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1st semester 2017: Slight improvement for paste imports

24/11/2017 - François-Xavier Branthôme - Architecture of Trade - Read in french

Since the implementation in 2015 by the Nigerian government of a set of protectionist measures intended to promote the country's production and processing of tomatoes, it has become more complicated to analyze world data relating to the import of pastes. The first effect of these measures was unexpected, given that this market has featured for a long time among the foremost importers in this category: after suffering from repeated attacks of Tuta absoluta, the production of processing tomatoes has struggled to take off, and local companies like Dangote and Erisco have found themselves unable to run their processing plants with sufficient raw materials. That said, in this difficult context, it seems unlikely that Nigeria's apparent consumption of paste has suffered any impact from this situation. In 2013/2014, national demand justified the importing of 200 000 mT of paste, and this has meant that operators have now had to call on other less formal supply sources. This is the second (more predictable) effect of the decisions taken by the Nigerian government.
Indeed, the protests expressed by several local operators – who are committed to industrial partnerships with Asian investors – against the financial policies of the government, in addition to the recent closure of the Dangote factory in Kano, have brought regional practices under intense scrutiny. According to Nigerian press sources, the African food giant reportedly had to throw in the towel due to difficulties encountered with its supply network, but also "following the terrible blow suffered because of the way the Nigerian market is affected by contraband alternative products that are a lot cheaper than those of local production." 
This does not mean that Nigerian government policy is likely to directly affect the dynamics of the worldwide processing tomato industry. But the importance of local demand has turned this region (Nigeria, Ghana, Benin, Togo, etc.) into a major player on the world trade scene, a fact that is essential for understanding the performance of the main processing regions as it is likely to increase the complexity of the performance of the main consumption regions. 
Half-yearly worldwide paste import results: official results (without Nigeria) and recomposed results (including Nigerian imports estimated according to available data).

With the "disappearance" of Nigerian purchases, the worldwide flow of imported products seems to have decreased quite sharply in recent years. However, available information regarding shipments from the main processing regions to this destination, particularly from China, is sufficient to at least partly establish some kind of likely estimate for the purchases of Nigeria and its neighboring countries. Altogether, this provides a completely different picture of global demand over recent marketing years. Based on this approach, the volumes of paste imported around the world over the first half of 2017 recorded a slight increase, unlike the volumes of products exported*: the volumes traded amount to 1.21 million mT (+3%), taking total imports recorded between July 2016 and June 2017 to approximately 2.4 million mT, which is about 4% more than during the 2015/2016 marketing year (2.3 million mT). 
Import volumes of the fifteen main paste-importing countries, over the first six months of the past four years. Increases are in blue, decreases are in yellow. 

Unlike global movements of export shipments, which are likely to undergo big variations due to the competition between major supplier regions, the dynamics affecting imports – and therefore the markets where they are most felt – are less likely to suffer sudden variations. So the half-yearly accumulated figures for paste imports for the seven biggest players in this category (Germany, Italy, UK, Japan, Russia, the Netherlands and France, with more than 100 000 mT per semester) have recorded almost no variation over the past ten marketing years other than those that have driven their growth, from 470 000 mT for the period running July-December 2008 to 560 000 mT for the period running January to June 2017 (see the infographics at the end of the article). The same can be said of the half-year accumulated results for the twenty-five main paste-importing countries (more than 20 000 mT per semester). 

Nonetheless, in the context of the moderate but generalized upward trend that has been driving the worldwide market, a few countries stand out from the others, mostly due to the development of the capacity and production of local industry operators. This is notably the case of Algeria, whose processed volumes have sharply increased in recent years, and whose imports during the first half of 2017 (15 200 mT) were 9 000 mT (-37%) lower than those of the first six months of 2016, and 18 000 mT (-54%!) lower than the average of the first six months of the three previous years (2014, 2015 and 2016). On a wider scale, the Algerian tomato products industry has been progressively replacing the almost systematic use of imports from China or the USA by increasingly local production volumes.

