China’s demand for krill may result in changes to CCAMLR Convention
Dmitri Sclabos is a self-proclaimed expert in Antarctic krill. And he has the bona fides to back up that assertion. An agronomist and graduate of the Pontificia Universidad Catolica de Chile, Dmitri Sclabos started working in the krill fishing and processing sector in the early 1990’s. Sclabos has risen to become managing director of Tharos, a Santiago, Chile-based consultancy that has worked in the South Antarctic krill fishery for more than 25 years. In the past, Sclabos helped develop a new process to produce krill oil on board vessels at sea that he said is less harmful to the environment. And along with Tharos Process Engineer Raul Toro Guerra, Sclabos jointly developed two world patents for a solvent-free krill oil extraction processs, which he claims is a first in krill processing.
These days, Sclabos’ attention is firmly planted in China. Tharos estimates Chinese demand for krill can potentially reach 4.5 times current global krill oil production and four times current krill meal production. The country’s “vast internal market” has become a prime target for Tharos, but it is now competing directly with Chinese companies fishing for krill in the Antarctic. Krill has become a strategic target in recent years for Chinese companies like Shen Len, which recently launched the world’s largest purpose-built vessel for fishing Antarctic krill. Norway, and specifically Aker Biomarine, also has a presence in the fishery, seeking to develop high-value food and medicinal products from Antarctic krill.
But in an interview with SeafoodSource, Sclabos said he believes demand from China will ultimately steer the world’s most-populous country into throwing its weight behind a change in the Antarctic krill stock management system, which is currently controlled by the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR). China is a member of CCAMLR, as are Norway and Chile, alongside Chile and 23 other nations. But with China vowing to double its krill-fishing activity over the next four years, and its efforts to source high-quality krill oil at the lowest possible price, Sclabos said that could lead the country to prefer and work toward a management system that more openly prioritizes the economic development of the fishery.
SeafoodSource: There is increased interest in krill fishing in China … What does increasing Chinese involvement mean for the industry?
Sclabos: The South Antarctic krill fishery has gone beyond science and commercial drivers. It is also a geopolitical issue. What happens at sea sustains what happens in the Antarctic Peninsula, and further south inside the continent. It is not only China [you need] to look at, but all other players, incumbents, and insurgents. China alone will [double] is current fishing effort within the coming three to four years.
CCAMLR's has a well-run quota allocation and enforcement to sustain this growth as well as a healthy biomass, [which was] recently reinstated through fresh data coming from recent research voyages at a 76-million-ton stock. We will see if NGOs and consumers think similarly. Growth comes from a demanding Chinese market. China has several non-commercial import hurdles that still give some privileges to their fishing operators, but they will slowly fade away.
Chinese subsidies help allocate funds for Antarctic krill fishing. China's first Antarctic Ocean Living Resources’ Development and Utilization Project was launched in Dalian, in March 2011, named Rapid Separation of Antarctic Krill and Key Technology of Deep Processing. This project started in October 2010, when the Chinese State Ministry of Science officially launched the “863 Program” as a national strategy. A project team was put together that included nine universities and research institutions.
SeafoodSource: What are the hurdles placed on imports by China?
Sclabos: They are basically sanitary and regulatory-minded import obligations that take a very long time, are costly [and involve] mostly Chinese agents dealing with Chinese legislation, which makes trade convoluted. They are mostly administrative measures. Also needed are import licenses … And they all change periodically. You need manpower to do this … or pay a hefty amount for someone in China to help, which anyway takes time.
SeafoodSource: Government officials in the Chinese city of Haimen in Jiangsu Province recently announced a “priority” investment project featuring processing and research and development facilities, which will handle 50,000 tons of Antarctic krill per year in a CNY 6 billion (USD 853 million, EUR 773 million) investment. Do you think this is a realistic proposal, given the huge figures involved?
Sclabos: The Chinese government’s financial support is vast. In the mid- to late-2000’s, it supported some small companies to get involved in on-land re-processing of krill products. Many of them went bust, some used the subsidies to get involved in real estate business, others just weren’t up for the task and failed, few succeeded.
Current [Chinese] support goes to large trawlers – one is brand-new, soon-to-be launched, a second is on the drawing table – plus existing ones. It shows how committed China is in this fishery. In parallel, Chinese companies that re-process on-land what is sourced from their fishing operations are also growing in importance and size. Chinese are working hard to reach Western quality standards. All this configure a scenario where most of its fishing and re-processing infrastructure is well covered. Hence, the “priority” investment I think has limited space to maneuver in the short-term, especially when you factor in the potential constraints on the fishing effort. Meal demand is high to extract the oil, as is oil for local market. [Taking into account] their trawlers’ [catch], plus what can be purchased from third countries, I don’t see such a sizeable investment happening in three to four years.
SeafoodSource: Do you feel the subsidised nature of China’s krill fishing industry is a threat to the long-term sustainability of krill supply?
Sclabos: This is a question that should include Norwegian operations, as they also profit from several types of subsidies. The Chilean operation receives none. I think that such [a] subsidized nature will not prevent China being part of an Antarctic sustainable-approach team, not necessarily a threat.
It is linked to how China positions itself within international rules. As mentioned in the source scenario, China, similar to all other Antarctic players, play by CCAMLR rules. And they should do so if they want to prevent a market backlash whereby consumers, industry stakeholders, krill advocates, and NGOs shout foul and initiate a call to boycott their products. Their market is so vast that China can play solo, but it needs to be part of the larger global community, be seen as part of the solution, and the country’s government is smart enough to take a strong geopolitical stand in this region.
