Inflation and short supply in North Atlantic seafood- light at the end of tunnel?
Intro
The war in Europe unfortunately seems to continue with no immediate peace in sight. This situation has dramatic effects also in the seafood industry, but particularly in the energy sector that is fueling?record high inflation across Europe, not seen in the last 40-50 years. Interest rates are as a consequence also going up and bottom line is that consumers have less spending power in all market places in the coming period. We start to see the signs of recession , but the situation is much different compared to latest financial crisis in 2008. The high prices of energy is igniting a faster pace in the green transition that gives hopes for the future and that climate changes will be less severe than predicted and at the same time opens a new green economy with job creation and creativity for future solutions to the planets problems.?Seafood industry will play a vital role in the future to feed the world population in a sustainable and less carbon polluted way compared to other land based proteins.?The following analysis by market intelligence at Royal Greenland wraps up the situation for the core species to the company , if you want to explore more on Royal Greenland news - please visit the home page- I am sure we will have an interesting?and challenging fall when summer vacation is over , until then enjoy your summer.
Cold-water shrimp (Pandalus borealis)
Market Price development C&P?prawns
2022 has started very strongly for the C&P cold-water prawn market. Demand continues to remain strong and sales (& ex-ports) volumes is higher in 2022 though Jun than the same period LY. High sales volumes have pushed inventory-levels down and this has had a noticeable impact on market prices, which is month-by-month reaching higher price points. ?If the current momentum in market prices continues it is to be expected that the price-level will close the gap to the pre-pandemic level sooner rather than later. Hereto comes that the general inflation is affecting cost prices, transportation cost as well as cost on other proteins supports a high and increasing price level in the cooked & peeled as well as in other of RGs species.
Supply
Greenland: Supply out of Greenland in 2021 finished more or less at the same level as 2020 and expectations to 2022 is that supply out of Greenland will very likely increase despite challenges with ice delaying and complicating the fishery of prawns more than usual. Total quota for 2022 is 115,000t prawns; whereof approx. half will be landed for peeling totaling an annual supply of 29-30,000t of C&P prawns.
Canada: Supply out of Nfld. & Lab. did for the first time in several years increase the fishery of prawns by 8% compared to 2020, corresponding well with the positive quota adjustment. 2022 quota announcement from Canada indicate that there will be less supply due to reductions of quota-levels from areas mostly supplying C&P prawns. The decline in supply will probably be approximately 1-2,000t, which is not expected to have any significant impact on price setting.
Norway: Norway experienced better than usual fishery in 2021 as ~34.000t were caught; an increase of ~10,000t compared to the catch-level in 2020. The jump in Norwegian fisheries were higher than anticipated (also considering that Russian fishery in the same fishing area were poor) and expectations for annual fishery in 2023 is that it will be better than 2022 due to strong YTD-fishery.
General: Supply of C&P prawns in 2022 is believed to be higher than in 2021 due to strong catch levels out of Greenland and Norway.
World trade
In 2021 imports of cold-water C&P prawns increased to 49,500t from an already high import-level in 2020. Most volumes originated from Greenland (Denmark) who delivered 20,000t followed by Iceland and Canada.UK was the largest single consumption destination for C&P prawns importing 18,000t while the EU as a whole imported 26,000t with Sweden being largest single market consuming 14,500t.§In 2022 though Apr is the combined total imports of C&P unchanged compared to the same period LY. To the UK, imports are up by 38% vs the same period LY while other markets are slightly down.
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Market Price development Shell on Prawns
Shell-on Prawn market prices have since Mid 2021 been improving month-by-month so much so the development in prices resembles a straight line. From the low point in Mid 2021, prices have recovered by +50% and this development in prices has pushed current price levels close to the all-time high back in 2018 - a time where the supply was lower than it is today in 2022. The war in Ukraine which has caused a stop of exports to Russia from main SOP supply countries was expected to have a strong negative impact on market prices on shell-on prawn. But due to strong demand from other markets the upward momentum in prices has, however, been maintained despite fall-out of sales to Russia. Ukraine, a large SOP market in its own right, has started to import shell-on prawns again a positive sign of some “normality” returning.
Supply
Greenland: Supply out of Greenland improved in 2021 as offshore fisheries ended the year at roughly ~66,000t whichis approx. 3,000t more than in 2020. Supply out of Greenland is expected to be higher in 2022 as a result of increased capacity in the fishery and Q1 2022 fishery also indicates that this is realistic being a few thousands tons higher than LY.
