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The Asian surimi industry.

The Asian Surimi Industry

The Asian surimi industry is under-going a period of rapid change as the Republic of Korea, Thailand, New Zealand, and the United States are increasingly challenging Japan's position as the world's leading surini producer. the appreciation of the yen and the Japanese exclusion from U.S. and Soviet walleye or Alaska pollock resources, have caused Japanese production to decline from its 1984 peak of 418,000 metric tons (t) to only 310,000t in 1989. Meanwhile, the output of the other four major producing countries has increased from about 26,000 t to 260,000 t during the same period (Fig. 1, Table 1).

The Korean surimi industry shows the greatest potential for independent growth among the Asian surimi producers, with an output of 60,000 t in 1989. The Thai and New Zealand industries also show considerable growth potential, but are at present dep"ndent upon Japanese technical assistance. Quality and adequate raw material resources are the primary obstacles facing these three up-and-coming Asian surimi producers.

Background

Fish paste products have long been a part of traditional Asian cuisine, but surimi has become one of the most dynamic commodities in the Asian seafood industry because of recent innovations in production and utilization. Surimi is an intermediate product made from minced fish meat that has been washed, refined, and treated with cryo-protectants. Although fish paste products have been hand-made for centuries, a process for freezing surimi, invented in 1960, provided the impetus for expanding the industry and surimi markets based on the vast walleye pollock, Theragra chalcogramma, resource.

In 1975, Japanese firms introduced imitation crabmeat and analogs of other shellfish, generating much greater interest in surimi overseas than did traditional Japanese surimi-based food products. About 90 percent of Japan's surimi production is used to manudacture traditional products (known as kamaboko), imitation crabmeat (kanikama), scallops, and other analogs (Table 2). The other 10 percent is used to make fish hams and sausages. Surimi can be produced on factory trawlers at sea, or in land-based processing plants. Because fresher fish is used, at-sea surimi is generally considered to be of higher quality than land-based surimi. Walleye pollock is the most commonly used species in surimi production because of its abundance, high gel-forming capability, year-round availability, white color, and pleasant taste. Walleye pollock is predominantly found in the North Pacific, in waters off Alaska, the Bering Sea, and within the Soviet Exclusive Economic Zone (EEZ). As foreign access to pollock stocks in the U.S. and Soviet EEZ's is being reduced, howeveer, other demersal species such as hoki, Macruronus novaezelandiae, and blue whiting, Micromesistius poutassou, as well as pelagic-species such as jack mackerel, Trachurus japonicus, and sardine, Sardinia melanostrichus, are also being used in surimi production (Table 3). To date, however, producers have not found any single species besides polock that both satisfies the necessary processing criteria and is sufficiently abundant to supply the growing world market. In the last 20 years, world demand for surimi-based foods--marketed as inexpensive, healthful alternatives to natural seafood--has grown dramatically, and surimi production, originally dominated by Japan, has spread to over 20 countries in Asia, Europe, and North and South America.

Japan continues to dominate both production and consumption of surimi and surimi-based foods, but other countries have begun to challenge Japan's position in recent years. The U.S. and South Korean industries are particularly dynamic. The U.S. surimi industry has almost doubled in size each year since it was established with Japanese technical assistance in 1986. It is expected to produce over 140,000 t of surimi in 1989. (For an explanation of the Japanese production and import figures used in this report, please see "Note" at end of article.) The South Korean surimi industry, capitalizing on the Japanese yen, is beginning to displace Japan in the main export markets of Europe and North America. The surimi industries in Thailand and New Zealand also show considerable growth potential. Japan will also eventually have to contend with other countries in Europe (France, United Kingdom, Norway, etc.) and Latin American (Argentina and Chile) which are developing surimi industries.

Japan

Japan's surimi production expanded sharply in the 1950's and 1960's and peaked in 1984 at over 418,000 t (Table 4), accounting for about 95 percent of the total world supply. Production has steadily decreased since 1984, however, for several reasons. First, the United States and the Soviet Union have greatly reduced Japan's allocations of pollock. Second, Japan's consumption and production of surimi-based foods has been declining, leading to reduced domestic demand for surimi. Third, a significantly stronger yen has helped make foreign products much more competitive in both Japanese and foreign market. Today Japan accounts for less than 75 percent of the world total, producing only about 290,000 t of surimi in 1988.

