While the supply outlook for 2021 is positive, one must expect lower supplies of major groundfish species like cod and haddock in 2022. As the COVID-19 pandemic begins to subside, demand is growing and trade is set to increase, although there are still some challenges facing the industry, especially logistic problems in China.

Supplies

The International Council for the Exploration of the Sea (ICES) has issued its 2022 total allowable catch (TAC) recommendations for groundfish in the Barents Sea. ICES recommends a 20 percent cut in the Barents Sea cod quota to 708 480 tonnes, down from 885 600 tonnes in 2021. The Icelandic cod TAC should be cut by 13 percent to 222 373 tonnes for the 2021/2022 fishing season, which starts in September. For Barents Sea haddock, ICES recommends a 23 percent cut to 180 003 tonnes. The Icelandic haddock TAC should be increased by 11 percent to 50 429 tonnes. The final quotas for the Barents Sea will be set later by the Joint Norwegian-Russian Fisheries Commission (JNRFC).

At the North Atlantic Seafood Forum, held digitally in June, Kontali revealed their forecasts for 2021 production of whitefish, both wild-caught and farmed. In total, they expect a 3.7 percent growth in global supplies, to 20.7 million tonnes (composed of 7.65 million tonnes from capture fisheries and 13.08 million tonnes from aquaculture). In fact, these forecasted 7.65 million tonnes would represent a new 10-year record for capture groundfish species. Cod catches from Norway, the Russian Federation, Iceland and the Faroe Islands were up by nine percent as of the end of March this year, and for the full year, Kontali estimates that cod supplies of North Atlantic cod will increase by 13 percent.

The Alaska pollock B season started on 10 June 2021. Producers are complaining that the fish is very small, with an average size per fish of 400 grammes. This makes it extremely difficult (or impossible) to use the fish for pin-bone out (PBO) fillet blocks for the European market. It is also a challenge to produce deep-skin fillets for the US market. With such small-sized fish, more will surely go to surimi production.

The Russian Scientific Fishery Institute Council of Directors has announced that the country’s total allowable catch (TAC) for 2022 will be 3.25 million tonnes. Of this amount some two million tonnes are allocated for Alaska pollock, on a par with the TAC for 2021. However, there will be some changes in geographical distribution. The major fishing area for Alaska pollock, the Sea of Okhotsk, which in 2021 has a TAC of almost two million tonnes, will decline to less than one million tonnes in 2022.

Market

Russian exporters have for years supplied the Chinese processing industry with Alaska pollock, but are now discovering that Chinese consumers have a growing appetite for Alaska pollock products. Part of this development may be the result of the proliferation of western fast-food chains in China. McDonalds and Kentucky Fried Chicken are both popular in China, but Alaska pollock products are also channelled through retail chains. However, Russian exporters to China have recently found it almost impossible to ship their goods. As China closed the main ports of Dalian and Qingdao for vessels from the Russian Federation last year, Russian exporters started using the Korean port of Busan as a transhipment port. However, Chinese authorities are requiring Korean health certificates for these shipments to enter China, but as the shipments are just in transit and not formally entering the Republic of Korea, they cannot obtain such Korean health certificates. Thus, the situation is at an impasse.

Demand for traditional groundfish products like klipfish, saltfish and stockfish appear to be on the rebound after the COVID-19 pandemic. For klipfish, Portugal is the crucial market, and in May, Norwegian klipfish exports to Portugal grew by more than 1 000 tonnes compared to May 2020. Portugal in fact took about 80 percent of Norwegian klipfish exports in May. For saltfish, the rebound is even stronger, and again, Portugal is the main market. Stockfish (air-dried codfish) exports are also up, but for this product, Italy is the main market.

Surimi

The inventory of surimi in Japan hit a low point of 33 300 tonnes in March 2021. An inventory below 50 000 tonnes is considered dangerously low. Compared to March 2020, the total amount of frozen surimi was 83 percent, but for surimi of Alaska pollock it was only 69 percent. However, in March, US exports of frozen Alaska pollock surimi to Japan increased, up 19 percent by volume compared to a year ago, and up 9 percent by value. Prices went down, however, and dropped 11 percent compared to March 2020.

