Russia considering drastic measures to deal with pollock glut

Russia’s pollock season, which began on 1 January, is in serious jeopardy as its primary market, China, has shut out Russian imports, citing COVID-19 safety measures.

Russia sells to 61 percent of its national seafood exports – worth nearly USD 3.3 billion (EUR 2.74 billion) – to China, with Russia's pollock exports to China worth USD 580 to USD 600 million (EUR 482 to EUR 499 million).

The Chinese market became significantly harder for Russian seafood companies to access after Chinese customs authorities announced in January they had found strains of live COVID-19 on the packaging of seafood imported from Russia. In response, China said it would increase the frequency and thoroughness of its inspections of imported Russian seafood. 

While Russia introduced an action plan in an attempt to assuage Chinese concerns, Russian Federal Agency for Fisheries Head Ilya Shestakov said in early February 2021 that all seafood exports from Russia to China had ceased. One by one, Chinese ports had closed to Russian imports, with Qingdao and then Dalian shutting down by early February. China then closed its land-border crossings with Russia, leaving Russia’s seafood companies scrambling to figure out what to do with the pollock they had caught through January.

The timing couldn't be worse for Russian companies, as Chinese New Year celebrations, running from 11 to 17 February, shut down all administrative work.

“China will resume seafood imports in the second half of February at best,” Russian Federal Agency for Fisheries Deputy Head Pyotr Savchuk said.

Being shut out of the market over the holiday also represents a major lost opportunity for sales. Meanwhile, the total allowable catch (TAC) for pollock in Russia this year is 1.996 million metric tons (MT), up to 90 percent of which is planned to be harvested during A season, which lasts from 1 January through April.

Through 1 February 2021, Russian fisheries in the Far East caught 280,900 MT of fish – 14 percent less than in the corresponding period of 2020 – including 178,520 MT of pollock, 17,260 MT of cod, and 61,680 MT of herring. According to the Russian Federal Agency for Fisheries, Russian seafood companies had planned to send around 150,000 MT of pollock and herring to China in January, but the entirety of that volume that is now stuck in Russia.

Worsening matters, cold storage facilities in Russia's Far East are nearing capacity, with the 70,000 MT of land-based storage in land facilities, and 55,000 MT of reefer-ship storage capacity expected to be maxed out by mid-February, according to Russian media reports.

As a result of the supply glut, prices for pollock have fallen. Dobroflot CEO Alexander Efremov told Kommersant the wholesale cost of pollock decreased to RUB 72 (USD 0.95, EUR 0.79) per kilo, down from from RUB 100 (USD 1.31, EUR 1.10) before the crisis. Similar trends are seen in retail, he said. 

In late 2020, following the closure of Dalian to Russian imports, Russian Presidential Envoy to the Far Eastern Federal District Yuri Trutnev called for Chinese authorities to drop the Russian seafood import ban, but he did not receive a response from his counterparts in China.

Russian tycoon Gennadiy Timchenko, who serves as the chairman of the Russo-Chinese Business Council, also attempted and failed to solve the crisis through diplomacy. On 21 January, he paid a visit to China’s embassy in Russia, accompanied by his son-in-law, Gleb Frank, who is the CEO of major pollock fishing firm Russian Fishery Company (RFC). Timchenko met with Zhang Hanhui, China's ambassador to Russia, the council said in a press statement. But the meeting had no immediate impact on the situation.

Russia is now seeking other measures to avert the total collapse of its pollock season. Trutnev has asked government agencies, including the Fishery Agency, to design a plan to move to value-added processing of more Russian pollock.

“In the future, we should totally abandon the export of raw products and manufacture end-product here, in Russia’s Far East,” he said in a press release.

Savchuk told local media the government is considering further investment in fish processing plants in central Russia, Fishnews media agency reported.

“It’s necessary to deliver the catch from ports in Far East to other regions for processing,” he said.

The government is also encouraging seafood companies to branch out to other markets besides China, following the model of Russia's crabbers., who have successfully quickly shifted their exports to South Korea after being shut out of China.

In late 2020, the Pollock Catchers Association (PCA) said it hoped to increase exports to Thailand, Vietnam, and Indonesia. Thailand and Vietnam are promising markets since the Russian government completed a fast-tracked trade process with both countries in 2018, including the confirmation of veterinary certificates.

That work has not yet been completed with Indonesia, but the Indonesian market is potentially the most lucrative, as the Southeast Asian country imported 117,000 MT of seafood worth USD 300 million (EUR 249.5 million) in 2019. Over the last two years, Russian fisheries have sold fish to Indonesian customers through partners in South Korea, but the PCA has successfully lobbied Russian government bodies initiate negotiations with Indonesia to open the process of allowing direct shipments. Those talks are ongoing, according to the PCA.

Namibia is also being eyed by Russian authorities as a destination for the nation's pollock. The Fishery Agency said that at least 20 Russian companies, including pollock catchers, expressed their readiness to export to the African country after governments harmonized veterinary certificates last year.

One other option under consideration is the purchase of excessive volumes of pollock by the state, a tool that is used with some frequency in the grain market. In January, All-Russian Association of Fishing Industry (VARPE) President German Zverev officially asked Shestakov to consider that option, business paper Kommersant reported. The Fishery Agency’s press service confirmed to the paper that state purchases are now being considered to tackle the crisis. 

The mechanism could prove to be effective. In 2020, uptake of Russian pollock by the domestic market significantly increased, PCA President Alexei Buglak said, according to the newspaper Fisherman of Kamchatka. Accurate figures for the whole year are still not available, Buglak said, but he estimated that in the first half of 2020, domestic sales of pollock accounted for the same volumes as for the entirety of 2019, following intensive promotional efforts by Russian companies and the Russian government. 

Photo courtesy of Russian Fishery Company