Market supply and demand

Supply: 'Bijiang', the first bulk fishmeal vessel from Peru's new fishing season, arrived at Shanghai port with about 12,800 tonnes of fishmeal in the past week. The pace of decline in port inventories has slowed due to fewer fishmeal departures lately. According to official statistics, fishmeal inventories at major Chinese ports totalled about 102,750 tonnes (excluding new bulk fishmeal arrivals) at the end of the week, down 5.7 percent from the previous week.

Demand: Fishmeal departure volume from major Chinese ports fell significantly in the first week of this year due to fewer spot fishmeal transactions. At only 6,200 tonnes, the departure volume was about 59.1 percent lower compared with the previous week.

Overseas market

Peruvian fishmeal prices continued to edge higher lately due to tight supplies. FAS and FOB offer prices for FAQ fishmeal were in the range of US$690-700/tonne and US$700-710/tonne respectively, up slightly from the previous week. Offer prices for Peruvian FAQ fishmeal (64 to 67 percent protein content) were in the range of US$740-755/tonne recently, while some importers continued to suspend their price quotes.

Outlook analysis

Fishmeal prices in China surged after New Year's Day, with prices at ports rising by RMB100-200/tonne within two to three days. This was mainly due to the following:

Transacted prices for some of the new fishmeal arrivals from 'Bijiang' were already in the range of RMB6,400-6,450/tonne, which lent support to prices of existing port inventories. Consequently, importers were less inclined to release their stocks in anticipation of further gains amid stronger bullish sentiments. Several importers holding spot fishmeal inventories have even suspended their quotes and sales lately.

Outside China, stronger CNF prices have lent support to fishmeal prices in China. A pick up in demand for Peruvian fishmeal from regions including East Asia and Europe, as well as tight spot supplies, have caused Peruvian fishmeal prices to edge higher lately. Continually high import costs, coupled with limited fishmeal arrivals expected in the near term, have intensified concerns over long-term fishmeal supplies in China.

Spot fishmeal inventories at Chinese ports have already fallen to an acceptable level of about 100,000 tonnes lately, which significantly eased selling pressures of importers. Some small- and medium-sized importers have even run out of stocks, which lent support to fishmeal prices in China.

After experiencing continued losses during the earlier period (around November 2005), many importers hoped to leverage on the recent rise in fishmeal prices to make further gains. This also lent support to fishmeal prices in China. In light of strong CNF prices, expected increases in near-term import costs and a pick up in demand seen in the run up to Chinese New Year in late January, fishmeal prices in China are expected to be stable to marginally higher in the week ahead. The fishmeal arrival situation, competitive activity of importers and Peru's fishmeal market movements are seen to determine market direction in China.