Canada: Supply out of Nfld. & Lab. did for the first time in several years increase the fishery of prawns by 8% compared to 2020, corresponding well with the positive quota adjustment. 2022 quota announcement out of Nfld. & Lab. indicate that there will be a higher supply of shell-on Prawns of 1-2,000t, which is not expected to have any real impact on price setting.
Russia: Russian fishery has in 2020 experienced poor catch rates in both 2020 and 2021. It is therefore believed that Russian supply will continue to decline but by how much that is very uncertain. The sparse Russian supply will, however, likely not be exported to western countries but will be consumed domestically or in China.
World trade
Global trade of shell-on-prawns is dominated by volumes originating from Canada and Greenland respectively. In 2021 trade from these countries was 113,000t a record level compared to previous years and an improvement of ~9,000.Russia was the driving force behind this impressive increase in export volumes growing from 9,000t to 16,500t during a period with lower than usual demand from the Asian markets. In YTD 2022, this trend in demand and export volumes continues as the first four months of trade has been higher than LY by 5,000t. It is the main market China who is importing large volumes of Shell-on prawns to fill up the dry Chinese market and keep up with growing local demand and consumption.
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Greenland halibut (Reinhardtius hippoglossoides)
Market Price development
Greenland halibut prices were strongly affected – in a negative sense – by the outbreak of the global pandemic and price levels on HOG products were forced down during the second part of 2020 and Q1 2021. After 6 months of uncertainty in prices they have from Q2 2021 been up trending continuedly with the following monthly price eclipsing the last. Demand from Asian markets have remained strong despite lockdowns and the expectation is that this will be the case for the remaining part of 2022. Today (Jun-22) the price level on HOGs have surpassed the former all-time high price point and if demand continues to be high keeping inventories low it is to be expected that the market price will climb further up.
Supply
Greenland: Supply out of Greenland was approx. 1,600t higher in 2021 compared to 2020 due to more volumes being landed from the inshore fishery. Expectations to 2022 is that supply will be on par with 2021 but possibly lower in 2023 due to the biological advice on the off-shore quota between Canada and Greenland was reduced for 2023 by 18%.
Norway: Supply out of Norway was 1,000 lower in 2021 compared to 2020. In 2022, it is expected that the annual catch level will be lower in 2022 vs LY as the joint quota with Russia has been decreased to 23,500t a 2,000t reduction compared to the previous year.
Iceland: Supply out of Iceland was almost unchanged in 2021 compared 2020 and expected to increase by ~2,000t as the quota around Iceland, Faroe Island and East Greenland has been hiked from 23,529t in 2021 to 26,6510t in 2022. YTD fishery is slightly below LY, which suggest that the catch increase could end up being lower than 2,000t. The advice for 2023 was raised very slightly for 2023, which is expected not to have a significant impact on market prices The overall outlook for supply of Greenland halibut will be mostly unchanged in 2022 compared to LY.??
World trade
Global trade of Greenland halibut did for the second leg of 2021 to a large extent move pass the most negative COVID-19 challenges and trade in 2021 did finish the year a few thousand tons ahead of 2020 volume-wise at 100,000t traded Greenland halibut products. The Chinese and Taiwanese market have grown during 2021 and especially the Taiwanese market has grown by almost 50% in 2021 primarily driven by volumes coming from Greenland. Year-over-Year development shows that the first four months of 2022 is on-par with LY at 23,000t exported volumes. It is primarily China who is fueling this trend with export volumes 15% ahead of LY despite the fact that export prices are higher than they were in 2020/21.
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Atlantic cod?(Gadus morhua)
Market Price development?
2022 has been a record-breaking year for cod with the rising prices seeming more or less unstoppable. At the start of the year auction prices on Norwegian H&G 1-2,5 kg had risen 1 EUR/kg to 3,76 EUR/kg since to early 2021. This was slightly below the all-time high auction price of 3,90 EUR/kg in Feb-2020. Today (Jun-2022) the auction price has increased further to 5,21 EUR/kg adding an additional 1,45 EUR/kg or 38% to an already strong historical price-point. This development in market prices for cod and never seen high prices in 2022 begs the question whether a price level above 5 EUR/kg is here to stay or brought about by a cocktail of factors such as demand surge due to fewer COVID-related restrictions (in Western countries), supply chain constraints and geopolitical conflicts.
