Brief overview of key markets for Pacific seafood as per mid-February 2010

The general character of main commodity supply from Russian and US producers in February 2010 has been still defined by the situation on the pollock grounds in the Sea of Okhotsk and in the Bering Sea, though judging by the development of longline and trawl fisheries in Alaska, the US producers have been not focused exclusively on pollock, according to the overview prepared by analysts of http://www.megafishnet.com/ (https://www.fishnet.ru/) based on Japanese and Russian sources.

By mid-February 2010 the harvest of Atka mackerel in the Aleut Islands has already exceeded 10,500 tonnes, still 20% down on last year. The flounder harvest has reached 35,000 tonnes, nearly 130% up on last year. Completely unusual concentration has been observed on the grounds of yellowfin sole, the harvest of which has jumped nearly 13 times to more than 24,500 tonnes. In the meantime, the longline, trawl and trap harvest of cod in the Bering Sea has reached 54,000 tonnes, nearly 5% up on last year. The total harvest of the above species has approximated 95,000 tonnes, nearly 15,000 tonnes up on last year, while the situation on the pollock grounds has still failed to satisfy the market participants.

Pollock

The US Bering pollock fishery by mid-February 2010 has started to speed up quickly, but the fishery situation has remained generally weak and the size of harvested pollock and the average level of the raw fish quality have left much to be desired, which has especially concerned buyers of US products. Even closer to mid-February 2010 the fishery participants have only had to wait for the new wave of the spawning run and operate on such mostly not very strong concentrations contributing non-uniform catches in terms of quality, fish size and age. In the middle of February 2010 factory trawlers have kept actively searching for strong runs (actually failing to find them) on the northern grounds, and the number of fishermen landing catches onshore has still remained strongly limited (only two or three vessels per large shipowner). The shares of small young and large old pollock have been not very high in percentage, and that can in no way improve the situation with loading of production lines. On the other hand, brisk dynamics cannot be ignored.

In the second week of February 2010 the US pollock harvest in the Bering Sea has approached the result of the A season 2009 for the first time in 2010 and exceeded 24,500 tonnes. Nevertheless, due to extremely weak results of previous weeks the total pollock harvest in Alaska has not reached 60,000 tonnes as per 13 February 2010, practically 25% down on last year. On the Russian grounds the fishery situation has been several times better, the total harvest including areas to the east of Kamchatka has reached 350,000 tonnes already before the middle of February 2010 and subject to the catch rates remain stable the harvest by early-March 2010 may reach 500,000 tonnes.

Pollock catches and commodity production in Alaska

As for the situation with production of main commodities by the US producers, there has been a dramatic rise of activity of frozen pollock roe production. On the second week of February 2010 for the first time from the beginning of the year the weekly harvest reached 1000 tonnes, nearly 2.5 times up on the first week of the month, but even with such growth rates the last year result has not been reached, and the total output from the start of the season has been limited to only 1700 tonnes, practically twice down on last year.

Weekly production of fillet products has also more than doubled as compared to early February 2010, but it has still failed to reach 4000 tonnes. The seasonal production has declined by one third on last year to 7200 tonnes. The output of headed and gutted pollock through the week has increased much less, approximately by 70% namely, but it has exceeded the last year result and the seasonal production has already equaled the result of the A season and amounted to 3000 tonnes (presumably, the bulk of headed and gutted pollock has been meant for further processing into fillets, as some fillet producers have not fully loaded their capacities). Surimi production through the second week of February 2010 has risen as compared to early February 2010 nearly by 120%, but it has still appeared to be lower than last year, and seasonal production has decreased by more than 40% and failed to reach even 5000 tonnes as per 13 February 2010.

Pollock roe

Due to practically complete absence of December shipments the volume of the US export of frozen pollock roe has remained on the level of November, which means that the total shipments in 2009 were limited to less than 16,000 tonnes, almost 4000 tonnes or 20% down on 2008, though production itself has declined approximately by 11% or 2200 tonnes. If one compares official export figures with officially registered production indices, some 2600 tonnes of products from winter-spring A season and summer-autumn B season 2009 remain as if hanging in the air, while in 2008 the annual export was only 900 tonnes below the annual production volume. Presumably, comparably active shipments may resume in the first quarter of the current year forestalling the start of export of products from the A season 2010, however the possibility of that is estimated as not high, especially taking into account the last year experience, when in the first quarter the export shipments were normally inactive, especially in January and February 2010.

