By Keith Norbury
As China’s economy grows and its people become more affluent, it opens up the prospect of exporting more premium products to China, such as lobsters and boats. Signs of that have already occurred with respect to the trade in live Canadian lobsters.
The boats have been slower to catch on with Chinese consumers. “Canadian lobster exports (to China) have grown exponentially in the last five years from very, very humble beginnings to where it is now a substantial part of the market,” said Stewart Lamont, managing director of Tangier Lobster Company Ltd. about 90 kilometres Northeast of Halifax. “The stars have lined up in terms of making China an ideal export market.” One of those stars is the growing urban middle class in China that is becoming increasing familiar with luxury products in the West and has the money to buy them. “They can go on the Internet and find out about Louis Vuitton leather luggage and Canadian hardshell lobster,” Mr. Lamont said. Another factor is a lobster glut in the Maritimes, which has depressed lobster prices and helped turn that growing Chinese market into an industry saviour. That surfeit of lobsters, which Mr. Lamont correlates with diminished stocks of cod to gobble up juvenile lobsters, has driven lobster prices as low as $3 a pound, the Globe and Mail reported in December. By comparison, the price of Canadian lobster delivered to China is fetching from $7 to $15 a pound “relative to supply and market conditions throughout the year,” Mr. Lamont said. He sees potential for those prices to go even higher. The lobster of choice in China is Australian rock lobster, which fetches $35 to $40 a pound, but is in short supply because of over-harvesting. “What we have to do is educate the Chinese market so that they realize that our Canadian lobster is every bit as good as Australian lobster, and we can sell it at price points that approach the Australian model,” Mr. Lamont said.
According to Industry Canada’s Trade Data Online, the four Atlantic provinces exported $31.6 million of live lobster to China in 2012. (Actually, the category was lobsters that weren’t prepared, preserved or frozen, which would appear to leave just live lobsters.) That was up from $21.6 million in 2011, $7.5 million in 2010, and just $789,000 in 2007. The 2012 figure was still only a little over 10 per cent of the $272.6 million of live Maritimes lobster sold to the U.S.
Potential encourages B.C. boat builder
But, as Michael Burt, Director of the Conference Board of Canada’s industrial economic trends team, pointed out: China has 1.3 billion people. “Even if only 20 per cent of the population is wealthy enough to buy luxuries, that’s still 250 million 300 million people, which is (almost) the population of the United States,” Mr. Burt said. “So there are definitely opportunities there.”
Brock Elliott, President of Campion Marine Inc., a Kelowna, B.C. manufacturer of speed boats and other pleasure crafts, saw such an opportunity when he and his wife, Leona, visited a boat show in Shanghai three years ago. Mr. Elliott was encouraged enough by the market potential that the company reached an agreement with a local business person in Tianjin to become Campion’s dealer-distributor for Northern China. At last count, Campion had shipped nine boats to the dealership, which had sold seven of them.
“It’s going OK,” Mr. Elliott said. “But it’s still slow over there as far as boating is concerned. Recreation is new to them.” During their trip to China, they visited seven marinas that were either under construction or being developed with what he described as first-class docks, slips, breakwaters and other facilities. Most of them are now completed but still lacking boats.
Many of the country’s prime waterways are also off-limits to recreational boating because they are reserved for military reasons or commercial fishing. It was only recently that all of the waters surrounding the sub-tropical island of Hainan were opened to pleasure boats. “So that was big news,” Mr. Elliott said. Campion ships its boats to China the same was as it does to any other country overseas. Smaller boats are placed in 40-foot high-cube containers while larger ones are put on flat racks. “It’s very inexpensive for us to ship to China,” Mr. Elliott said, noting Kelowna’s proximity to Canada’s West Coast, which is about 400 kilometres away.
