Overview of key markets for fish products from Russian and American Pacific fisheries as per early May 2010

By the start of May 2010 the results of the Russian and American roe pollock fisheries were generally clear for the market participants with the Russian indices quite expectedly exceeding the results of the US operations both in terms of production volumes and prices. It is also possible that the results of the new salmon season will turn out to be fairly good for the Russian producers judging by the basic information on the main markets' condition (Japan inclusive), according to the overview prepared by analysts of http://www.megafishnet.com/ (https://www.fishnet.ru/) based on Japanese and Russian sources.

Pollock roe

Current inventories of salted and other processed pollock roe show that the low level of product inventories from the last season raw material could be one of the reasons behind fairly high activity of the Japanese buyers at auctions of Russian products in Busan where the Japanese side already in April 2010 tried to provide the necessary volume of seasonal shipments of frozen raw of affordable quality. However, probably in May 2010 when the auctions in Busan will be continued (under some reports the sales are to be resumed already in the middle of the month) interest of the Japanese side to purchases of the Russian raw roe will remain fairly strong as many Japanese buyers have failed to fulfill their plans on seasonal shipments at the auctions in Seattle.

As per late February 2010 (when the previous season of frozen pollock roe shipments came to an end) the inventories at the largest coldstores of Japan amounted to a little more than 17,100 tonnes of processed pollock roe, 20% down on the respective result in the same period last year. In February 2010 only, the inventories decreased by 4% and in general through the first two months of the current year 2010 the coldstore inventories were estimated at 6% below the last year result (after greatly delayed data update the turn-of-the-year inventories were estimated at less than 18,200 tonnes versus ca.20,500 tonnes before the update. The latter was caused by almost one fourth decline of the number of coldstores covered by official statistics as compared to last year, however the declined coldstores included mostly small facilities therefore the impact of officially big decrease of statistical units on the storage indices was estimated by the market specialists as fairly limited).

That was an exclusively low level of coldstore inventories for at least ten recent years, while progressing of sales was noticeably recovering thanks to a very cautious and restrained price policy of all leading producers. The Japanese need in new purchases of the raw material therefore was fairly large and the growth of its production as compared to last year appeared to be evidently not so large as it was forecasted before the start of the season A of 2010 in Alaska and in the Russian zone.

As per mid-May 2010, when estimating the outlook for shipments of frozen raw material the Japanese side (guided by official or close to official figures) took into account that the total production on the US and Russian grounds amounted to ca.44,300 tonnes, ca.12% up on the estimates as per early May 2009 when the Russian products from East Sakhalin and Kuriles were not taken into account either.

Such estimates were made also on the basis of the latest data on US production. According to such data, as per 1 May 2010 on the grounds in the eastern part of the Bering Sea the fleets produced only 13,100 tonnes of frozen pollock roe, 12% down on the result for the A season 2009. However, thanks to more than 80% increase of pollock roe production in the Alaska Bay up to a record high level of 1000 tonnes, the total volume of the US production in the A season maintained at 14,000 tonnes and namely amounted to ca.14,150 tonnes, only 8.3% or less than 1300 tonnes down on the result of the A season (15,400 tonnes).

At the same time, the roe yield in the Bering Sea was limited to only 4.20% versus nearly 4.75% in the A season 2009, however before the start of the season many Japanese specialists forecasted the roe yield at much below 4.00% and even at only 3.00% (taking into account the age structure of the commercial stock), that would have inevitably led to a decline of seasonal production of pollock roe on the grounds to less than 10,000 tonnes. Evidently, the US producers managed not to allow such a dramatic decrease of seasonal output, but it turned out to be with prejudice to the product quality, therefore the Japanese specialists thought it quite fair that the auction prices in Seattle declined by ca.30-40% on last year, and the average price was limited to only 600 Yen per kilo, 37% down on well above 950 Yen per kilo last year.

As for the Russian production, the production estimates were based on the results the Okhotsk pollock fishery in winter-spring season in three subareas where the season was closed on 20 April 2010. More specifically, the total harvest amounted to only 850,000 tonnes, while it was forecasted at 900,000 tonnes. Despite the catch increase by 30% on last year the roe output in the above mentioned three areas was estimated at only 25% as the official data said that the yield decreased from 3.7% last year to less than 3.6%. As per mid-May 2010 the Japanese side thought that frozen pollock roe production in three main subareas of the Sea of Okhotsk amounted to ca.30,100 tonnes, of which ca.80-85% were sold at auctions in March and April 2010 and ca.5000 tonnes were to be put up for sale at auction in May 2010.