Import of frozen pollock roe from Russia and USA to South Korea

The average price of the US export has remained at 9.00 USD per kilo, only 3% or less than 0.30 USD per kilo down on last year. At the same time, reports from the Japanese importers on the results of autumn auctions 2009 in Seattle, when a lion share of products was sold out, hint about a decline of prices (in Yen) by less than 25%. It is quite possible that the average sales price at spring auctions (ca.960 Yen per kilo) can be attributed to strengthening exchange rate of Yen to USD, though data on prices for US pollock exports has long been raising doubts (especially as concerns roe and surimi) and last year has not turned into an exception. It is worth noticing that the average price of the US products imported to Japan in 2009 practically fully coincides with the result of the spring auctions and amounts to ca.960 Yen per kilo, 25% down on 2008.

Dynamics of frozen pollock roe import to South Korea in January has been in keeping with the general trend of the last season and again demonstrated very strong activity of shipments of the Russian raw material to the market. In January 2010 the customs again cleared more than 200 tonnes of Russian products (import of more than 200 tonnes was recorded for the fifth month running), more than 170% up on January 2009 when the shipments from the season 2009 had not started yet. In general the volume of the South Korean import of Russian products from the season of 2009 has approximated 6000 tonnes (from March 2009), ca.25% up on 2008.

Another interesting development noticed in the South Korean import data is that the average CIF price has been very close to 9.00 USD per kilo, namely amounting to 8.92 USD per kilo, while the average result for shipments of products from the season 2009 leveled only at 7.00 USD per kilo. January result has been the highest for the period from March 2009 when the seasonal shipments took off and it has noticeably exceeded maximum results of April and November correspondingly amounting to 8.65 USD per kilo and 8.57 USD per kilo. The above figures can cheer up the Russian producers who in the recent months have been losing optimism due to passivity and extreme caution of the Japanese side pressing for the need to leave prices for frozen roe at low level. However, if the Russian customs take the price of 9.00 USD as basic for estimation of the product's customs value, the producers may be facing big problems at coming auctions in case of unfavourable development of the situation.

Pollock fillets

The US export of frozen pollock fillets to Europe in the end of last year developed fairly actively despite a number of deterrents including Euro's weakening exchange rate and protracted recovery of EU's economies from crisis. The total shipments through December 2009 amounted to 2500 tonnes of fillets, of which nearly 90% were shipped to Europe, ca.135% up on December 2008.

However last year the US producers actually failed to avoid a serious decrease of the total annual sales of pollock fillets to Europe and the December activity has only slightly improved the general background against which the A season 2010 has been developing.

The total export to all directions in 2009 amounted to ca.78,700 tonnes, nearly 11% or 9500 tonnes down on the US export volume in 2008, however considerable increases were observed to the Asian countries, which resulted in a larger decline of shipments to Europe. The total volume of shipments to Asia practically reached 22,000 tonnes last year, growing by more than 30% or 5500 tonnes. The volume of direct shipments to the EU countries was limited to only 52,500 tonnes, more than 20% or 14,500 tonnes up on the previous year. At the same time, export to main markets of Germany, the Netherlands and France went down by 23% to less than 51,000 tonnes. The prices of those shipments as compared to 2008 did not change much, practically remaining at 3.00-3.60 USD per kilo (judging by the average export price), while in December 2009 prices were much higher, namely close to 4.00 USD per kilo.

US export of frozen pollock fillets to EU in 2008-2009

Official data on the European import (for 27 EU states) has disclosed even stronger reduction of shipments of US products (less December imports). As per late November 2009 the customs did not clear even 45,000 tonnes, import declining by 44%, with ca.4500 tonnes imported in November 2009, 1000 tonnes down on October 2009 and nearly 40% down on November 2008. The average import price rose nearly by 30% to somewhat higher than 3.00 Euro per kilo CIF, though in October and November 2009 prices were considerably below that level and amounted to ca.2.65-2.70 Euro per kilo.