Statistics from the National Marine Fisheries Service (NMFS) show that US exports of surimi during the first three months of 2021 were only slightly down compared to the same period in 2020. Total surimi exports amounted to 70 347 tonnes during the first quarter of 2021, just 100 tonnes less than in same period of 2020. Of this amount, just over 97 percent consisted of Alaska pollock surimi. The two largest markets were the Republic of Korea and Japan, which together accounted for 76.1 percent of total US surimi exports.

Trade

During the first three months of 2021, Chinese imports of whole frozen cod, which is the raw material for processing cod fillets in China, dropped by over 45 percent, to 24 026 tonnes. The main suppliers, the Russian Federation and Norway, both suffered sizeable reductions of 50 and 23 percent respectively. Greenland, however, increased cod shipments to China by 44 percent, albeit from a low level. Chinese exports of frozen cod fillets declined as a consequence. Total exports during the first three months of 2021 were down by 18.9 percent, to 18 080 tonnes. All export markets were affected by this downturn. For Alaska pollock, the picture was even more dramatic: China’s imports of whole frozen pollock dropped by an alarming 90.5 percent during this period, with the Russian Federation accounting for the bulk of this reduction. However, the corresponding exports of frozen Alaska pollock fillets did not reflect the dramatic reductions in raw material imports. Total exports of frozen Alaska pollock fillets during the first quarter of 2021 declined by only 1.4 percent, perhaps indicating that China had some raw material in cold storage. Exports to Germany declined by 5.5 percent to 13 452 tonnes, while exports to the Republic of Korea increased by 61.9 percent and to the United States of America by 21.4 percent.

The European Union imported 20 percent more frozen Alaska pollock from the United States of America in 2020 than in 2019. Total EU imports from the United States of America amounted to 10 606 tonnes worth EUR 20.03 million (USD 23.7 million). EU imports of Alaska pollock from the United States of America have been falling since the beginning of 2019, and the import price has shown a steady growth during that period, although towards the end of 2020 prices stagnated somewhat. The logistical problems in China experienced by Russian exporters are shown clearly in Russian export statistics. Russian exports of whole frozen Alaska pollock during the first quarter of 2021 fell by 54 percent to 140 711 tonnes. Exports to the Republic of Korea increased by 149 percent to 114 589 tonnes, while exports to China dropped by 92 percent to just 19 882 tonnes, down from 255 702 tonnes during the first quarter of 2020. As described before, these exports to the Republic of Korea are re-exported to China, without entering the country.

Prices

Although demand for Alaska pollock is strong, prices for H&G are volatile and, in some cases, weakening. Demand for raw material in China is very strong, but logistical challenges remain. Prices for headed and gutted (H&G) cod and haddock have been fairly stable during the first months of 2021. Bigger volumes of fish are now expected to arrive from Norway and the Russian Federation, but observers believe that the increased supplies will be offset by growing demand, and that prices therefore will remain stable.

Outlook

While groundfish supplies are expected to increase by almost 4 percent in 2021, the outlook for 2022 is one of tightening supplies. Cuts in quotas for cod and haddock in the Barents Sea will surely impact the market, and could push prices upwards. In the Alaska pollock sector, production of fillets and blocks may decline because of smaller fish. This could mean that more US pollock will go to surimi production. As surimi inventories in Japan are very low at the moment, an increased US production would alleviate the situation.

For 2022, the outlook remains uncertain. The announced cuts in quotas will obviously reduce supplies, and prices are therefore expected to rise headed into 2022. Alaska pollock prices are expected to increase somewhat due to Russian supply problems, logistic challenges in China, and most importantly because of recovering demand from other markets emerging from the COVID-19 pandemic. In general, prices of groundfish products are expected to rise