The COVID-19 pandemic has hit the Alaska pollock industry in the United States of America and reduced production, creating a tight supply situation that affects first and foremost Europe. At the same time, China has closed its ports (and borders) to the Russian Federation, creating a very difficult raw material supply situation for Chinese processors. Prices are volatile, and the outlook is very mixed.

Supplies

In Alaska, the pollock A season is falling behind last year’s results. COVID-19 has affected the sector greatly, as a number of facilities have had to close down because of outbreaks. Consequently, raw material is becoming scarce for some operators. As the A season ends in April, the final catch numbers are lower than expected. However, the uncaught quotas are rolled over to the B season, which starts in June. US production of Alaska pollock fillets as of mid-March stood at 30 600 tonnes, which was 43 percent lower than last year. At the same time, Russian pollock fillet production increased by 4 percent to 34 000 tonnes, resulting in the unusual situation where Russian pollock fillet production is larger than US production.

The dispute between the European Union and Norway regarding EU access to fishing grounds around Svalbard (the archipelago far to the north of Norway) has heated up. The Svalbard Treaty, which was retained in 1920 and gave Norway jurisdiction over the islands, allows all signatory nations to engage in commercial activities in the archipelago, but Norway regards the Exclusive Economic Zone (EEZ) around Svalbard as part of the Norwegian EEZ. In December 2020, Norway reduced EU’s quota for 2021 to just 6 004 tonnes of cod in Svalbard waters. This was a 75 percent reduction compared to the quota for 2020. The European Commission then increased the final total allowable catch for cod fishing around Svalbard to 28 431 tonnes. This move is now hotly disputed by Norway. The EU fleet is now confused about the next steps. The situation is further complicated by the Brexit deal between the European Union and the United Kingdom of Great Britain and Northern Ireland, under which part of the quota is transferred to the UK. Norway, along with the other Nordic countries, have stated that they will not negotiate anything bilaterally until a trilateral agreement between Norway, the European Union and the United Kingdom of Great Britain and Northern Ireland has been reached. Meanwhile, the EU fleet is at a standstill.

The annual Skrei (spring-spawning cod caught in the Lofoten and Vester len region in Northern Norway) season was off to a late start this year. Skrei is a top-quality cod which is mostly exported fresh to the European market, and at premium prices. For example, in March 2021, fresh skrei export price (fob Norway) was NOK 38.45, while the fresh cod fob price was NOK 30.09. However, demand was down in January and February 2021 due to COVID-19, and prices were lower than during the 2020 season. In anticipation of slower market demand, the Norwegian Seafood Council has stepped up its promotional campaigns in Europe. In Spain alone, some 5 000 points of sale have joined the Skrei campaign. Market As the Skrei season was off to a late start this year because of bad weather, Norwegian cod landings were about 8 000 tonnes behind by the end of March with 117 000 tonnes landed in 2021. In spite of price reductions for fresh cod on the European market, Norwegian exporters were diverting more fish to fresh sales and less to production of the traditional products such as air-dried cod (stockfish) and salted and dried cod (klippfish). This could lead to a shortage of klippfish and saltfish later in the year because production of these products has a very limited timeframe as they have to be salted and dried as soon after landings as possible. Although there were some 300 000 tonnes left of the quota at the end of March, this will probably not be landed until later in the year, when conditions for salting and drying are less favourable. The Russian pollock industry is in trouble, as China has shut out imports from the Russian Federation, citing COVID-19 safety hazards. The Russian Federation normally sells over 60 percent of its Alaska pollock exports to China. Problems started in January 2021, when Chinese customs authorities said they had found strains of live COVID-19 on the packaging of products imported from the Russian Federation. Russian producers of Alaska pollock are now progressively looking to their domestic market and are increasing capacity to serve this market in addition to export markets. This, plus the lack of whitefish supplies because of logistical issues impacting Chinese processing plants, will create a shortage in the whitefish market. Several Chinese plants closed early for Chinese New Year because workers had to go home early and enter quarantine before the celebrations.

Trade

China, which is the largest importer of Alaska pollock in the world, has run into trouble over the past year. Fourth quarter 2020 exports of Alaska pollock to China’s largest market, Germany, fell to 20 700 tonnes, down 42 percent compared to the same period in 2019. Exports to the Republic of Korea also fell during the fourth quarter, by 36 percent to 3 300 tonnes, and exports to the United Kingdom of Great Britain and Northern Ireland were down by 20 percent to 2 600 tonnes. The causes of these declines are several, including port disruption (main Chinese ports Dalian and Qingdao are closed to Russian ships, thus making the raw material supply situation difficult), lower landings, processing problems because of the COVID-19 pandemic and shipment issues. Total Chinese whole frozen Alaska pollock imports during 2020 fell by 11.3 percent, to 612 242 tonnes. All major suppliers experienced reduced shipments. The Russian Federation, the top supplier, exported 574 758 tonnes, down almost 10 percent compared to 2019. Reduced imports of whole frozen Alaska pollock were reflected in lower exports of Alaska pollock fillets. Total 2020 exports of frozen Alaska pollock fillets fell by 28 percent to just 191 630 tonnes.

While Russian pollock exports to China declined in 2020, exports to the Republic of Korea were up by 35.7 percent to 182 600 tonnes. In fact, in the beginning of 2021, the Russian Federation accounted for 99 percent of Korean imports of frozen Alaska pollock. Pollock exports from Alaska experienced a lift in November 2020, though, as exports rose by an astounding 59 percent to 22 627 tonnes. Export prices also rose by 17 percent, to USD 2.69 per kg, bringing the November export value to USD 60.98 million. After a very good year for groundfish exports in 2019, Norwegian exporters had expected another good year in 2020, but COVID-19 dampened this initial positive forecast. Total cod exports in 2020 amounted to 172 000 tonnes, down 4 percent compared to 2019. The value of exports also declined by the same percentage. The loss of the restaurant segment hit exports of fresh cod hard, as demand fell in Europe. Exports from Norway of traditional products such as klippfish also fell. Klippfish export volume fell by 9 percent to 83 000 tonnes, while the value declined by 10 percent to NOK 4.3 billion. The main reason for the decline was lower demand in Brazil and in Portugal. These are the two main markets for salted and dried cod from Norway.

Prices

Prices for US pin-bone out (PBO) pollock fillet blocks and surimi have been rising to almost record levels of USD 3 600 – 3 700 per tonne in the beginning of 2021. With limited demand from the white tablecloth sector, prices for fresh Skrei dropped 30 percent in January. While COVID-19 is most likely to blame for this, the 20 percent quota increase has also put pressure on prices. Total Norwegian landings as of mid-March were down 6 percent compared to 2020, but prices had dropped by 20 percent. Normally, a 20 percent quota increase would lead to about a 15 percent price decline.

Outlook

The outlook for the groundfish sector is turbulent and complex. While Chinese production of frozen Alaska pollock fillets is declining because of a stop in imports of round-frozen fish from the Russian Federation, and US supplies are tight because of the COVID-19 situation, some markets are looking up. However, the fresh fish market is not likely to recover fully until the COVID-19 situation is under control in major markets and the restaurant sector reopens. Meanwhile, the retail sector is doing well and much demand has shifted to home consumption. It is not expected that this trend will remain equally strong in the future, as consumers seem hungry for eating out as soon as the possibility occurs. Recent news from New York, where bars and restaurants have reopened, indicate that there will be a strong boom in restaurant and foodservice sales as the pandemic subsides. Prices are volatile. Cod prices are down, as are Russian pollock prices, but prices for US pollock are up as a result of tighter supplies from Alaska. According to early indications in 2021, prices will stay high.