Raw Materials

The most serious problem facing Japanese surimi processors is reduced access to walleye pollock resources. Because about 80 percent of Japanese surimi is manufactured from walleye pollock, Japan currently requires about 1.5 million t (round-weight) of pollock annually) [1]. Traditionally, Japanese producers relied upon domestic landing for their supply of raw material. However, the Japanese pollock catch dwendled rapidly when the United States and the Soviet Union established their 200-mile fisheries jurisdictions (in 1976 and 1977, respectively), encompassing major pollock fishing grounds, and began to cut Japanese pollock catch all ocations (Table 5).

Currently there is no pollock catch allocation for directed Japanese fishing in the U.S. EEZ. Under the 1989 Japa-U.S.S.R. bilateral groundfish agreement, the Soviets allocated about 121,000 t of pollock to Japanese fishermen. Of this total, 53,480 t was free-of-charge while for the remaining 67,530 t the Japanese have to pay a fee. In response, Japan has moved the bulk of its pollock fishing operations into the highseas "Donut Hole" region in the Bering Sea. Japan has also begun experimenting with the utilization of other fish species for surimi production. New Zealand hoki has been one of the most promising alternative sources of raw materials because of its abundance and the high quality of hoki surimi. But, for 1989, New Zealand reduced its catch allocation to Japan by over 75 percent--to only 2,899 t--bringing independent Japanese fishing in those waters also to a virtual halt. In response, the Japanese appear to be targeting Canadian Pacific hake, Chilean jack mackerel, and various Argentine demersal species.

Japan has also turned to joint venture (JV) agreements with the United States, the Soviet Union, and other countries to ensure access to raw materials. Total joint venture surimi production--whereby Japanese surimi factory vessels purchase Alaska pollock over-the-side from foreign trawlers within their respective EEZ's, and process it at sea--increased from 6,000 t in 1979 to 143,000 t in 1987. This number fell to about 141,000 t in 1988, however, because of decreased U.S. joint venture processing (JVP) allocations (Table 6). JV production is expected to fall further in 1989 to a projected 52,000 t. About 23,000 t of surimi was produced through joint ventures with the Soviet Union in 1988. About 50,000 t (round weight) of joint venture pollock purchases are negotiated yearly with North Korea. New Zealand, Thailand, Chile, Argentina, and Canada have also been small-scale joint venture partners.

Production

The Japanese domestic production of surimi has dropped from its peak of 418,000 t in 1984 to 290,000 in 1988 (Table 4) primarily because of recent competition from less expensive U.S. and South Korean imports. The decrease also results from declining demand from surimi-based food processors, as the domestic consumption of their products falls off due to changing Japanese eating habits (Table 7). Prices for all grades of surimi have fallen precipitously since 1987, putting many producers out of business (Table 8).

Imports

The decreasing domestic surimi production has spurred on a dramatic growth of imports from 14,000 t in 1985 to a projected 130,000 t in 1989 (Fig. 2, Table 9). Because of the recent fall in the value of the U.S. dollar and the Korean won against the yen, most of Japan's surimi imports come from the United States and South Korean, although New Zealand, Thailand, and Taiwan also supply small amounts. As U.S. domestic surimi consumption grows, however, U.S. exports to Japan are expected to level off. Although South Korean surimi retains an image of poor quality in the Japanese market, its price, 20-30 percent lower than Japanese surimi, has made it increasesingly popular. Industry sources predict that Japan will import 10,000 t of South Korean surimi, and 90,000 t of U.S. surimi in 1989. According to the same sources, the availability of these inexpensive imported materials has permitted Japanese analog producers to cut prices and retain most of their domestic market share.

