Low stocks in Japan and reduced tropical surimi production could contribute to a rise in surimi prices from this year's pollock A season, especially for lower grade products, said European and US industry players.
A currently strong euro could also influence European buyers to make some opportunistic purchases, although stocks are considered to be good in Europe after lackluster sales in 2013, they said.
US sources mentioned talk of pollock block prices rising as high as $3,200 per metric ton, and when it comes to surimi in particular, some think the picture for 2014 is poised to get rosier.
“Surimi prices are currently on the rise and with strong demand worldwide and a decline in supplies of tropical surimi, early indications are that surimi prices could increase by 20-25% -- $400-$500/t on a dollar basis -- next A season,” said one US-based pollock source.
Others were not so bullish, although all predicted some increase ahead.
“Pollock surimi demand is getting stronger,” Ken Suzuki, with Maruha Nichiro’s Westward Seafood, told Undercurrent News.
Suzuki is targeting a price increase of 10% to 15% at least, taking in consideration that Japan loses due to the exchange rate. Another Alaska salmon source Undercurrent spoke with was less confident on his forecast, but said the company is edging towards agreements with customers for price increases of 10% to 15%, and sometimes more, depending on the grade and the customer’s country.
Due to the weak yen in Japan, it may be difficult to get prices to Japan to go up much, but prices to other countries in Asia such as South Korea, as well as to Europe, may be easier to nudge up more, they said.
“I think customers are going to buy more pollock surimi than usual – I can feel it,” Suzuki said.
Strong Japan sales, low stocks
Sources pointed to good sales in Japan last year -- resulting in low stocks -- and the low tropical surimi supply as the reasons for the increase.
Pascal Guenneugues, from Future Seafood, ventured that Japan could be coming to the negotiating table already in January due to its low inventories.
"Japan has very little stock in my opinion and they will have to negotiate the new season very soon," said Guenneugues.
According to the US-based pollock source, surimi seafood consumption in Japan last year was very high and reached a five-year peak. Inventories, meanwhile, were 14% lower year-over-year by end of October. To top it up, Hokkaido pollock fishing was much lower than expected and a lot of Hokkaido’s H&G pollock went to China, said this source.
A European industry player said stocks in Japan are estimated at around 60,0000t, a low figure, but still above the historical lows of around 45,000t.
This source was perhaps the least bullish about the coming increase.
"Stocks may reach near-critical levels, but I don't see any Japanese buyers headed to Alaska just now," he said. The pollock A season is due to start on Jan. 20.
Overall, he said, "there should be a healthy demand for surimi. But nothing highly exciting."
Drop in tropical surimi supply
According to the European source, it is particularly sales of lower grade surimi that could see price increases.
That is mainly due to increased demand for lower grade surimi and the drop in supply in tropical surimi, which fell by around 10-15% in the first half of 2013, and by around 25-30% in the whole of 2013, according to sources.
Considering tropical surimi accounts for more than 60% of global surimi supply, this is bound to have an impact on demand for lower grade surimi.
"Alaska pollock is the real value offer now [for lower grade surimi]," said this industry player. In addition to having low production, Thailand also has an noncompetitive currency rate right now. So most of their production is sold domestically, he said.
According to the afore-mentioned US pollock source, the situation in Thailand is not improving and is becoming a concern, while catches in Vietnam and India have also been very poor in the past few months.
Complicating the picture, however, is the situation of the Japanese yen. "The weakness of the yen could block an increase in prices," said Guenneugues.
Japan is very much considered as the key driver for the surimi market. The country is the largest market for US pollock surimi, taking in around 45% of exports, followed by South Korea (30-35%) and western and eastern Europe (25%).
According to one industry source, however, much of the high volumes seen to South Korea last year were actually bound to Japan, as Busan is cheaper both for transport and storage than Japan.
Turning page on poor B season
Although surimi prices seem likely to rise, US-based sources said they are unlikely to reach levels that would make surimi more attractive than pollock blocks.
Surimi prices tumbled early last year, and prices by the end of last year's B-season were so low that companies were losing money on the product, said Suzuki.
Joe Bersch, general manager of Alaska pollock supplier Premier Pacific Seafoods, agreed.
Surimi prices were even less attractive than PBO blocks as of the end of B season 2013, Suzuki said, and PBO blocks as of the end of B season were already the lowest they have been since B season of 2007, according to Undercurrent’s prices portal.
Adding to this grim picture, Suzuki said, “Our business is getting harder in 2014 because of the low prices on fillets and the low price on surimi right now.”
Data seen by Undercurrent suggests pollock surimi production reached a low in 2009, when it fell to less than 90,000t. This then increased to just over 100,000t the following year, behind jumping to nearly 150,000t in 2011.
Production volumes in 2012 and 2013 were fairly similar, with season A production at 68,200t and 70,200t and season B volumes at 97,900t and 100,100t, respectively.