Supply
Iceland: Supply out of Iceland has been stable around 270,000t since 2018 and 2021 has been no exception. During 2021 271,000t of Atlantic cod were caught around Iceland which was slightly lower than the year before. The quota was, however, reduced to 222,373t for the 2021/22 season (a 13% drop in quota) and it has been reduced again to 208,846t for the 2022/23 season an additional decline of 6% compared to LY. The outlook for 2022 is therefore that annual Icelandic fishery will most likely fall significantly below 270,000t in line with the available quota.
Norway & Russia: Supply out of the Barents Sea has been roughly at par with the volumes landed the previous year according to Norwegian fishery statistics. In 2021 the quota-level was 906,600t and in 2022 the quota was reduced to 729,480t (a 20% decline) but the drop in quota was partly compensated by flexing uncaught quota into 2022. The expectations for 2023 is that the quota will be cut by 20% to a quota-level at 566,784t – a very significant decline and the lowest level in many years.
Greenland: Quota-levels in Greenland has for many years been stable around 50,000t and annual fisheries has been some-what lower than that at 35-40,000t. The initial five months of inshore fishery in 2022 has been poorer than usual seasons and only 3,300t has been landed. This is 57% down compared to Jan-May 2021 and it applies to both volumes from inshore fishery and volumes landed from off-shore vessels.
General: Global supply is expected to shrink in 2022 as the Barents sea and Icelandic grounds quota was reduced quite significantly and this trend will continue in 2023 as well due to further quota reductions.
World trade
Global trade of Atlantic cod has in volume-terms follow the movements of the supply of Atlantic cod. Global trade was “low” in 2020 due to less supply and significantly higher in 2021. The European market improved by 9% from 2020 to 2021, consuming 375,000t worth of cod both H&G and elaborated products. The UK market declined by 7% from 2019 to 2020 and a further 13% from 2020 to 2021 while the US market finished 2021 at a slightly higher level than 2019 and 2020. In 2022 global trade of Atlantic cod is more or less moving at the same pace as 2021 with the trade of Cod being close to 200,000t from Jan-Apr 2022.
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Snow crab (Chionoecetes opilio) ?
Market Price development
During 2020,2021 and very early 2022, snow crab prices have enjoyed an astonishing jump in market prices from a low around 7 usd/lbs to a high?around 17,00 USD/lbs on Urner Barry Nfld. 5-8oz snow crab clusters. This has all changed since the market price started its decent in late Feb-2022 and later plummeted to a price point around 8 USD/lbs on the 26 of June. At the moment the processors are required to pay harvesters no less than CAD 6.15/lbs and this razor thin difference between raw material price and actual market price has led several large processors in Canada to halt or even stop production lines and the buying of snow crabs from harvesters. To stabilize the snow crab market going forward it is important to see the improve price and regain some of the lost territory. The market price seems tough to have stabilized in recent weeks seeing no decline – an early sign of better days (and prices) to come in the weeks ahead hopefully.
Supply
Alaska: The quota for Alaskan snow crabs was reduced from the 2021 level of 20,411t to 2,540t in 2022. The season runs from Oct-May therefore the fishery is completed and have reached the market. No news on quotas for the coming season.
Canada: Supply out of Canada was around 75,000t in 2021 about the same level as previous years. The quota levels we-re announced earlier in the year and as the biological surveys suggested the overall quota was increased to 95,000t with the gulf-area and Nfld. & Lab. being improved quite significantly. Late Jun-22 88% of the Nfld. & Lab quota was caught and +90% in the gulf-area.
Russia: Russia is one of the largest producers of snow crabs with ~30% of the global quota. The combined quota in 2021 was approx. 45,000t and this figure is expected to be higher in 2022 due to a higher quota in the Barents Sea.
General: Global Snow crab supply in 2022 is expected to increase following the significant increase of Canada and to a lesser extent Russia fishery. This compensates for less supply our of Alaska. ?
World trade
In 2021 the US imports of snow crab increased to 63,000t from an already high import-level in 2020. Most volumes originated from Canada who delivered 40,000t to the US market followed by Russia who delivered ~19,000t. 2021 imports into Japan followed the same direction as the US market and they increased imports to ~15,200t up from 13,000t the year before. Overall snow crab imports in 2022 though May are down 22% compared to the same period LY. To the US, imports from Canada are down by 18% while the largest drop in imports in percentages is Russia who is behind by 64% vs same period LY (due to sanctions). Opposite to the development in the US market, the Japanese imports are up May through 2022 by 48% vs same period LY.
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Best regards
S?ren Eschen
Sales Director
Direct number:+4599308225
Cell: + 45 20 60 84 50