The growing demand for surimi products in nearly all markets has led to a shortage of raw material for surimi producers and consequently prices are going up. Prices for cod on the UK market have also gone up and will probably stay high as it is not expected that supplies will increase.

Resources

The European Commission in July banned cod fishing for most of the Baltic Sea to prevent an impending collapse of the stock. This follows a warning by the International Council for the Exploration of the Seas (ICES), which announced in April that the eastern Baltic cod population had reached such a low level that it could no longer reproduce sufficiently. According to ICES, even a total ban on cod fishing in 2020 would not be enough to bring the stock back to levels at which fishing could be resumed.

In August, a bill was introduced in Chile to ban all trawling for hake. According to the proposers, the objective of this law is to protect the marine ecosystems. If the bill passes, only long-lines or gillnets will be legal fishing methods for hake in Chile. The fishing industry is protesting and criticising the proposal, stating that trawling for hake is only done in an area where there has been trawling for half a century, in the so-called “Trawling Footprint”. Critics of the bill claim that it would be more important to eliminate illegal fishing for hake, which is done mainly by the artisanal sector.

In Peru, hake fishing north of 04 degrees was suspended for a period of 42 days, starting on 25 August. Any hake caught in this area before the ban went into effect must be processed within 48 hours of the start of the ban.

It has not been a very good year for Pacific cod. Inventories are high after the A season and the sellers’ asking price is also high, so several buyers are buying cod from the Russian Federation instead. The outlook for the B season, which started in June and runs through December, is not bright. Warmer than usual sea temperatures are negatively affecting this fishery. Observers in the market now expect prices for Pacific cod to soften as competition from other sources is strong and the high prices asked by US sellers have to come down.

Trade

The trade war between the United States of America and China is affecting the groundfish trade in several countries. US exports of Alaska pollock to China are down. China is now sourcing more raw material for its processing industry in the Russian Federation.

To help soften the effects of the trade war for the pollock industry, the US Government is making massive purchases of Alaska pollock to be distributed through the National School Lunch Program and other Federal Food and Nutrition Assistance Programs. The Government put out a request for suppliers to bid for a purchase of almost 17 million pounds (7 700 tonnes) of Alaska pollock by 20 September, after having made large purchases during the first half of 2019.

Processors and exporters in China are being affected by the trade war. While the United States of America is still China’s biggest single market for groundfish, exports to this market dropped from 16 percent of total exports in 2017 to just 10 percent in 2018. To compensate for this, China is looking at alternative markets like the EU28, the Russian Federation, Asian countries and Africa to shift their trade away from the United States of America.

China is also retaliating against US President Trump by raising import duties on a number of seafood products, including cod and Alaska pollock, from 25 percent to 35 percent. However, raw material for processing and re-exports are still exempted from this punitive tariff.

This trade is making itself shown in trade statistics, but there are some unexpected results during the review period. The United States of America have registered important declines in exports of groundfish to China, both round and processed. However, China has not registered a similar decline in its exports of (mainly processed) groundfish to the United States of America. There was a marked increase in Russian Federation round frozen Alaska pollock export to China, and only a slight decrease in Chinese imports of the same from the United States of America.

Norwegian exports of whitefish fell slightly during the first six months of the year. Total groundfish exports amounted to 210 800 tonnes, which represented a decline of 6.1 percent from the same period in 2018. The value increased by 2.2 percent to NOK 8.1 billion. Exports of fresh cod fell by almost 32 percent by volume, but only 21 percent by value, while exports of frozen whole cod increased by 6.8 percent by volume, 21 percent by value.

Surimi

Demand for surimi products in Japan is rising, and so are prices of raw material. The Japanese surimi industry is to a large extent dependent on imports of Alaska pollock from the United States of America. Import prices have been going up steadily over the past few years. Processors have been forced to pass these price increases on to the consumer.

