3.57%-4.41%, having found no dumping rates. The decision, made on Oct. 22, came into effect on Oct. 28 upon publication in the Federal Register.

Previously, a preliminary decision was in place, with the dumping rate set at 10.58% and the duty rate at 2.89% for most Ecuadorian companies.

Ecuador-based exporters considered the new rate "manageable."

“This decision only proves what we have been saying that Ecuador does not engage in dumping practices,” José Antonio Camposano, executive president of Ecuador's national aquaculture association, CNA, said Oct. 23 at the sidelines of Aqua Expo conference in Guayaquil, Ecuador. “We hope the subsidy decision will eventually be re-evaluated [by the US], as in Ecuador there are no subsidies in place."

Since the previous duties were imposed at the end of March, most Ecuador-based exporters had reduced shipments to the US, with exception to shrimp farming company Santa Priscila, as its dumping rate was considered “de minimis,” with the company not subject to a duty.

Demand outlook mixed

The change in US duties follows a period in which the global shrimp market -- and particularly US-based wholesalers -- saw lower supply and higher prices in the middle of the year, when global supply of shrimp was affected by cooler water temperature in Ecuador and the beginning of low season in India. As a result, US-based consumers faced higher prices and low availability.

“Prices increased more to the US than other regions, as no one could fill the gap [created by duties]," an Ecuador-based exporter said.

However, even with the updated duties announced, an exporter said market negotiations were "as tough as ever."

In fact, some US-based importers were asking for discounts on bidding prices, as they can source from multiple companies since the duties decreased, according to a shrimp producer.

Additionally, shrimp exporters have faced limited demand from other buying outlets, such as Europe and China. Demand for Christmas holidays in Europe and for Lunar New Year in China have been weaker than expected, limiting the upside potential for this time of year, several market participants said.

However, other participants expected sellers would have no reason to lower prices in the current season.

“If someone wants shrimp at this time of the year, they will have to pay more,” a market expert said.

The Platts Ecuador Shrimp Marker from S&P Global Commodity Insights stood at $5,650/mt FCA Guayaquil on Oct. 28, steady from the previous day, but $250/mt lower than the Oct. 21 assessment at $5,900/mt FCA Guayaquil on Oct. 21, before the US announced the updated duties.

However, market sources said the decrease had little relation to the update, but rather was caused by lower expectations on year-end sales to Europe.

On the other hand, farmgate prices have continued to rise amid low supply, putting pressure to exporters’ margins. Prices of 30-40 counts/kg head-on, shell-on shrimp were heard up to $4.40/kg in the week ended Oct. 25, compared with around $3.90/kg in early September, sources said.

“The main challenge in shrimp continues to be the market, we need to expand the existing market,” Camposano said. “We must promote shrimp consumption, so more people have access to this product.”