Russia winning US share on Asian market of surimi

September 8, 2023 09:32

Russia has noticeably increased supplies of surimi (raw material for crab sticks) to China and South Korea as a result of consumer saving trend. The USA is the leading supplier of surimi to Asia, but lower prices let Russia win some of its competitor’s market share.

According to RBC, the growth of consumer saving in Asian countries has led to the fact that in a number of countries the United States began to lose ground to Russia in sales of surimi. This was underlined by the Food and Agriculture Organization of the United Nations (FAO) in a report published in August on the white fish market.

In 2022, surimi showed a strong demand and high prices. But this year the price and demand for pollock surimi were sluggish. According to FAO, sales of surimi in the European and Asian markets in the first quarter of 2023 fell by almost 10% and the producers’ margin grew smaller.

The reason for the decline in demand is that consumers are increasingly reducing spending on non—essential products, and surimi is one of those types of goods that suffer from this, the FAO notes. This, in turn, led to the fact that some buyers have shifted to cheaper Russian products: "Prices for surimi are falling, and Russians can produce it at a lower cost than Americans. Buyers in Asia don't seem to care who they buy from, as long as the price is low and the quality is acceptable," the FAO report says.

Why minced pollock is popular in Asia

Surimi is minced pollock, which is used as the main component for crab sticks. In addition, surimi mince is used for the production of a wide range of products — fish meatballs, imitations, dried snacks and other products, according to Russia’s Pollock Catchers Association (PCA). The main share of the global surimi market, which the Indian-American consulting company Grand View Research estimated at $3.78 billion by the end of 2022, is occupied by products from tropical or warm-water fish species (its share reaches 70%). But most of all on the world market, surimi is valued from white fish caught in cold waters, especially from pollock.

Surimi consumption is widespread in the Asia-Pacific region, the reason is its availability, versatility and taste, explained in a study by the Canadian—Indian research company Vision Research Reports. In many parts of Asia, seafood is the basic food and the main part of the local cuisine. Frozen surimi, unlike fresh seafood, has a longer shelf life — this makes it a convenient and affordable product for consumers. Surimi-based foods such as fish balls, crab sticks, and kamaboko (a traditional Japanese white fish dish) are commonly consumed as snacks or added to dishes as a source of protein.

Russia and the USA are the largest pollock producers in the world and therefore the main competitors to each other in this market segment, VARPE President German Zverev reminds. These two countries account for 95% of the world's pollock catch and production, while both countries supply most of their products for export, competing with each other for sales markets.

In 2022, Russia produced 1.9 million metric tons of pollock, and the USA — 1.3 million tonnes. For the first time in the history of observations since the early 2000s, last year Russian fishermen were already able to overtake the United States in the pollock fillet production segment. According to Russia’s Federal Agency for Fisheries Rosrybolovstvo, domestic production increased by 16.8% to 139 thousand tons in 2022.

Surimi production in Russia is also growing. According to Rosstat, in the first half of 2023, the production of frozen, minced fish and other fish meat exceeded the level of the previous year by 24% and amounted to 52 thousand tons. This makes it possible not only to provide products to the domestic market, but also to effectively develop exports: among Asian countries, the main buyers are China, South Korea and Japan, Rosrybolovstvo adds.

Russian fishermen started mass production of surimi only in 2021, recalls Zverev. So far, production volumes in Russia are lagging behind American ones, but the growth rate of production is more noticeable. According to the FAO forecast, the production of pollock surimi in the USA by the end of 2023 will increase by 16% compared to last year — up to 187 thousand tons. In Russia, production by the end of 2023 may reach 50-60 thousand tons, Zverev predicts — this is almost twice as much as a year earlier (28 thousand tons). "For many years, the United States has been the largest producer of pollock surimi, but now Russia is catching up with it," the expert states.

Prices for surimi, which Russia exports, according to Zverev, are really more competitive compared to American ones. For example, the average price of Russian minced meat and pollock surimi supplied to China in the first half of 2023 was about $2.1 thousand per MT. This is almost two times cheaper than similar American products — about $4.1 per MT, the president of VARPE states. The average cost of 1 tonne of Russian surimi shipped to South Korea in January—June was at the level of $2.1 thousand, to Japan — $2.9 thousand, while the US prices were at the level of $3.7 and $ 3.2 thousand correspondingly.

As a result, in the first half of 2023, Russia was able to significantly increase surimi exports to China and South Korea, Zverev notes. Thus, the supply of Russian pollock meat, including surimi, to China increased 102 times compared to the first half of 2022 and reached 8.9 thousand tons. Supplies to South Korea increased almost 3.8 times compared to the same period last year and reached 2.1 thousand tons. The US exports of surimi to these countries decreased, continues Zverev: to South Korea — 1.5 times (up to 7.3 thousand tons), and to China — almost 1.8 times (up to 1.8 thousand tons).

The exception was Japan, to which the export of Russian surimi (as well as the rest of fish products) in the first half of 2023 decreased by almost 14% year-on—year to 5.4 thousand tons. Americans increased supplies to Japan by 11% (to almost 37.3 thousand tons).

"Now the situation in export markets is difficult, including due to the decline in prices for all types of Russian pollock products, which occurs against the background of increased catch and production and problems in the final markets. In addition, Russian pollock is released on world markets with a "sanctions discount," complains Alexey Buglak, president of the Pollock Catchers Association.

According to him, lower prices for Russian surimi in comparison with American is a forced measure. On the one hand, a weak rouble makes Russian products more competitive in export markets, and a shorter logistics leverage allows us to supply products to Southeast Asian countries with some savings, the expert argues. On the other hand, the operating and production costs of enterprises are growing, and Russian enterprises are also losing profitability, but they are forced to keep a more competitive price.

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