(SeafoodSource) Strong demand for sea cucumber (also known as beche mere) is driving investment in the sector in China, say analysts monitoring key cultivators.
While a large-scale southern sea cucumber harvest this spring pulled the price down from RMB 216 per kilogram to RMB 160 kilograms. However, prices will increase in the second half of the year predicts Sun Xia, aquatic industry analyst at Guo Hai Securities Co.
With prices rising to RMB 200 per kilogram, “earnings growth can be expected,” said Sun. Colder fall and winter weather drives an increased demand for dietary supplements “… and there are more festivals in these two seasons, therefore the demand for sea cucumber will rise,” explained Sun.
Among the key cultivators, Dalian Yi Qiao Marine Seeds Co. Ltd has been busy raising finances to expand its cultivation operations. It should be in for a boost as sea cucumber prices rise in the latter half of this year. Yi Qiao in June announced it would issue shares to raise RMB 798 million to add 14,000 acres of production, as well as a 80,000-cubic-meter plant for sea cucumber seedling cultivation. By the end of 2012 the company will have at least 2.6 million mu (15 mu equals one hectare) under cultivation with plans to add 30,000 mu early next year.
Listed on the Shenzhen stock exchange, Yi Qiao Marine Seeds drew 86.1 percent of revenue from shellfish seedling, with a gross margin of 59.4 percent.
However, the firm is keen to add more sea cucumber cultivation, given gross margins of up to 87.6 percent, according to company records.
Sea cucumber prices in Weihai seafood wholesale markets rose from RMB 170 per kilogram to RMB 180 per kilogram in July, according to research by Qi Lu Securities. The firm predicts prices will climb to RMB 200 per kilogram in the latter half year of 2012.
The Dalian-based Homey Group International in the past year built an offshore artificial reef for cultivating sea cucumber by throwing 150,000 cubic meters of stone in 1,000 acres of sea. “The culture grounds can provide sea cucumber over 5 millions in one season,” explained a company spokesperson.
Another explanation for higher demand, says Sun Xia, is an expected shortage of supply in autumn given the fall off in supply from Southern China after the key spring harvest.
“Southern sea cucumber producers have not solved the problem of how to cultivate in warmer summer weather … therefore we still only have one season per year.”
Despite optimism on prices, beche mere producers also face potential risks, including a downturn of the sea cucumber demand and price due to a weaker Chinese economy. Any increase in yields is also threatened by the “fluctuation of the survival rate and potential risk of water pollution and extreme natural disasters.”
Local producers also face competition from better quality wild imports, particularly from Alaska and Canada. Demand remains strong for wild Alaska sea cucumbers, which are typically larger and have higher nutritional value than farmed Chinese sea cucumbers.