Surimi producers: Lower prices but no relief

While Alaskan pollock prices are down again, retail price pressure and lower margins continue to bully sales on a global scale. "The pressure is non-stop," one European producer told IntraFish.

"Clearly, surimi prices are going down for the coming season," he said. "But no one wants to share any specific figures because everybody is scared the market will immediately react, pounding on them forreducing prices for the finished product -- even though nobody is making any money in this business anymore."

While 2012 started off with low inventories and strong buying power of Japanese producers, this year is the "total opposite."

Last year in January, grade A surimi base sold at ¥300 (€2.75/$3.69) to

¥330 (€3.03/$4.06) per kilo for delivery in Tokyo.

Grade B sold at ¥240 (€2.2/$2.95) to ¥260 (€2.39/$3.2) and grade K at ¥270 (€2.48/$3.32) to ¥290 (€2.66/$3.57), while Grade SA traded at ¥380 (€3.49/

$4.68) to ¥400 (€3.67/$4.92).

This year, prices are down by 15 percent, falling back to 2011 levels, the producer said

Asia slowing down production

Japan is not the only ailing market in Asia, Pascal Guenneugues, founder and president of Future Seafood, told IntraFish.

"At the beginning of January [2013], the production all over northern Asia dropped considerably," he said.

In addition to Japan, also Taiwan, Korea and China reported slower sales for finished products due to the late winter.

"Consumption was down in most countries and producers of finished product, who anticipated a larger market for the end of the year were holding too much inventory," he said.

Jean-Luc Beliveau, who heads research & development at French producer Alliance Ocean, concurs with Guenneugues, saying sales have been "incredibly slow," especially in Korea and Japan, the two worldwide biggest surimi markets.

It is difficult to predict if the situation will change, he said, as everything is dependant on the weather.

Many companies throughout Asia stopped buying surimiin December last year, with factories stopping production in January due to low sales, said Guenneugues.

"After that came the Chinese New Year holiday so theyhaven't restarted yet," he said. "There has practically been no, or very, very slow, production in China and Vietnam forJanuary and February."

Also Thailand and India have seen lower sales due toa slowdown in consumption. "We will see a large drop in surimi production in southeast Asia for at least the first quarter this year," he predicts.

'Confused' market

All this could trigger Japanese and other Asian buyers to hold off purchasing new stock.

"Japanese buyers and importers are holding enough inventory to go on until at least another three to four months," the European producer said.

"The market is a little bit confused at the moment," he told IntraFish, adding that buying -- and pricing -- decisions could be delayed until April, "or maybe later."

He believes that US producers are now pushing to move "as much volume as possible to Europe."

Lower sales in Europe, Russia

But also Europe itself is faring worse than previously expected. Due to the poor weatherthroughout the spring and summer of last year -- high season for surimi consumption in countries such as France and Spain -- and the flop of the Dukan diet in

France, sales went down "considerably," said Beliveau.

French surimi and ready-to-eat food producer FleuryMichon, for instance, saw its branded surimi salesshrink by 0.8 percent in 2012. In contrast, all of its other branded activities posted growth rates.

According to Eric Coly, head of financial reporting at Fleury Michon, this is is closely linked to the bad weather and the comparison to the boost surimi saw in 2010 and 2011due to the Dukan diet.

"The market was in bad shape," he told IntraFish."But the Fleury Michon brand resists well and we maintain sales in France."

Coly declined to make any predictions for this year, saying "we don't want to engage ourselves in predictions towards a very uncertain market in Europe."

The Russian market, on the other hand, is still battling with price pressure on its finished products,said Guenneugues, slowing down the market in the second half of last year.

The decrease in quality is another issue. "A lot of consumers are rejecting the products and decrease their consumption," he said.

"Producers are now considering how to react on this and to reverse to try and improve the quality of the product. It looks like the decrease last year is at least 10 percent in Russia. This is affecting especially the low-grade frozen products."

Is there hope?

Beliveau is hopeful that the market will recover again, despite it being a difficult task.

"Coraya launched a new crab stick last year, Grand Coraya," he said. "With this innovation we would like to see that we can push the market again."

"The weather was one of the reasons of the slow market development last year," Beliveau told IntraFish. "It's very difficult to make any predictions for this year because everybody is talking about the economic crisis in Europe andeverybody says we have to wait and see what happens with the market."

"It will be difficult," he said