SIAP: Global seaweed demand to drop by 50%

The seaweed industry in the Philippines is seeing at least 50 percent drop in global market demand in the next two years, describing this period as the "worst" crisis ever faced by the industry players in history.

Seaweed Industry Association of the Philippines (SIAP) president Benson U. Dakay said that unlike the other crises that hit the industry such as in 1997, the foreign exchange battle, among others, this US-injected financial disaster is the most difficult, considering that it involved largely a "consumer crisis."

In 1997 regional economic crisis, only the financial capacity of the companies had been challenged by the banks, while demands from consumers were stronger. This time, the problem is "no one is buying your product as the consumer market is badly hit."

Dakay, who owns the world's largest carrageenan supplier Shemberg Marketing Corporation (SMC), said that despite these difficult times, he vowed not to trim down workforce, instead the company will adopt every possible cost-cutting measure to keep the total regular 1,200 employees intact.

Shemberg's biggest clients, Nestle and Mars (the maker of M&M chocolates among other snackfood and petfood), have slashed down their carrageenan volume order by 50 percent.    

Likewise, the world's largest turkey (food) maker—Pilgrim also cut down regular orders by 50 percent due to slack consumer demand.

What happens now, he said is there is a glut of supply of carrageenan or raw seaweed in the Philippines, pushing down the price of seaweed from P150 per kilo, to P50 per kilo today.

Dakay expects that this ordeal will last until two years. Hopefully, he said the global economy will rebound after 2010.    

In 2008, the seaweed industry exported close to US$200 million worth of semi-refined and refined carrageenan to the world market.

This year, Dakay expects to see a downtrend of carrageenan exports to at least US$150 million.

Other carrageenan processors and exporters, on the other hand were not able to make it in the last few years, and shut down their respective plants, affecting hundreds, if not thousands of workers.

Aside from the people, whose livelihood depend solely on their salaries from seaweed exporting companies, Dakay said the over 100 thousand seaweed farmers are also the most affected now.

Reportedly, the seaweed farmers asked President Gloria Arroyo for help, but only to be told that they (seaweed farmers) will instead decide to plant rice, instead of seaweed.

Shemberg maintains four carrageenan processing plants located in Pakna-an Mandaue City, Mactan Island, Carmen, and Zamboanga.

Carrageenan is a hydrocolloid extracted from red seaweeds that is used as an ingredient in food, dairy, air freshener, oral care, pharmaceutical products, personal care products, biotechnology research and other industrial consumer product applications.

The product is used in a variety of commercial applications such as gelling, thickening and stabilizing agents, especially in food products such as chocolate milk, cottage cheese, frozen desserts, yogurt, pet foods and sauces. About 70 percent of the world demand for the product is for food purposes.

Nevertheless, Shemberg is now surviving from trickles of orders from its clients worldwide, Dakay concluded.