Pingtan Marine abandons plan to build krill-fishing vessel

Fujian Provincial Pingtan County Ocean Fishing Group Co., or Pingtan Fishing, is in talks with Huanghai Shipbuilding Co. to cancel an order for a new krill-fishing vessel.

The announcement by the subsidiary of Fuzhou City, Fujian Province, China-based Pingtan Marine Enterprise in its third-quarter 2021 results came months after its registered public accounting firm, BDO China Shu Lun Pan Certified Public Accountants, announced in an audit of the company’s 2020 financial statements it was in the process of evaluating the Pingtan Marine’s ability to continue as a going concern and was assessing the company’s prepayment to Huanghai Shipbuilding for a 107-meter krill-fishing vessel.

The cancelation is related to rising input costs for vessel construction rather than to any factors related to krill stocks, according to a consultant in the field.

Dmitri Sclabos, the director of Santiago, Chile-based krill consultancy Tharos, said equipment suppliers to the krill industry have been raising prices. He also told SeafoodSource that a Chinese industry associate had told him the impact of rising costs “in our operation has gone beyond imagination."

“Stopping a project is not directly related to catch efficiency, expected lack raw material, potential increase of MPA [marine protected area], TAC [total allowable catch] decrease, market downturns, etcetera. They are, in my opinion, primarily financial and operative considerations,” Sclabos said. “The former is significant; steel prices for example have skyrocketed, impacting capacity expansion and investors' cash obligations. The latter is related to the lack of fishing and processing experience. No matter how experienced the company is in pelagic fishmeal or fish oil processing, krill does not behave as a standard pelagic species.”

While market leader Aker Biomarine reported a 30 percent drop in its 2020 krill catch, Sclabos said the Pingtan withdrawal is also based on an overambitious timeline for its return on investment.

“Their investors wanted a much faster payback period, which we know well is not possible. Our decades-long experience shows that you need at least three years at-sea to start considering if you are on a regular regime condition,” Sclabos said.

Krill stocks remain stable, according to Sclabos, and catches fluctuate yearly.

“We remain strong on China as a demanding and vast market, but needs sound management practices to become a stable and long-lasting supplier,” he said.

Sclabos said he expects the 15 Chinese firms that have announced intentions to join the krill-fishing sector to be whittled down further following Pingtan’s withdrawal. Among the players set to remain are state-owned companies including China National Fisheries Corporation (CNFC) and Liaoning Pelagic Fisheries (commonly known as Liaoyu Group). A new Liaoyu vessel set for launch in 2023 was designed by the Wuhan, China-based 701 Research Bureau, which is affiliated with the state-owned shipbuilder CSSC. Set to exit the sector are several firms located in Fujian Province, home to much of the privately-owned Chinese distant-water fleet, according to Sclabos.