Russia modernizes its pollock fleet, but struggles to find buyers
Russia’s pollock fishery was faced with an unprecedented season in 2021 as the nation’s products were shut out of Chinese ports – a sudden loss of the destination market for 60 percent of the country's seafood exports.
The closure forced the fishery to look for new destinations for its products, raising existential questions about the future of Russia's seafood trade strategy.
Russia’s pollock A season started on 1 January and ended on 10 April. The fishery deployed 124 vessels, which was down from 2020, but with several new vessels coming into the fleet, its overall productivity was up. Nevertheless, the total catch across the fishery was 858,000 metric tons (MT), down 14 percent from last year. With the total allowable catch (TAC) in 2021 at nearly 1.996 million MT, the utilization rate is just 73 percent, versus 87 percent in 2020.
The industry made a significant shift to concentrate on the production of pollock fillets and mince, a shift from its previous focus on unprocessed pollock. Fillet production rose by 17 percent and mince production increased by 21 percent. The share of raw materials processed into fillet and mince was 24 percent, up significant from the year prior.
Multiple factors came into play to shape these results. Five shore plants, built under the government-initiated investment quota program, have started operating in recent months, bringing an additional 7,000 MT of fillets to market during the first four months of 2021. And the addition of at-sea processing translated into vessels catching less pollock as they functioned at the limit of their onboard processing capacities.
Also affecting this year's catch totals was the weather in Russia’s Far East, with twice as many bad-weather days logged in 2021 as the year prior. In addition to the weather difficulties, China’s denial of Russian imports heavily influenced the season, and continues to. Early on, when the uncertainty with Chinese ports and deliveries first began, many Russian pollock ships shifted to fishing herring.
Currently, the Chinese ports of Dalian and Qingdao are still closed to Russian ships, making direct sea deliveries impossible. As a result of the closure, companies have sought other avenues into China, with the majority of Russian seafood exports to China traveling via containers through the Russian ports of Vladivostok and Petropavlovsk-Kamchatckiy, as well as through Busan in South Korea.
But with supply chains tangled and broken, many Russian pollock exporters were forced to search for new markets. Russia shipped much more pollock to Thailand and Vietnam in 2021. But efforts to ship product further abroad were stifled by a steep rise in freight costs.
The decline in production and demand, combined with the logistical costs, led to a 20 percent decrease in fisheries turnover compared with last years’ season A, Russian Pollock Catchers Association President Alexei Buglak told the Fishnews media agency.
“This year’s season can go down in history. It has revealed our dependence on China and, overall, on foreign transport infrastructure. It proved there is a need for the development of processing and storage capacity in coastal regions,” Buglak said. “Having a super-modern fleet will give nothing if there is no storage capacity."
Buglak said this year could be a watershed moment in the Russian seafood industry.
"A few companies are thinking of new markets to reduce their dependence on China and South Korea," he said. "We are going to see a principally new stage in the industry’s development.”
The Russian Fishery Company (RFC), one of the country’s biggest pollock catchers, was among the quickest Russian firms to react to the Chinese crisis, shifting its sales to value-added products, establishing a widened network of international partners, and pushing harder into Russia's domestic market. Because of its size and influence in the industry, RFC influenced the rest of the industry to adopt similar practices.
While the overall fishery in Q1 2021 saw a 15 percent increase in the production of sea-frozen pollock fillets and mince than in the same period in 2020, RFC is aiming to turn its entire catch of pollock into fillet, mince, and surimi processed at sea.
And despite the troubles Russian exporters have had accessing the Chinese market, RFC continues to try to expand its business there. From April 2020 to April 2021, RFC signed contracts to supply more than 5,000 MT of pollock fillet to China.
“We believe that the domestic market of China is a promising area for deeply processed fish products,” RFC Deputy General Director Saveliy Karpukhin said in a press release. “Considering the growing interest of the Chinese consumer in healthy eating, environmentally friendly, rich in healthy elements wild white fish is the ideal product.”
Among recent contracts the company netted is Qingdao-based Chang International, which sells its products under the brand Ocean Gala. The partnership is a channel for RFC’s shatterpack fillets to the high-end supermarket chain Ole', five-star hotels, and Disneyland Shanghai, the company said. As part of the Earth Day celebrations at Disneyland Shanghai, Chang International presented RFC’s pollock to visitors as an environmentally friendly product of sustainable fishing.
RFC has also strengthened its sales to the domestic market, a move the country’s government has supported. In promoting its products domestically, the company is emphasizing its products are processed just a few hours after they are caught.
It remains to be seen whether the efforts from the industry and the Russian government will save Russia's pollock sector from the serious damage they feared would occur at the beginning of the export crisis in January 2021. But a harbinger of the future direction of the fishery will be seen in Russia’s B season, which will start in October 2021. The TAC for the 2021 season is 250,000 MT, but Russian fisheries experts are predicting just 80,000 MT will be caught, as the productivity of the fishing grounds is typically 1.5 to two times lower during this season than in A season. The utilization of the TAC with this catch will be up to 85 percent, according to the PCA's Alexei Buglak. Raising the rate of utilization to 92 to 95 percent would require enhancing the intensity of fishing twofold.
If that happens, it would be a sign that Russian fishing companies have figured out a way to sell their pollock for a profit.
Photo courtesy of The Russian Fishery Company