Norwegian operations are at present the largest in terms of catch effort, size of trawlers, and processing investment, as well as carbon footprint and environmental impact. Aker submits itself to be a strong advocate of sustainable practices, inviting surveyors and the scientific community on board their trawlers, bu they remain the largest players with the largest impact in the area. They have new projects in the South Antarctic, and new projects in the pipeline. Their presence is larger than the Chinese at present.
SeafoodSource: Much of the talk about krill in the Chinese context concerns its potential as a source for aquafeed. Is there enough krill for a sustainable supply?
Sclabos: As a source for feed, just as for food applications and pharma and nutra applications, both will define the fishing effort, and how sustainable Antarctic krill is [in the future]. To put it in context, the current South Antarctic krill fishing effort takes a mere four percent of the annual – theoretical – eight-million-ton TAC. I say theoretical as it does not work, for example, like the Peruvian anchovy fishery, where the TAC is fulfilled entirely. The Antarctic krill fishery will never reach that before CCAMLR, NGOs, and the entire world stop it. There is the precautionary catch limit of 620,000 tons, which is a more real value in my opinion. Using this as proxy, current catch effort takes a third of that. If the current catch effort growth remains as is, and several new projects come live, the South Antarctic krill fishery as we know it, will change. Norway and China lead this growth, as it has been for the past 10 years.
On a scenario where 620,000 is the cap, all depends on the type of end products targeted. Tharos’ estimate for annual demand is 120,000 tons dried meal in feed and 5,000 tons of oil for food, respectively. This will take almost one million tons of raw krill catch, making it unsustainable if the precautionary limit is used. And I am not counting Korean, Ukrainian, and other countries’ production of meats, whole frozen krill, more meal, and new end-products in the pipeline which will increase the fishing effort by say to 1.1 million tons to 1.2 million tons annually.
Using current production average yields – new technologies will change a bit that – and given the demand I just explained, the entire precautionary catch limit will be consumed. In this scenario, the precautionary catch is not enough. New Norwegian, Chinese, and other countries’ krill projects will put further pressure to raise the TAC, or just breach the consensus, which is how CCAMLR works so far. That may force a move to a different way in how CCAMLR sets limits. It brings new challenges on how CCAMLR does its job, how it allocates quotas [and regulates] members’ commitments. But before this [threshold] is reached, our research shows that other sources of proteins and lipids will help ease the pressure on this fishery.
SeafoodSource: What are the consequences of global warming for krill stocks? Do you think warnings about a potential collapse of krill stocks have been accurate?
Sclabos: Global warming is already taking its toll in the South Antarctic region. We have seen krill stock and penguins moving deeper inside the Peninsula looking for colder waters. What usually happened in February and March in terms of krill’s biology can now be seen in November or December onwards. The real impact will probably be seen in the years to come, and in ways we do not have yet the tools to measure properly. Hence, more fishing restrictions, expanded MPAs [marine protected areas], limits to type of trawler fuel, waste treatment, and zoning, among other restrictions. I envision TACs [total allowable catch] will be implemented, be they politically or commercial assigned. If they follow the history of other pelagic fisheries, past-historical fishing effort will define part, if not all, of it. Might this be the reason for such hectic activity at shipyards?
SeafoodSource: As for Tharos, where do you see the opportunity in krill production for your firm over the next five years?
Sclabos: Manufacturing all krill end-products entirely on-board using Tharos’ technologies.We aim that our technology finally scales up commercially at-sea, where the krill is fished and processed in less than two hours from catch. We also aim to apply new patents for special krill products currently in the last R&D stages. Market drivers point to [demand for] 100 percent clean foods, GMO-free, with a minimum environment impact, if any. Our model brings unique technologies to achieve these goals, and beyond. Krill oil for example … all current and coming Antarctic krill operations still rely on the model that manufactures krill meal at-sea, ship it to shore to reach the oil extraction plants. These use ethanol, hexane and other solvents to either extract or concentrate the oil. The oil becomes available four to six months after raw krill was captured … [this causes] oxidation and losing of valuable compounds. Our model cuts the carbon footprint by at least seven times.
SeafoodSource: You don’t own your own krill vessels?
Sclabos: To own a vessel means a [capital expenditure] way above our pay-checks. Our model is to partner with an operator or license the technology. Partnering and co-owning an operation is what we did in the Arctic. Licensing against royalties and down payment with an operator that runs its own fishing operation, and wants to add more value, is what we will do in the South Antarctic waters.
SeafoodSource: Who are you partnered with in the Arctic and how large is that operation?
Sclabos: Several partners, among them Norwegian firm NITG and the Icelandic [seafood] company Brim. Compared to Antarctic trawlers, this is still a small operation through a factory trawls with license to fish in Iceland. There is an investment round underway to scale it up.
SeafoodSource: What new functions or uses for krill do you see coming online in the coming years?
Sclabos: Pharma applications, specifically human and animal health. Prices today hinder mass market [distribution] of certain krill end-products – oil, for example. Once the oil price is halved, new applications will become commercially viable.
Besides the oil, there is renewed interest in hydrolysates is in the pipeline. This might follow the opposite trend, a price increase if buyers want operators to have a sustainable financial outcome. Rimfrost’s bankruptcy was enlightening. Its business model was costly but the product was good and low-priced. Both don’t coexist.
Another set of products that could come out of the krill fishery is [aquafeed]. Aqua species, mostly carnivorous... are fed up eating veggies. [Krill] can add some nice flavor and taste [to vegetable-based feeds] – another sector where hydrolysates have a place.
Photo courtesy of Dmitri Sclabos/Tharos