Japan controls imports through a surimi import quota (IQ) system. The Japanese claim that biannual IQ's prevent foreign countries from oversupplying the Japanese surimi industries by bringing down prices. The pollock surimi IQ is distributed to three major categories of user groups--fishermen, processors, and traders. The fishermen's quota is earmarked for import of Japan-U.S. joint venture processed pollock producks (primarily surimi). The processor's quota covers South Korean surimi. Finally, fishermen, processors, and traders are all entitled to use the Overseas Fishery Development (OFD) quota, which applies to imports of surimi and other processed pollock products from countries with pollock resources within their EEZ's. As Japan's access to pollock resources has shrunk in recent years, total import quota have increased dramatically from 95,000 t (round weight) in fiscal year 1986 to 631,000 t of pollock in fiscal year 1988 (Table 10). With domestic catch and joint venture production falling yearly, this trend is likely to continue.

Exports

The appreciation of the yen from a rate of yen 240/$1 in 1985 to yen 125/$1 in 1988 damaged Japan's world export share in many commodities by raising their prices to protentially uncompetitive levels. Although other sectors of the Japanese economy have weathered this crisis by cutting costs and streamlining production, the surimi industry, already hit by high costs caused by inadequate access to fishery resources worldwide, has been severely disadvantaged. Consequently, surimi exports to the United states declined from about 6,000 t in 1986 to only 800 t in 1988 (Table 11). Imitation crabmeat exports also declined precipitously in the past year, with exports to the United States decreasing by one half (Table 12). In response to these trends, the Japanese producers have shifted their export focus to the rapidly expanding European market. Surimi exports to Europe rose by 50 percent in 1987, and accounted for 40 percent of total Japanese fishery exports in 1988. However, this increase was not large enough to offset an overall decline in Japanese world surimi market share in both 1987 and 1988.

Current and

Future Developments

To gain access to hoki, jack mackerel, and southern demersal stocks, Japanese producers have increasingly been turning to South American countries, especially Argentina and Chile. Japanese vessels have been using Chilean jack mackerel to produce surimi for several years. Five Japanese vessels began producing hoki and southern blue whiting surimi in Argentine waters in 1987, but this project reportedly lapsed in 1989. the Japanese company Nippon Suisan expected to begin experimental surimi production of about 3,000-4,000 t through a joint venture with the Argentine company Mejino in 1989. Pacific hake joint ventures with Canada were also on the rise, accounting for a projected 6,000 t of surimi in 1989.

In addition, several unprecedented agreements were signed or discussed with the Soviet Union in 1988 for the initiation of Alaska pollock joint ventures in eastern Siberia and on the Sakhalin Island in the Northwest Pacific. the potential for future joint ventures with the Soviet Union, which has been enthusiastically pursuing closer economic ties with Japan since beginning business restructuring moves in 1986, is great. Joint ventures with New Zealand are also likely to increase because of the 75 percent cut in the Japanese hoki catch allocation in New Zealand waters for 1989.

In contrast, joint ventures with the United States are on a downward trend. Over the last 2 years, the United State has sharply reduced U.S. Joint venture processing allocations (JVP) to the Japanese to keep pace with the raw material requirements of the rapidly expanding U.S. surumi industry. JVP's are the maximum round-weight amount of a particular species that the Japanese are permitted to buy over-the-side from U.S. vessels within the U.S. EEZ. The 1989 Alaska pollock JVP allocations, reflecting the 79 percent growth in the U.S. domestic surimi production since 1988, have been reduced from 504,000 t in round weight (20,000 t in surimi weight) in 1989 (Table 6). Total Japanese joint venture surimi production was expected to decline from 141,000 t in 1988 to 52,000 t in 1989.

Growing competition from South Korea in both domestic and JV surimi productions also has industry sources concerned. Some U.S. competitors fear that cheap South Korea surimi may be profitably reexported by Japan, but the Japanese producers believe that it will glut an already stagnating market, resulting in a further harm to the industry. They also fear that a recently concluded JV agreement between a South Korea company and the Soviet Union presages a trend toward Japanese exclusion from cooperative surimi production opportunities with the Soviet Union. The agreement permits South Koreans to enter traditional Japanese pollock fishing regions for maintenance privileges for Soviet factor vessels in Korean shipyards.

