China committed to becoming a world leader in krill oil production
China is focused on becoming a supplier of high quality krill products. With this aim, it will keep building its presence in the South Antarctic seas.
According to Dimitri Sclabos, CEO of Tharos, a Chilean-based consultancy that has worked in the South Antarctic krill fishery for more than 25 years, China has registered four trawlers for the 2015-2016 fishery. (The season runs from 1 December 2015 until 30 November 2016.) Not all of these trawlers might eventually take part in the fishery, but it is a good indication of the country’s commitment.
Although the USA remains the market leader in sales of krill oil for human consumption, there is huge potential in China, given its fast-expanding middle class. Chinese krill fishing is due to expand with Project 863, part of the country’s Antarctic Ocean Living Resources Development strategy for the exploitation and utilisation of South Antarctic krill.
Qingdao, in Shandong Province, has led the development of China’s krill fishing and processing industry, and by the time Krill Project 863 is complete, it is envisaged that Qingdao port will create more than USD 1 billion (EUR 0.90 billion) of annual output value.
“This [Chinese] demand is [due] to young middle class consumers who are concerned about their health,” said Sclabos. “They see krill oil as being better than fish oil to help them in this respect. However, price is a hurdle to overcome.”
China is looking for ways to buy high quality krill oil at the lowest possible price, according to Sclabos. However, foreign brands are still banned so importation is mostly done through irregular channels, if at all, Sclabos said, which is leading to quality issues.
According to Sclabos, besides high prices, the biggest problems hurting consumption are solvent residues in krill oil; competitive phospholipids-plus-astaxanthin-enriched marine oils; and other competing marine oils made from fish processing residues, he said.
“These are not only processing issues, but are also due to the raw material used to extract the oil,” he said. “Low-quality krill meal, from where the oil is extracted, is mostly what is brought to market by Chinese operators, as the market is limited to foreign krill meal brands which are not licensed.”
As a result, China is seeking to increase and improve domestic production to fulfil consumer demands.
“Although Chinese krill oil will keep showing quality issues, overall quality standards are improving. Chinese players remain committed to bring in updated technologies and, most importantly, to strive to achieve efficient operations and the highest possible quality of end products.”
Tharos reckons Chinese domestic demand for krill oil will reach 3,000 metric tons by 2018, though that might decline due to China’s recent financial turmoil, which has hurt consumption, according to Sclabos.
“The 3,000 metric tons demand remains the Chinese consumption target, but reality may prove that a smaller volume may end up being sold,” he said. “In the worst case, I expect 50 percent of the target to be fulfilled subject to China’s domestic production.”
As of last month, there were 11 trawlers from four countries – China, Chile, Korea and Norway – registered with the body that regulates fishing for krill in the Southern Ocean – the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR).
Although 12 trawlers from five countries were registered for the 2014 -2015 South Antarctic krill fishery, not all were fishing at the same time. The Chinese were in and out, for example, as were the Chileans. It may have been that on a specific moment all 12 were fishing, but in general between eight and nine were simultaneously fishing.
Despite a near-record amount of boats fishing for krill in Antarctic waters, the krill fishing industry faces challenges, Sclabos said. Recent demand for krill oil has declined globally and the Omega-3 category has seen years with a market downturn as high as 7 percent year-on-year, on the back of existing quality problems.
However, Omega-3 players have shown a remarkable strength to fight back current market conditions, Sclabos said.
“There is confidence that the krill industry will strengthen itself backed by new technologies, products and business models,” he said. “Early 2016 will see how committed the krill fishing industry is once CCAMLR updates the list of trawlers that will participate in the 2015-2016 South Antarctic krill fishing season.”