RP’s biggest carrageenan exporter records ‘worst year’

Business World

BY MARITES S. VILLAMOR, Visayas Bureau Chief

CEBU CITY -- Carrageenan manufacturer and exporter Shemberg Marketing Corp. just had its worst year.

Shemberg Chief Executive Benson U. Dakay said his company lost an estimated P60 million this year because of the appreciation of the peso. Selling prices of carrageenan, a food additive derived from seaweed, are quoted yearly and could not be automatically adjusted whenever the foreign exchange rate fluctuates.

“We quoted our prices based on the P47-$1 rate, but by the time we collected payment, the peso had strengthened to P43. This was our biggest loss in our 40 years of existence. (The year) 2010 is our worst year,” Mr. Dakay said in a telephone interview.

Shemberg is the biggest carrageenan exporter in the Philippines.

Mr. Dakay said he expected the losses to continue next year unless the exchange rate is fixed, as was done in China and India. The peso has strengthened by around 8% this year, although it has weakened to P44.20:$1.00 last week.

Mr. Dakay, who is also the president of the Seaweed Industry Association of the Philippines, and other export leaders have been calling on monetary authorities to take a harder look at the foreign exchange policy of China to make the export sector competitive. But the government has maintained that the exchange rate is best left to market forces.

To moderate losses, Mr. Dakay said he will be quoting prices, especially for kappa carrageenan, on a quarterly basis next year.

Kappa carrageenan is derived from cottonii and is widely used as ingredient in processed meat, jelly, and pet food. It accounts for about 90% of the global carrageenan market, Mr. Dakay said.

Shemberg also has to cope with competition in the world market as well as the declining supply of cottonii in the Philippines.

“There are too many players now,” Mr. Dakay said, citing China as well as Indonesia, which has overtaken the Philippines in raw seaweed production and is encouraging more local processors to make carrageenan.

Production of raw Eucheuma cottonii seaweed has dropped to an estimated 60,000 tons this year compared with the estimated 150,000 tons during the Philippine seaweed industry’s so-called golden years (1977-1990), Mr. Dakay said.

Indonesia, on the other hand, produces about 100,000 tons of raw seaweeds yearly, he added.

A bright spot in the seaweed processing sector is the specialized market for iota carrageenan, which is derived from Eucheums spinossum. Iota carrageenan is used as an ingredient for toothpaste and capsules.

There’s an increasing supply of spinossum because farmers prefer to plant this type of seaweed. Processors, meanwhile, favor spinossum because of its lower price and higher yield.

Only three kilos of spinossum, compared to five kilos of cottonii, are required for a kilo of carrageenan.

But Mr. Dakay said the market for iota carrageenan is still too small and could not offset the losses in the cottonii market.

“Unless a miracle happens, expansion of the market for iota is not in the horizon,” he added.