The COVID-19 pandemic has seriously affected the lobster market, and the continuing trade conflict between the United States of America and China has not helped. Furthermore, the European Union is also expected to impose stricter tariffs on US lobster. Lobster is a typical restaurant item, and with restaurants closed due to the COVID-19 pandemic, there was very little demand for this delicacy. As a result, prices have declined and will likely stay low while the pandemic lasts and beyond.

Supplies

The lobster stocks in the Gulf of Maine have all but disappeared, according to recent reports. The main reason seems to be that the Gulf of Maine’s waters are heating up much faster than elsewhere, and this development has made the once abundant lobster fishery commercially extinct. In addition, the protection of the right whales in Maine has taken a turn that threatens the Maine lobster fishery. A federal court ruling states that the National Marine Fisheries Service (NMFS) has violated the Endangered Species Act (ESA) by permitting the lobster fishery in the state. Lobstermen are fighting this decision, claiming that no whales have ever been killed or seriously injured by their lobster catching equipment.

The 2020 lobster season in eastern Canada turned out to be very short because the start of the season was delayed in Newfoundland and Labrador, Prince Edward Island, and Quebec. Fishing started between 1 and 15 May, but the season was not extended beyond the normal termination date at the end of June.

Viet Nam is hoping to increase its lobster production through lobster farming. By 2025, the country hopes to produce 3 000 tonnes, up from 2 273 tonnes in 2019. In order to achieve this, Viet Nam is planning to import advanced farming technologies from other countries. Most of Viet Nam’s lobster production is exported to China. In 2019, as much as 95 percent went to China, with the rest used for domestic consumption. However, demand in China has been falling due to the COVID-19 pandemic, and prices have also declined.

International trade

During the first quarter of 2020, global imports of lobsters dropped by almost 20 percent compared to the same period in 2019, from 33 032 tonnes in 2019 to 26 534 tonnes in 2020. The biggest drop was registered for Chinese imports (-34.1 percent to 8 268 tonnes).

Among the exporters, the largest percentage drop was registered for Australia, which fell by 53.8 percent. Exports from the United States of America fell by 46.2 percent, while Canada fared somewhat better, and registered a drop in exports of just 14.6 percent. The US lobster industry has been on a downward trend for some time, mainly due to trade issues.The United States of America – China trade conflict resulted in high import tariffs on US lobster entering China, causing a 20 percent drop in US lobster shipments to China in 2019 compared to 2018. The COVID-19 pandemic has further aggravated the situation, as demand for lobster in China declined.

New Zealand, on the other hand, is reporting that its rock lobster exports to China, which plummeted in early 2020, started to rebound in late April 2020. Furthermore, US exports to Europe have also declined sharply, mainly as a result of the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada. In 2019, US lobster exports to Europe dropped by as much as 22 percent, to 3 342 tonnes. The situation is not likely to improve. It is expected that the European Union will further increase its import tariffs on US lobster in response to the World Trade Organization findings that the United States of America provided unfair subsidies to airplane manufacturer Boeing. In retaliation, the United States of America is threatening to raise taxes on European cars to pressure the European Union into lowering or removing its tariffs on US lobsters.

Canada, the world’s largest producer of the North American lobster (Homarus americanus), has taken over market share from the United States of America since 2017. However, Canada’s lobster exports to China, which enjoyed a surge at the end of 2019, and in January 2020, dropped off dramatically in February with the advent of the COVID-19 pandemic. Canadian exports began climbing again in March and April, although far from the volumes shipped at the start of 2020. In January, Canada shipped 4 323 tonnes of lobsters to China, 41 percent more than in January 2019. Yet in February 2020, shipments dropped to just 93 tonnes (95 percent less than in February 2019), and 473 tonnes in March 2020 (70 percent less than in March 2019).

Despite US threats about increasing tariffs on Chinese goods entering the United States of America, China is not likely to lower its tariffs on US lobster. At present, Chinese import tariffs on live US lobsters amount to 32 percent, while tariffs on live Canadian lobsters are only 7 percent. When China entered lockdown in January, Western Australia’s rock lobster exports dropped to almost zero. However, in mid-to-late April, shipments picked up again, although Chinese demand was still weak. About 90 percent of Western Australia’s rock lobsters are exported to China. The lockdown had a devastating effect on the industry, therefore it will take some time before demand builds up again.

In late May, Canadian exporters joined forces with some Chinese supermarket chains to promote lobster in an effort to rebuild the trade. Canada’s Trade Commissioner Service network in China partnered with local retailers as well as e-commerce firms, targeting the “home cooking” market in particular. As a result, trade picked up a little, but this is probably just as much due to the gradual return to “normal” in China.

Demand on the domestic markets in both Canada and the United States of America was weak during the lobster season, and prices were “terrible”, according to lobstermen. In the United States of America, the drop in sales through the restaurant sector has been countered by lobstermen who have tried direct sales to the consumer. The efforts seemed to give very good results in Massachusetts, where direct sales tripled. Direct sales from four lobster vessels resulted in sales of 2 200 lobsters on the first day, which was Easter Sunday.

Direct sales is also being promoted through Facebook, with good results. Prices, however, have been below what they were before the COVID-19 outbreak. In response to the low prices, harvesters in the Canadian province of Newfoundland and Labrador have set the minimum price at CAD 3.25 (USD 2.32) per lb. This is the lowest since 2014. In 2019, harvesters were getting an average of CAD 6.78 per lb.

Outlook

The outlook for the rest of 2020 is very uncertain. While demand seems to pick up somewhat in some markets (notably in China), much will depend on the development of the COVID-19 situation. There have already been signs of a “second wave”, which seems to be the result of a too rapid relaxation of preventive measures. If this becomes widespread, as it seems to be in the United States of America in particular, demand, and trade, will decline further. In countries that are able to adapt to the COVID-19 situation by continuing careful preventive measures to avoid the spread of the disease, consumption could well rise again. However, lobster is a typical restaurant item, and even with the reopening of restaurants, consumers are reluctant to eat out. Furthermore, most countries have strict rules about reducing restaurant seating capacity, and this naturally limits sales through restaurants.

In addition, worries about the future make luxury items less attractive. The full effect of COVID-19 on the economy may not be seen for a long time. A weakening of the economy quickly translates into weaker sales of luxury items, including lobster. At any rate, prices will be under pressure for as long as the pandemic lasts. A certain shortage in supplies may counteract this, but tighter supplies will just offset price reductions in a normal functioning market. The present demand and price situation must be expected to last well into 2021.