Japanese imports of Alaska pollock surimi were down 4 percent by volume and up 9 percent by value in June 2019, compared with June 2018, according to the Japanese Customs. Japanese imports of itoyori (threadfin bream) surimi were also down in this period, with a marked fall in imports during the month of June 2019. Itoyori surimi is imported mainly from countries in Southeast Asia. During the first half of 2019, most itoyori surimi imported into Japan came from Thailand (40 percent), India (25 percent), Vietnam (15 percent), and Indonesia (9 percent).

Thailand is showing strong growth in its exports of surimi and processed surimi products. During the first half of 2019, Thai exports of surimi increased by 26 percent, from 6 500 tonnes during the first half of 2018 to 8 100 tonnes during the same period in 2019. Thai exports of processed surimi grew from 11 300 tonnes in 2018 to 13 800 tonnes in 2019 (+23 percent).

One of the largest surimi processors in Europe (Viciunai) anticipates the European market to grow by 5 percent in 2019, to about 120 000–125 000 tonnes. This is in spite of the fact that the largest market for surimi in Europe, France, is weakening. The French market is expected to shrink by 10 percent to about 44 000 tonnes this year. In other European countries, such as Germany, Spain, Italy, Belgium and the Netherlands, it is expected that sales will increase. France consumes about 1 kg of surimi per person per year, while Germany consumes only about 150 g per person per year. The German market holds a much greater potential for increasing consumption, while the French
market is saturated. Also, there has been little innovation in the French market, and this also seems to have slowed down sales.

Prices

Prices for headed and gutted (H&G) Alaska pollock from the Russian Federation started to come down a little after the record levels reached in July, the highest in 10 years. Chinese buyers are said to expect prices in the range USD 1 750–1 850 per tonne by the end of 2019. Some observers expect the price to stabilize at around that level. Russian Federation catches have been good, some 8 percent higher than last year, but the fish is somewhat smaller. Chinese imports from the Russian Federation have been strong, and the unit price has been going up since mid-year.

The price of Alaska pollock surimi is at a 10-year high. Japanese buyers are paying JPY 580–600 (USD 5.37–5.55) per kg for FA-grade frozen-at-sea surimi. This price is 10 percent higher than a year ago. The main cause for this high price is the very strong demand in Europe and in China.

In August, it was reported that prices for US surimi in Japan were up by 30 percent. The average price in Japan was Yen 401 (USD 3.80) per kg in June. However, even with such a steep price increase, it was not enough to compensate for the processors’ increasing cost of raw material. 

The weak Euro and good demand for Alaska pollock for surimi has pushed Alaska pollock block prices high. This development is expected to continue. The Russian Fishery Company expects Alaska pollock prices to continue to rise, about USD 100–150 higher per tonne in the B season this year, and as much as USD 200–250 higher in next year’s A season. After that, prices are expected to stabilize.

The proposed USD 41 million purchase of Alaska pollock by the US Government is expected to contribute to these high prices because it takes about 10 000 tonnes off the market. This may not be a huge amount, but it will be noticed.

Prices of Norwegian groundfish products were up, and for fresh cod, the fob price was NOK 37.34 per kg during the first six months of 2019, which was 15.2 percent higher than in 2018. The main reasons for this were lower catches and a weak Norwegian krone (NOK), according to the Norwegian Seafood Council (NSC).

Outlook

A continued trade war will contribute to a changing structure of the international trade of groundfish. China will buy more Alaska pollock from the Russian Federation as raw material for its processing industry, it will export less to the United States of America and more to markets in Asia. Paradoxically, it now looks as if the US industry is the loser in this trade war, more so than the Chinese industry. China is still importing raw material from the United States of America at zero tariff, if the processed products are re-exported.

Prices for Alaska pollock are expected to go higher. Cod prices are also edging upwards because of tighter supplies in the coming year. However, a recent development may affect cod prices in two different directions. It was announced in September that the North Sea cod fishery is losing its Marine Stewardship Council (MSC) certificate. This may affect prices for North Sea cod negatively but could push prices up for Barents Sea cod, which does have an MSC certification.