In the first quarter of 2024, shrimp, cocoa and wood were the products that experienced the largest drop in their exports to the Chinese market.
With US$ 4,799 million in its total non-mining and non-oil exports, in the first quarter of 2024, Ecuador experienced a slight growth of 1% in dollars, but in volume it had a drop of 5%, according to the latest report from the Federation Ecuadorian Association of Exporters (Fedexpor).
The data as of March are known just when the trade agreement between Ecuador and China came into effect - on May 1 - and show the fall of that market from first to third place of destinations for Ecuadorian products, dropping its share from 26% to 16% and receiving US$ 484 million less in exports, dragged down by the drop in shrimp.
This is due to two factors: the suspension of nine Ecuadorian export companies by Chinese customs since February, which is still ongoing, and the slowdown of the Chinese economy, which translates into fewer imports. However, although shrimp represents 84% of Ecuador's total exports to China, there are others that also declined in that market, such as cocoa with a drop of 65% in volume and 24% in foreign currency, and wood and its products. manufacturing with 31% less in dollars and a slight growth of 1% in volume.
These products are part of the five main products exported to China, along with bananas and animal feed, which, on the other hand, showed growth in their exports of 13% and 100%, respectively.
Cocoa shipments fall due to slowdown in the Chinese economy
The president of the board of directors of the National Association of Cocoa Exporters (Anecacao), Iván Ontaneda, recognizes that so far this year cocoa exports to the Chinese market have been low, this after indicating that this destination is not one of the main for the sector, but Europe, the United States and Japan and Indonesia, in Asia.
It confirms that compared to 2023, cocoa shipments decreased, as did shrimp, also as a result of the decline in the Chinese economy.
“We feel that there is a significant inflation that has impacted consumer pockets, not only in China, but also in Europe and the United States. Obviously that has affected people's purchasing power to buy the products that we export,” says Ontaneda.
From January to March, cocoa exports to China only generated US$6 million, while in the first quarter of 2023 the figure reached US$8 million with 100% growth in foreign currency and exported volume.
According to Ontaneda, China is an important and potential market, but in the medium and long term. “We have been growing in that share, although the Chinese market currently does not represent a major demander of cocoa, we believe that in the coming years we will achieve that. The trade agreement will generate better dynamics, we hope that.” Although he warns that in 2024 the high cocoa prices that escalated until weeks ago to US$12,000 per ton - which he attributes to speculation - will generate a drop in consumption, probably of chocolate, in China and other markets.
Currently, cocoa enters China with a tariff of 8% and its gradual reduction to zero tariff will be over a period of five years, that is, it will decrease by 1.6% per year.
What about wood?
In the case of wood, China is one of its main markets, although the first is Colombia. According to Fedexpor, from January to March last Ecuador exported US$18 million in wood and manufactured goods to the Asian giant, which represents 15% of total exports to all its destinations. Meanwhile, in the same period of 2023, shipments to the Asian giant reached US$27 million.
Christian Riofrío, executive director of the Ecuadorian Association of Wood Industries (AIMA), points out that the general drop in the sector in exports, including China and its other markets, is 8.7%. He explains that there are subsectors that have had a less significant fall, but their impact on the total sector is important. Likewise, there are subsectors with very high percentage drops, but that have a low impact on the total sector.
For example, the most exported are boards, which are the most in demand in Colombia and which in the first quarter of 2024 represented 56.13% of the sector's exports with US$ 69.5 million.
It is followed by raft, whose derived products (glued blocks and panels) are the most exported to China, with 32.26% with US$ 39.9 million. Then furniture (2.47%) with US$ 3 million and other products (9.14%) with US$ 11.3 million.
Now, when comparing the figures with those of the first quarter of 2023, it is noted that the export of boards fell by 2%, raft by 12.32%, furniture by 32.20% and other products fell by 32.57%. %.
Why are currencies falling, but the amount of wood sent to China rising?
According to Riofrío, the prices of balsa products have since dropped and have reached levels at which the sector is competitive with synthetic substitutes, which is why volumes have increased.
“The price has gone down and demand has gone up, therefore it is selling a little more in volume, although it is not felt in dollar values. In 2020, prices tripled and that made the raft lose competitiveness in the international market compared to substitutes. So, now the price went down and it sells more because we are more competitive.”
In 2019, balsa exports generated US$219 million, in 2020 they reached a record of US$570 million due to the pandemic. But since 2021 the figures began to decline, that year balsa exports generated US$ 196 million, in 2022 they were US$ 187 million and in 2023 they stood at US$ 181 million; and if the average of US$ 13.3 million per month presented until last March is maintained, the year would close with US$ 159 million.
Regarding the trade agreement with China, Riofrío recalls that the exclusion of 18 tariff subheadings was achieved, protecting the most sensitive products in the sector: furniture, flooring, plywood, among others.
He explains that from the point of view of what can be exported from Ecuador to China, it was possible to consolidate the tariff preferences that the sector already had, ensuring the entry of products without tariffs into the Chinese market. “Raft products are the most important in the sector to China (Ecuador is the main exporter of raft products in the world) and there are opportunities to grow moderately.”
Another product with potential is teak, although Riofrío points out that it will have to go through the process of opening markets, so immediate results are not expected.
Meanwhile, Felipe Ribadeneira, executive president of Fedexpor, highlights - following the publication of the export figures - that the entry into force of the agreement with a market of more than 1,400 million customers, with a potential for exponential growth in exports of agro-industrial goods, raises the need to take advantage of the commercial instrument on two fronts.
On the one hand, the elimination of sanitary and phytosanitary barriers to be able to enter more products from the exportable basket. And, on the other hand, promote Ecuadorian products and win over the Chinese consumer through participation in international fairs and trade missions.