The outlook for the Japanese surimi industry is thus bleak. Although the search continues for a fish species to use as an alternative raw material to Alaska potllock, few can be turned at low cost into the white, high-quality surimi preferred by the Japanese. In addition, the high yen, U.S. and Korean competition, and adequate supplies of raw materials are likely to grow more problematic with time. The era of Japanese predominance in the surimi industry may be reaching its end.

The Republic of Korea

The most significant development in the Asian surimi industry has been the rapid rise of the Republic of Korea (ROK) as a major independent producer and exporter of surimi and analog products. It is the only Asian surimi industry which does not depend on Japanese technical assistance and aid. Production has more than tripled over the last 8 years, as ROK surimi, boosted by the fall of the won against the yen, has succeeded in penetrating not only the Japanese domestic market, but also markets in Europe and North America. The South Korean industry, however, must overcome not only the challenges of reduced access to raw materials in the U.S. and Soviet EEZ's and growing U.S. competition, but also a reputation for poor quality. In addition, an increasing domestic consumption rate may also limit the growth of ROK's world export share.

Raw Materials

The South Korean surimi industry, like Japan's, is primarily based on walleye pollock utilization. In contrast to Japan, however, ROK pollock catches rose steadily during the 1980's (from about 367,000 t in 1983 to 726,000 t in 1987). Since 1988, however, reduced access to raw materials from the U.S. EEZ has forced Korea also to move operations to the Bering Sea and New Zealand, and to turn to joint ventures with European countries, the Soviet Union, and the United States. Statistics for 1988 reveal a 25 percent decrease in Alaska pollock catch to 181,500t. Despite this, the ROK continues to be a net exporter of walleye pollock, with 30 percent of its catch being exported in fillet form. Exports go mainly to the United States and Japan. In 1989, about 36 ROK vessels are operating in U.S. waters, through JV agreements with U.S. companies. South Korean-U.S. JM pollock production increased from 98,000t in 1984 to 452,000 t in 1987, but has declined since then to 389,000 t in 1988, and an estimated 270,000 t in 1989. In one Recent JV, a South Korean company has agreed to purchase 86,000 t of pollock from the Soviets off the western coast of the Kamchatka Peninsula. Joint ventures with North Korea, although still on a small scale, are also on the rise, with pollock constituting one of the most significant commodities in the growing North-South trade.

Production

At-sea surimi production began in 1984 aboard three vessels with a yearly capacity of only 14,000 t. The capacity of the fleet doubled in 1986 with the addition of 3 factory ships. Nine factory vessels and 185 shore-based processing plants were operating in mid-1989, to produce about 50,000 t of surimi per year (Table 13). Analog production, including imitation crab, has increased from 69,000 t in 1985 to 87,120 t in 1988. Although the maximum production capacity of the Korean industry is still small compared to Japan's, it has benefited greatly from the recent fall of the Korean won against the Yen, and is expanding rapidly. Domestic consumption of surimi-based foods is increasing as the ROK population grows more affluent and demands more non-traditional, higher-quality foods, such as imitation crabmeat.

Imports

ROK imported a small amount of surimi for the first time in 1988, when a South Korea importer purchased 5,000 t from the Great Land Seafoods Company of the United States. To supply its growing domestic market, the industry will probably be forced to import more in the future.

Exports

South Korean exports of surimi to the United States have grown dramatically since 1985> they increased from 122 t in 1985 to 2,000 t in 1987 (Table 11). During the same period, ROK surimi exports to Japan increased from 4,000 t to 8,000 t. In 1988, total ROK exports of imitation crabmeat approached 20,000 t. Exports to the United States and Japan may be stabilizing because of a stagnating market on the one hand and growing dometic competition on the other. However, ROK surimi exports to Europe are growing rapidly.

