Sustainability of seaweed supply and price dynamics in the Chinese hydrocolloid industry

The non-food segment of the Chinese seaweed market, which is crucial for developing the hydrocolloid industry, relies heavily on the seaweed supply from Chile, Peru, and, to a much lesser extent, Indonesia, in addition to domestic production. In this paper we investigate the degree of market integration between seaweed from these countries. We find that the market is highly integrated as the Law of One Price holds, suggesting a global market. Furthermore, the import price from Chile and Indonesia follows the lead of the import price from Peru. As the hydrocolloid industry develops in China, increased demand for seaweed from Chile and Peru is expected, which increases the extraction of seaweed from natural beds. This situation will be unsustainable if Chile and Peru continue to rely primarily on wild extraction.