Protein exports to China nearly double in 2012
Another sign of increasing Chinese affluence is an appetite for protein, and not just lobster. Agriculture and Agri-Food Canada reported that Canadian agri-food and seafood exports to China increased 76 per cent in 2012, to $5.4 billion from $3.06 billion in 2011. Since 2008, when those food exports to China totaled $1.8 billion, the average annual increase has been 31.7 per cent. That compares with an average annual increase overall in that period of 2.7 per cent, and of just 1.4 per cent for such exports to the U.S. “What you tend to see when people become wealthy is they move away from subsistence diets, basic staples and grains, toward more protein-based diets. That generally means more meat,” said Mr. Burt, who was the lead author of a December 2012 report titled, Walking the Silk Road: Understanding Canada’s Changing Trade Patterns. That trend is most evident in the increasing demand in China for Canadian pork. In 2012, Canada exported 139,000 tonnes of pork, worth a total of $240 million to China, said Martin Charron, Vice-President for Trade Promotion and Market Development with Canada Pork International, a non-profit market-development agency for Canada’s pork industry. That was an increase of 13.6 per cent in value and 10.3 per cent in volume over 2011. The 2011 growth was far less dramatic than growth in the previous two years. In 2010, Canadian pork exports to China totaled $68 million. In 2009, they were just $38 million.
China is already the world’s largest pork producer. That means any dip in Chinese production could create a large of volume of demand that Canada can help fill. “We certainly hope this trend will continue,” said Mr. Charron, who used to work for the Canadian embassy in Beijing for years and also worked in Hong Kong and Taiwan. In total, he spent about 15 years in “greater” China. “The indication we have from various consultants working for the pork industry is that China will remain an import market for the foreseeable future.”
China freezes out fresh pork imports
All but a fraction of Canadian pork exported to China is shipped frozen. That’s because Chinese regulations require pork to be detained for 14 days for testing. Add that two-week detention period to an ocean voyage of similar length, plus time to transport the pork over land, and that makes fresh Canadian pork “a non-viable option” for the Chinese market, Mr. Charron said. “Obviously we’re not going to get it tomorrow, I can promise you that, but we would like eventually to see that rule being changed,” Mr. Charron said. He attributes the stringent import rules to the Chinese government “trying to play it very safe” in the wake of several food scandals in recent years, such as the tainted baby formula incident of 2008.
About half of Canada’s pork exports to China are offals, such as pig ears and snouts, which would be too costly to ship fresh in any event. Chinese demand for those parts, however, is valuable to Canada’s pork industry. “You can extract commercial value of bits and pieces of the pigs that otherwise you would be sending to make bonemeal with,” Mr. Charron said. “What is important about keeping access to all markets for us in the pork industry is that you’re able to extract the best price that you can for every piece of the pig at every time of the year.”
In February 2011, Canadian pork was shipped fresh to China for a dinner hosted by Prime Minister Stephen Harper during a trade mission to that country. But that was an exceptional case, Mr. Charron said. “Believe me, at the price per pound that would make it quite expensive. But we were dealing with an exceptionally important case to raise the visibility of Canadian pork in China,” Mr. Charron said. “If it’s good enough for the Prime Minister to serve it, it must be good enough for the people over there to eat it.”
Canada even exports some live pigs to China for use in breeding. These are even more valuable than fresh pork. They also give meaning to the expression “flying pigs,” in that as many as 842 can be transported at a time on a Boeing 747. “That pig, by the time it has flown across the ocean on a plane, you don’t kill it to make bacon,” Mr. Charron said.
Hopes high for greater beef exports to China
Canadian beef and veal exports to China are much smaller than pork exports. In fact, they tallied zero in 2011, according to Canadian Meat Council figures. Those exports soared to $4.65 million in 2012, placing China seventh among Canada’s beef and veal export markets. (It bears noting that meat exports to Hong Kong are tallied separately. Hong Kong was Canada’s fourth largest export market for beef and veal in 2012, at $78.75 million, which was down from $91.91 million in 2011.) “In the case of beef we don’t export very much to China,” said Ron Davidson, Director of Government and Media Relations for the Canadian Meat Council. “It’s essentially frozen boneless cuts.”
On the bright side, the federal government announced in January that four more Canadian meat-packing plants had been added to the list of those eligible to export to China. Seven plants, representing 90 per cent of the country’s beef-processing capacity, are now approved, said a news release from the Meat Council. “That was a significant achievement,” Mr. Davidson said, noting that it was an outcome of the Prime Minister’s trade mission to China last February.
It is hoped that the approvals will ramp up beef exports to China. However, one wrinkle is that China — like Russia and the European Union – doesn’t accept beef containing ractopamine, a feed additive used by many Canadian farmers to produce leaner animals. The Chinese also have specific labeling and packaging requirements that create grief for Canadian meat packers. “It’s an additional requirement which really requires a segregated production line or doing something specific,” Mr. Davidson said. “The more of that kind of thing you have to do, the more money it costs.”