EU import of frozen pollock fillets from Russia, China and the USA in 2008-2009

Import of Russian products (mostly single frozen fillets) to the EU countries has also decreased considerably, though not so much.

In November 2009 the import volume decreased as compared to October 2009 by 35% to only ca.1100 tonnes, 34% down on November 2008, however through the period from January 2009 the European import of pollock fillets from Russia declined approximately by 28% to nearly 26,000 tonnes. The average import price in 2009 increased practically by 34% to ca.3.00 Euro per kilo, although in autumn months prices were mostly below 2.70 USD per kilo. In general the level of prices for shipments from Russia has been above 3.00 Euro per kilo only until June 2009, while the prices for shipments from the USA have decreased below 3.00 Euro per kilo only from October 2009.

Shipments of the Chinese products made practically exclusively from the Russian raw material have been demonstrating stability against the background of generally negative development of the European import of Russian and US pollock fillets. In November 2009 China exported 12,800 tonnes of pollock fillets, nearly 20% down on October 2009, however as compared to November 2008 import rose nearly by 1.5%. The total volume of export for the period from January 2009 went down, though by less than 3%, to 151,700 tonnes. If in December 09 the import volume was larger than that in December 2008 (14,400 tonnes), the total decline of import shipments through the year amounted to only 4000 tonnes.

The average import price for the Chinese products in November 2009 (just like in October 2009) was below 2.00 Euro per kilo, while in general through the period from January 2009 it amounted to 2.25 Euro per kilo, and that was practically 28% up on the result of 2008, just like the increase for shipments from the USA.

The total import of pollock fillets to the EU countries as per late November 2009 was smaller than in 2008, namely 16.5% or ca.44,500 tonnes down, and the average import price rose by more than 25% to ca.2.50 Euro per kilo. Such a strong decrease of shipments could be hardly compensated by import shipments in December 2009. Some market players therefore forecasted that for the first time during four years the European import of pollock fillets was limited to less than 250,000 tonnes meaning that problems of the European users which were caused by delayed issue of EU-required legal catch certificates to the Russian producers of frozen pollock and pollock fillets turned to be very important and urgent.

Surimi

The US export of surimi in December was limited to less than 1750 tonnes, 22% down on December 2008, and the total export through the year went down nearly by 25% or 28,000 tonnes to ca.86,700 tonnes. Export of surimi 100% made from pollock declined by 25,000 tonnes to only 72,500 tonnes. The average export price rose by 22.5% to 2.45 USD per kilo (the average prices of pollock surimi leveled at 2.50 USD per kilo).

As per late November 2009 the European import of US products went down by 22% to less than 12,700 tonnes, and the average import price declined approximately by 20% to a little more than 2.05 Euro per kilo.

In 2009 Japan imported ca.58,400 tonnes of US products, 25% down on 2008. Import to South Korea declined to ca.10,400 tonnes, nearly 28% down on import in 2008. Thus, the above mentioned main export markets for US products the decline of shipments was fairly serious. At the same time, China, for instance, considerably increased its import volumes with the total shipments cleared by customs amounting to nearly 4000 tonnes, 50% up on 2008. Such interest of the Chinese users to comparably expensive US products means emergence of another competitor for surimi purchases in Alaska, moreover the volume of the Chinese import has already reached the level of annual production of one factory trawler and the dynamics of Alaska catches in the recent years has been showing steadily declining production volumes.

As for prospects for the European market, in the twelve months of 2009 the EU states imported much less than 35,000 tonnes from all the sources. Probably, the result of 2009 will turn out to be the weakest in the recent seven years. The market specialists attribute that to unexpectedly slow recovery of Euro-based economies from crisis. Problems in Greece, other Mediterranean states and Ireland may lead to weakening exchange rate of Euro to USD, and that will certainly reduce capacities of the European buyers.

In this connection, the Japanese specialists paid attention to active participation of one leading Lithuanian producer of crab sticks and other surimi-based products in a large international exhibition held in early February 2010 in Japan by TDC Group (nearly 400 Japanese and foreign companies took part in the exhibition). Serious interest was caused first of all by the Lithuanian statement that exhibited products were made only from Alaska and US raw material certified by MSC and targeting the consumers keen on ecology. However, for the Japanese market such factor could hardly encourage sales.