Current and

Future Developments

ROK faces the same difficulties as Japan in terms of access to foreign surimi raw material resources. Joint venture allocations with the United States are on a downward trend, as the pollock requirements of the U.S. surimi industry increase. However, future South Korean supplies of pollock may be influenced by political developments. Although ROK does not maintain diplomatic relations with any Communist nation, it is actively pursuing closer economic ties in many sectors of its economy with the Soviet Union, the East European countries, China, and North Korea. As surimi JV's are a common avenue for economic exchange, the industry stands to benefit from improved relations. The ROK is also focusing on Europe as a major JV base and export market. Several joint ventures with European companies, such as Demaine Bros. in France, have already been signed. To date, however, Korea has not done as well in either the Japanese or European market as in the United States market, because of the poorer quality of its surimi. Quality, access to raw materials, and domestic consumption are three factors that the South Korean industry must stabilize to continue expanding its position in the world surimi market.

Thailand

Fish jelly products, such as fish balls and fish satay, have a long history in Thailand. Barracuda, sea eel, and sole were traditionally the main raw materials, but today threadfin bream and croaker, available in much larger quantities, are the most commonly utilized species. The Thai surimi industry is developing quickly and exported more surimi to Japan in 1988 than did South Korea. At present, however, the Thai surimi industry is still dependent on Japanese technical assistance.

Raw Materials

Thai production is based on threadfin bream, Nemipterus japonicus, because it is the most abundant raw material found in Thailand's waters and because it also exhibits the proper characteristics for processing export-quality surimi. Thailand's yearly supply of raw materials was estimated at about 1.1 million t for 1987. The yield of surimi from the threadfin bream is the same as the yield from walleye pollock--about 22-24 percent of whole weight--but the flesh is slightly darker and oilier, making it a somewhat less desirable product than pollock surimi.

Production

Surimi processing remained a small industry throughout the 1970's, with three surimi plants producing only 2,000 t annually. Since 1983, however, demand for and output of surimi products has increased dramatically. To date, there are 11 plants in operation, producing 20,000-25,000 t yearly. The rapid growth is due to the expanding Japanese market for cheap, lower-quality imported surimi, as well as the rising domestic demand for new products such as fish noodles and fish sausage. Although the Thai Government does not compile statistics on domestic consumption, industry sources believe that 3,000-4,000 t of surimi will be used by Thai food processors, including 1,000 t for imitation crabmeat in 1989.

Imports and Exports

Thailand imports no surimi raw materials and only a small amount of imitation crabmeat. Exports, on the other hand, have been growing steadily over the last few years, increasing from about 11,000 t in 1985 to 20,500 in 1987. Thai exporters hope to sell nearly 30,000 t of surimi to Japanese companies in 1989. About 80-90 percent of Thai surimi goes to Japan, while 10-20 percent goes to the United States, Singapore, and Europe.

Current and

Future Developments

The future of the Thai industry hinges on technological improvements and resource management. Thai surimi is particularly disadvantaged in the Japanese market because of its low quality compared to the South Korean product. The industry is currently receiving tecnical assistance from the All-Japan Federation of Kamaboko Manufacturers Associations (Zenkama), and from Japanese buyers such as Hiraki Corporation. Because of the tropical climate, Thai producers must emphasize reduced landing times and improved icing and freezing of raw materials. Modern plants and equipment, as well as improved worker hygiene levels, are also necessary to ensure that the produce passes the microbiological standards of importing countries.

According to the Thai Government, Thailand may also have to deal with declining resources, especially in the Gulf of Thailand. In 1963, fishing effort for threadfin bream yielded 276 kg of fish per hour. In 1988, only 80 kg per hour were caught. Joint ventures and exploitation of the previously unutilized Andaman Bay waters have been identified as possible countermeasures. SIFCO Corporation, Thailand's largest surimi producer, has been involved with Japanese assistance since 1987 in many successful efforts to upgrade the quality and supply of its surimi.

New Zealand

New Zealand was the world's fourth largest producer of surimi in 1987, representing 3 percent of the estimated world production. New Zealand's rise to this position was rapid and was due primarily to the growing Japanese demand for New Zealand hoki, Macruronus novaezelandiae, to help offset the expected decline in pollock supplies. All New Zealand's surimi operations, however, are joint ventures with Japanese or Korean companies.

