Unfavorable exchange rates are hurting Japanese fish paste product makers. The yen has weakened from the 101 to 103 per U.S. dollar range in the first half of 2014 to the current level of around 118 yen per dollar, a nearly 15 percent difference.
Surimi prices are rising even in yen terms, reflecting low inventory levels in Japan. Blocks from Alaska’s current “A” season are trading at 40 to 50 yen (USD 0.33 to 0.42;, EUR 30 to 37) per kilogram higher than for the “B” season, a 15 to 20 percent hike. The U.S. pollock “A” season runs from January through March, while the “B” season is from early July to early October.
As a result, many large Japanese processors have announced price increases of up to 15 percent. Smaller processors profits are being squeezed, as they do not have the market power to dictate price increases to retailers. Electricity and tax costs are also rising for them. Electricity prices in most areas have been raised to fund imports of fossil fuels to make up for idled nuclear generating plants.
Hokkaido Electric Power Company announced rates would be raised in stages through the end of March 2015 by 15.33 percent for small users and 20.32 percent for industrial users. Japan’s consumption tax is not only paid at the retail level, as in the United States, but for all transactions along the supply chain. Vertically integrated companies can thus avoid an 8 percent charge for every transaction level they eliminate while subcontracted work bears the cost.
Availability of H&G pollock and surimi from Russia to the Japanese market is uncertain. The Russian government would like to increase self-sufficiency after it imposed a ban on seafood imports from the United States, EU, Canada, Australia and Norway, by diverting more of the catch toward domestic consumption. To encourage this, the Russian government is considering abolishing the discount on access fees and refund of consumption tax that exporters currently enjoy, but even without such export incentives, prohibitive rail transport costs from the Far East to population centers in European Russia and the sharp decline of the ruble make domestic sales less attractive.
The Marine Stewardship Council certified H&G Alaska pollock from Russia’s Far East in September 2014, making it attractive for processing in China and onward sale to Europe, where the certification is much demanded, and this was expected to draw more product from Japan to China. However, several Chinese processors are in financial difficulty after getting caught with high-priced pollock stocks last year and may not have the credit available to make large purchases.
