Ecuador's Position as China's Main Shrimp Exporter to Strengthen with the Signing of New FTA

Frozen Common Shrimp & Prawn

Published May 25, 2023

Ecuador and China signed a new FTA in May, which will gradually reduce the current China tariff for Ecuadorian shrimp from 5% to 0% over a span of 10 years. Ecuadorian-origin shrimp already has one of the lowest import prices in China and the tariff cut is expected to widen this price advantage and further heighten demand for Ecuadorian shrimp.

With the new free-trade agreement (FTA) Ecuador and China signed on May 10, the tariff of Ecuadorian shrimp exports to China will be reduced from the current 5% to 0% over a span of 10 years.

This will further strengthen Ecuador’s position as the main shrimp exporter to China and widen its price advantage compared to other major Asian exporters. Major ASEAN shrimp exporters such as Vietnam and Thailand already have a 0% duty to export shrimp into China. India also has a lower export duty than Ecuador’s current one, at 2.5%. These countries also possess a logistical advantage to export to China relative to Ecuador. However, Ecuador’s shrimp has a lower import price, according to China Customs statistics.

Source: Tridge and China Customs

Ecuador is China’s largest import origin for frozen shrimp. In 2022, China imported frozen shrimp from Ecuador with a total volume of 564 thousand mt worth USD 3.54 billion.This represents 65% of China’s total imports. The import price for this product from Ecuador was USD 6.27/kg, lower than Thailand’s USD 10.13/kg and Vietnam’s USD 6.53/kg. India, which was China’s second largest import origin for this product, had an average import price of USD 6.75/kg. Among major import origins, only Indonesia had a lower price than Ecuador, at USD 5.88/kg. If all else remains constant, Ecuador’s price advantage to export shrimp to China will widen with the ongoing tariff decline from Ecuador.

China is Ecuador’s largest export destination for frozen shrimp. During Q1 2023, Ecuador exported 189.65 thousand mt of shrimp to China, with a total worth of USD 1.00 billion. In terms of volume, Ecuador's exports rose 43% YoY, while in terms of value, exports rose 21% YoY. China's share in Ecuador exports grew from 56% in Q1 2022 to 64% in Q1 2023.

In 2022, Ecuador became the largest shrimp exporter in the world. Shrimp also became Ecuador’s largest non-petroleum export. It exported 1,060 thousand mt with a total worth of USD 6.65 billion. A total of 56% of the exported volume went to China.

Further growth in Chinese demand is bullish for Ecuadorian export prices, but this is to be hampered by further production growth. Ecuadorian shrimp export prices began rising sharply from June 2021 through May 2022 due to global supply chain constrictions and rising demand with the easing of pandemic restrictions. Prices were also affected by global supply disruptions and higher input prices with the start of the Russia-Ukraine conflict. During this period, prices averaged YoY growth of 24% YoY.

However, prices started to ease in H2 2022 and are now declining by 15% YoY in Q1 2023. The decline is more notable since not only current prices are below 2022's high base but also below the 2017-2021 averages. Factors that influenced the decline include considerable easing in supply chain disruptions, high inflation waning global demand for the product, and ongoing production increases. Sharp competition between major exporting countries such as Ecuador and India, and falling prices for inputs such as feed and energy also contributed to the decline.

With Ecuadorian shrimp becoming even cheaper to Chinese consumers due to the tariff reduction from the FTA, the demand for it is expected to grow, which in turn is bullish for Ecuadorian export prices. Nonetheless, as world shrimp supply continues to increase, most of the growth is actually expected to come from Ecuador and the bullish effect derived from higher demand might be more-than-offset.