However, the recent years showed the Japanese buyers that the seasonal supply of the Russian raw material would hardly be limited only to production of main Okhotsk operations. For instance, last year the supply from other fisheries (evidently including pollock roe from bycatch on the herring and other fish grounds) amounted to ca.1500-2000 tonnes (under different estimates). According to the market specialists, such situation can be repeated, though some Japanese importers admit that the level of quality of the Russian raw material has noticeably improved thanks to a more thorough grading and rejecting thus encouraging noticeable restraint of roe production for export markets (according to the official figures, with the roe yield being at the allowable normative level of 4.5% the seasonal production of frozen pollock roe only on main grounds could reach 38,000 tonnes).

However, even with regard to such a dedicated policy of leading Russian producers the total production volume in winter-spring season has already reached the record high level for the recent ten years and considerably increased the previous maximum in 2006 (ca.29,300 tonnes). There is a strong possibility that by the end of the season the Russian production will reach a much higher level that 30,000-31,000 tonnes, but dramatic price falls at May auctions are not expected as the quality of the Russian products in the current year is fairly high and the Japanese buyers, including those who purchase the raw material for the Chinese and South Korean processors catering for the Japanese market, will have no other opportunities for additional purchases of the raw material and the need in them may turn out to be quite urgent.

By early April 2010 the total volume of Russian shipments from the season 2010 to main markets (Japan, South Korea, China) is provisionally estimated at ca.2500 tonnes. By the beginning of the month it could evidently reach the level of 22,000-23,000 tonnes, though more or less true estimates could be made only close to mid-June 2010.

Pollock

Practically final figures on Alaska catches of roe pollock and output of main pollock commodities in the A season 2010 were made public as per early May 2010. As compared to the start of the second half of April 2010 no serious changes were observed in the beginning of May 2010, though for some product types the indices rose fairly noticeably.

The seasonal harvest in the second half of April 2010 grew approximately by 1000 tonnes (mostly at the expense of fisheries in the Alaska Bay, and in the Bering Sea and in the waters of the Aleut Islands the pollock catch was practically not registered at all) and reached the level of 350,000 tonnes, only 4% up on the total catch in the A season 2009. The seasonal TAC was therefore covered at 95%. Pollock roe production went down by ca.8% to 14,100 tonnes, mince production dropped by 3.5% to less than 8000 tonnes. Fishmeal production more than halved to less than 15,000 tonnes by early May 2010. Seasonal production of all fillet products failed to reach even the level of 43,000 tonnes versus more than 47,000 tonnes in the A season 2009, that is the seasonal production of pollock fillets in Alaska declined by ca.9%.

At the same time, production of pollock surimi amounted to ca.42,500 tonnes, nearly 14% up on last year and the market specialists think that the opposite trends in fillet and surimi production reflect real changes on the markets of these goods (in particular, expectations of a short surimi supply on the world market in the second half of the year). Production of headed and gutted pollock rose by more than 40% to ca.27,000 tonnes as compared to the result of the A season last year.

Salmon

On the first week of May 2010 all the 36 Japanese drift netters who have been approved for salmon operations under the Russian-Japanese agreement (stipulating conditions for the Japanese salmon fishery in the Russian EEZ) have arrived at the salmon grounds in the Russian zone. This year the salmon fishery has taken off some 6-7 days earlier than last year and that can give the Japanese producers of fresh and salted products (mostly sockeye and chum salmon) definite preferences if they are able to use the advantage in the current difficult weather and water conditions. The reports also say that all the 16 Russian drift netters have also come to the grounds, but so far (evidently until the closing ten days of May 2010) the situation on the Japanese market in the beginning of the new season actually depended on landings of the Japanese products harvested outside the Russian EEZ.

The new salmon season has been launched already in the end of the second ten days of April with prices for fresh spring chum salmon being unprecedentedly high (to a great surprise of the market specialists). Prices for products of the highest quality in the first days of landings have jumped to well above 2000 Yen per kilo (more than 21 USD per kilo), while last year from the first days of landings they were much below 1000 Yen per kilo. According to some information, the prices have been maintained by several buyers having stable orders from the dedicated users. By the end of April 2010 the situation has turned to be much calmer, but the price level has remained much higher than last year (prices for fresh chum salmon of grades from C to AB ranged from 480 to 800 Yen per kilo as per 30 April 2010). That has livened up the moods of the Japanese and Russian participants of marine salmon fishery.