A similar approach can be observed with Russia's foreign purchases, though to a lesser extent and with far higher quantities involved (64 200 mT during the first half of 2017). Over the past nine or ten marketing years, imports have decreased slightly and it will probably take several more years before the production of processing plants set up in Kabardino-Balkaria and others provinces of south-western Russia have a real impact on Russian supply patterns. Nonetheless, imports from January to June 2017 (64 200 mT) dropped by more than 6 300 mT (-9%) compared to those of the first semester 2016 and by 11 800 mT (-16%) compared to the average of three previous years (first semesters of 2014, 2015 and 2016). 

Dutch imports of paste (59 400 mT) have also recorded a drop (more than 5 000 mT (-8%) less than during the first semester of 2016), but this should be interpreted in light of the fairly sharp fallback in processing operations and sauce exports of the Netherlands over the past two marketing years. In 2016/2017, foreign sales in this product category (219 000 mT) were 4% lower than during the 2015/2016 marketing year, and they dropped 10% against the results of the 2014/2015 marketing year (243 600 mT). 

Among the countries that reduced their imports during the first six months of 2017, Poland and Mexico also deserve a mention, though in both cases, the result is merely a pause after several episodes of considerable increase, and these adjustments do not alter the more or less regular dynamics that have led, in just eight years, to a 65% increase of imports in the case of Poland and a 60% increase in the case of Mexico.  

Alongside the countries that are attempting to break free of imports by developing their own local processing industries, a large number of other nations remain highly dependent on external supplies in order to satisfy domestic demand. Apart from Nigeria, which has already been mentioned, the world's main consumption regions are to be found in western Europe, in Asia, in the Asia-Pacific region and in North America. Over the first six months of 2017, the more important importing countries confirmed their preponderance, with the three main players being Germany, the United Kingdom and Japan. At close on 78 400 mT, this country's imports have grown by more than 17 000 mT (+28%) compared to the first semester 2016 and by close on 6 000 mT (+8%) compared to the equivalent six-month periods of the past three years (2014, 2015 and 2016). 

Despite Argentina's efforts to increase its processed production, this country has nonetheless recorded the biggest progression for the first semester, with an increase of 89% (+9 300 mT) over the result of the first semester 2016 and a leap of 118% (+10 000 mT!) over the same period of the three previous years. The exceptionally high level of Argentina’s foreign purchases (19 800 mT for the first semester 2017, 53 000 mT for all of the 2016/2017 marketing year) should be seen in light of the production and processing deficit recorded over the 2016 season, which was marked by a very mediocre result (405 000 mT, instead of the 485 000 mT planned). 

The market in the United Kingdom seems at present to be able to adequately resist the drop in purchasing power following the weakening of the British currency against the euro and the US dollar, as witnessed by the latest results of European operators, particularly those in Italy, who are heavily involved in this market category. Between January and June 2017, British purchases of paste (79 300 mT) remained true to the slow growth pattern they have been following for about twenty years now. Purchases in the early part of this year were practically identical (+1 300 mT) to those of the first part of 2016 and about 6 400 mT higher (+9%) than those of the equivalent period of the past three years. 

After a few marketing years that saw a decrease (between 2008 and 2010), French imports of pastes have started increasing again. The first semester 2017 (56 300 mT) is part of this dynamic, with an increase of 2 900 mT (+6%) against the first semester 2016 and of 3 800 mT (+7%) against the average of the first semesters of 2014, 2015 and 2016. 

The increases in volumes imported over the first semester 2017 by Brazil and by South Africa also deserve to be mentioned. Their progression is relatively modest in terms of tonnage (approximately 5 000 mT for Brazilian purchases, less than 4 000 mT for South-African imports) but significant in terms of growth (+42% for Brazil, +35% for South Africa). The increase in South-African purchases is part of a regular growth pattern that has seen quantities more than double over less than ten years. Brazilian purchases vary depending on the performances of the local processing industry. 

*See also the first part of this report, which is dedicated to export results during the 1st half of 2017.

Sources: IHS, Tomato News

Some complementary data
Along with the drop in paste imports, West Africa has developed a new trade-flow pattern, particularly coming from China, involving products registered under customs code 210320 (ketchup and tomato sauces). 


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