Raw Materials

Hoki is excellent for surimi because of its high gel-forming capability, abundance, and good color. It constitutes New Zealand's largest commercial fishery, and is considered to be the second-largest surimi resource after walleye pollock, with a biomass of about 1.5 million t. It is covered by one of the seven New Zealand TAC (Total Allowable Catch) allocations, usually set at 200,000 t. Because of rising foreign demand, hoki catches by both foreign and domestic vessels more than doubled from 91,000 t in 1986 to 210,000 t in 1988. A stated concern about stock depletion, however, as well as a desire to promote the domestic surimi industry, has led the New Zealand Government to consider abolishing the Japanese and Korean hoki catch allocations. Also, New Zealand fishermen, handling hoki for export, object to foreign allocations. Japan's 1989 allocation has been reduced to 2,899 t, only 26 percent of its 1988 level, and industry sources expect the allocation to be phased out entirely within the next few years. Should this occur, the Japanese and the Koreans will be forced to depend upon joint ventures and imports for future access to New Zealand's hoki resource.

Production

New Zealand's hoki surimi production began in 1986 at 5,700 t, and rose to 17,300 t by 1987. One Korean and 15 Japanese factory vessels, under charter to 6 New Zealand companies, produced a total of 28,000 t of surimi in 1988. A small amount (3,000 t) of southern blue whiting surimi was also produced. Fletcher Fishing, Amaltal, Independent Fishing, and Skeggs companies are the largest surimi producers in New Zealand. Most New Zealand surimi is of the highest quality, valued in 1988 at $3.40-3.50 per kg. There is a limited consumption of surimi-based products in New Zealand. It is estimated that the total market is worth about $2.7 million annually--mostly supplied by imports from Japan. However, industry sources expect that domestic production will expand in responses to both rising domestic consumption and high potential export earnings.

Imports and Exports

Nearly the entire New Zealand domestic production is exported to Japan, although some is also shipped to Australia, Singapore, and the United States. Many producers hope to emulate the success of the U.S. surimi industry and make surimi a major fisheries export earner for New Zealand.

Current and

Future Developments

The development of an independent New Zealand industry will largely depend upon future foreign fishing allocations for hoki. If the allocation is cut completely, the New Zealand industry is likely to benefit from joint ventures and technology transfers from Japanese and South Korean companies. There is a strong desire within the industry to follow the example of U.S. producers, who used Japanese technical experties to build a strong domestic industry. Some New Zealand companies are requesting subsidization from the government to develop the domestic surimi industry which, they claim, has the potential to produce as much as 15 percent of the world's surimi supply. To date, however, the industry has not received any government subsidies.

Note: There are considerable discrepancies between U.S. and Japanese statistics for Japan's surimi production and imports. These are mainly due to a difference in U.S. and Japanese attitudes toward Japan's surimi joint venture production with other countries. It joint ventures, surimi is generally produced by Japanese-owned factory vessels using fish purchased over-the-side from foreign vessels in foreign waters. In Japanese statistics, all joint venture production is included as imports, and is clearly differentiated in our main source, the Minato shimbun, from the domestic Japanese production, despite the fact that the surimi is produced by Japanese companies. In this report, because we have primarily utilized Japanese sources, we have followed the Japanese custom of referring to JV surimi production as imports. Other reports, however, may include JV production in Japanese domestic production, thus resulting in much higher domestic production figures than are used in this report. (Source: IFR-89/73, prepared be Karen L. Kelsky, Foreign Affairs Assitant, Foreign Fisheries Analysis Branch (F/IA23), National Marine Fisheries Service, NOAA, Silver Spring, MD 20910.)

(1) Using a conversion rate from the round-weight to the processed product of 22-25 percent.
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Title Annotation:Foreign Fishery Developments
Publication:Marine Fisheries Review
Date:Jan 1, 1990
Words:4557
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