On the other hand, as per early March 2010 (no later info has been available as per early May 2010) coldstore inventories of frozen salmon (less trout, pink salmon and other species) at main coldstores of Japan have been ca.7% up on last year with the total volume of inventories amounting to nearly 86,500 tonnes. A comparably high level of inventories normally results into weakening of the market situation. However, some market specialists do not advise to hurry with definite conclusions in this connection.

They think that the general increase of inventories has been caused first of all by a more than 40% increase (+16,500 tonnes to 56,500 tonnes) of shipments of Chilean coho salmon in the current season. With such a rise of current shipments the growth of inventories by less than 10% is actually not so substantial and can hardly influence greatly the users' behavior as the forecasts of shipments from Chile in the current season have been not so optimistic so far. Moreover, the volume of the Chilean export of frozen coho salmon to Japan in the first quarter of the current year appeared to be nearly 9500 tonnes or more than 20% down on the first quarter 2009 and amounted to only ca.33,000 tonnes, therefore by the start of the second half of the year when active shipments of frozen sockeye from the new season in Russia and Alaska get started the total volume of available shipments of frozen raw fish on the Japanese market can be not so big as it is forecasted as per mid-May 2010.

Saury

Reports on coldstore inventories of frozen saury in Japan are also worth mentioning as their low level against the background of a very high level of exports from the season 2009 has given the grounds to conclude that by the start of the new fishing season in July the coldstore inventories will be practically zero.

According to the information on coldstore inventories as per late February 2010 (as per mid-May 2010 such info as per late March 2010 has not been yet published), by the start of spring 2010 the total supply of frozen saury of the season 2009 at main Japanese coldstores (exceeding 500 in number) declined to less than 30,000 tonnes, practically one third below the last year result. In the meantime, only through the first quarter of the current year 2010 Japan exported more than 36,000 tonnes of frozen saury, nearly 19,500 tonnes up (+115%) on the first quarter of last year, with ca.90% of the above volume shipped to Russia (in March 2010 only the Japanese exports to Russia totaled ca.15,000 tonnes). Probably, in April and May 2010 export to Russia has been of core importance for the Japanese producers and exporters of frozen saury, but no one can forecast the situation in the future season as the level of prices in the new season may greatly rise and complicate the situation with frozen fish prices ranging within 0.90 USD per kilo. More successful progressing of the saury fishery in the Russian zone can also strike out the Japanese hopes to maintain at the Russian market.

Surimi

China has been gradually turning into one of main consumers of pollock-based surimi of the US origin (according to the estimates of some Japanese specialists, in the first half of 2010 the market can pull over up to 3000 tonnes of products from the A season 2010 approximately corresponding the volume of the seasonal output of two fairly powerful factory trawlers). In this connection, development of the Chinese export of crab sticks, fish balls and other types of processed and ready-to-eat surimi-based products in the first quarter of the current year looks fairly interesting.

According to the Japanese specialists, in the first quarter of the year the Chinese factories again worked far from at full swing, also due to usually wide celebration of the New Year under the lunar calendar which in 2010 happened in mid-February. Nevertheless, already in March 2010 the volume of the Chinese export of surimi-based products returned to the level of 10,000 tonnes, practically 15% up on March 2009. The total volume of shipments through the first quarter exceeded 30,000 tonnes and nearly reached 32,000 tonnes, 13% up on the last year result.

The general level of prices by the end of March still failed to reach the level of last year with the average FOB price through the first quarter of 2010 amounting to ca.2.10 USD per kilo versus 2.30 USD per kilo in 2009, but in March prices were already much higher than last year (the average export price amounted to ca.2.23 USD per kilo versus 2.17 USD per kilo in March 2009) and fast rates of shipments against the background of comparably high prices can mean that the Chinese producers and exporters have already managed to overcome unfavorable consequences of the world crisis.

Serious changes in distribution of shipments between the main markets have not been reported with neighboring Japan, South Korea and Hong Kong, as well as North America and Western Europe remaining main directions, though trade with Russia and the Ukraine has also showed good results. In particular, in March 2010 only, China shipped 450 tonnes of surimi to Russia (nearly 5.5 fold up on March 2009). The total export to Russia in the first quarter of the year jumped by more than 60% and reached the level of 800 tonnes (somewhat down on the nation's export to Spain, but times up on the export volumes to Italy, France, Belgium, the Netherlands and even Germany). Shipments to the Ukraine in the first quarter of 2010 turned out to be nearly 85% up on last year and their volume appeared to be close to 200 tonnes, which could be regarded a fairly good result for the nation seriously hit by the world economic crisis.