October 9, 2003
Korea Fishery Products Overview 2002-03
SECTION I: SITUATION AND OUTLOOK
Korean fishery resources are being steadily depleted and, at the same time fish catch quotas in foreign waters are being restricted. As a result, domestic fishery production declined seven percent in 2002 to 2.48 million tons (from 2.67 million tons in 2001). To cope with this situation, the Korean government has accelerated the downsizing of the Korean fishing fleet and plans to reduce it further over the next several years. Recognizing the potential economic impact of this step and other fishery agreements, the Korean government is undertaking an in-depth study on aquaculture and how to secure higher fish catch quotas in foreign waters.
Despite the drop in production, total imports of seafood in 2003 are not expected to increase greatly from the $1.88 million in 2002. Rising seafood prices may have led to a decline in consumption. Imports from the U.S. are forecast to decline for 2003 as many U.S. exporters are shifting to the Chinese market. During the first eight months of 2002, total seafood imports from the U.S. amounted to $94 million, slightly down from $101 million during the same period last year. Until 2000, Korea enjoyed a trade surplus in seafood. However, they are currently suffering a growing trade deficit in seafood. Korea exported about $1.16 billion of seafood in 2002, down from $1.27 billion in 2001.
SECTION II: NARRATIVE ON SUPPLY AND DEMAND, TRADE, POLICY & MARKETING
Supply and Demand
Korea harvested 2.48 million metric tons of seafood in 2002, including 1.1 million tons in the on/off shore, 782,000 tons in the shallow sea aquaculture, 580,000 tons in the deep-sea and 18,500 tons in fresh water. Seafood production in Korea is forecast to decrease in the future due to the depletion of fish resources in adjacent waters and the enforcement of Exclusive Economic Zones (EEZ) by Korea's neighboring countries. In addition, Typhoon Maemi in September 2003 seriously damaged the shallow sea aquaculture, which will affect local production in 2003 and the beginning of 2004.
The Alaskan pollack catch declined sharply to 25,000 tons in 2002, from 199,000 tons in 2001, because the Korea fish industry failed to secure private catch quotas for Alaska pollack at Russia's international bid in early 2002. Again in 2003, the Korean fish industry failed to secure any private catch quotas for Alaska pollack and the Korean government was able to secure a government quota of only 22,000 tons in 2003. Total quotas of all types of fish purchased by the Korean government from the Russian government in 2003 were 51,800 tons, including 22,000 tons for Alaska pollack, 2,500 tons for cod, 20,000 tons for saury and 7,300 tons for squid. Russia is expected to reduce the government quota even further in the future, and will likely keep foreign fishing boats from catching fish in Russian waters starting in 2004. However, Korean fishing companies made several private agreements with Russian fishing companies for joint catching of 116,000 tons of Alaska pollack in 2003. This is different from a catch quota where a Korean vessel would catch fish in Russian waters. It may involve Korean investment in Russian fishing infrastructure or Korean fishery instruction.
As ground fish, surimi, and roe production directly correlates with the Alaskan pollack catch, total production of these products is expected to drop significantly in 2003 as well. Deep-sea production is also expected to decline in the longer term as Russia reduces Alaska pollack catch quotas in effort to rebuild its fish stocks in coastal waters. The deep-sea industry catches mainly Alaska pollack, tuna and squid.
Fresh water production is also expected to decline in the foreseeable future as enforcement of relaxed governmental anti-pollution environment regulations tightens. Fresh water production amounted to 18,500 tons in 2002, down from 20,600 tons in 2000.
A Total Allowable Catch (TAC) system was first implemented in 1999 for four fish species: mackerel, jack mackerel, sardine and large red crab. The Ministry of Maritime Affairs and Fisheries (MOMAF) established the TAC total for 2002 by fish species as follows: mackerel - 160,000 tons, jack mackerel - 10,600 tons, sardine - 17,000 tons, large red crab - 28,000 tons, purplish Washington clams - 9,000 tons, pen shells - 4,500 tons, top shells - 2,058 tons, and snow crabs - 1,220 tons.
The "Monthly Statistics of Korea" (July 2003 Issue) shows that the average monthly household expenditure in cities on fishery products was $28 in 2002. Annual per capita fish consumption in Korea is estimated at 33 Kg. a year. The success of Korean industry efforts to change consumer perception of fish (as a healthy alternative to red meat), to diversify fish products, to improve quality, and to develop processing technology will be key in expanding domestic demand.
Seafood imports by Korea increased to $1.88 billion in 2002, up from $1.65 billion in 2001. Korea remains an important market for U.S. seafood suppliers. Given Korea's high per capita consumption and lower domestic production, imports are expected to rise to meet local demand in the coming years. Although U.S. fish are of high quality compared to competitors, they are also higher priced than those of competitors.
Differences between U.S. export figures and Korean import data are often found. The discrepancies are ascribed to the following:
Korean importers purchase fish from the United States with open Letters of Credit with the product to be processed in China. The fish is shipped directly to China generally for transformation into fish fillet and imitation crab meat. These processed products are then exported to Europe, the U.S. and Korea. The species for such processing are usually yellow fin sole, cod, Pacific ocean perch, surimi and Alaska pollack. It is reported that the Koreans have about 20 fish processing plants in China, either wholly owned by Koreans or as joint venture companies with Chinese, as the cost of labor in China is much lower than that in Korea.
Korean importers store the imported product, such as pollack roe, in bonded warehouses and then re-export the product to Japan. Japanese buyers reportedly come to Busan and inspect the roe before they purchase. The storage prices are lower in Busan than in Seattle or Alaska.
U.S. export figures are based on the FOB value and Korean import data is based on the CIF value.
There is the time difference between departure from USA and arrival in Korea.
Imported seafood products are utilized for both re-export and domestic consumption. Major suppliers include China, Russia, the United States, Japan and Vietnam. In 2002, these five countries accounted for over 70 percent of total Korean seafood imports on a value basis. In 2002, China became the largest seafood supplier to Korea by exporting $711 million, followed by Russia at $214 million, the U.S. at $165 million, Japan at $142 million, and Vietnam at $122 million. The major species imported to Korea in 2002 were: yellow Corvina, frozen ($138 million); Alaska pollack, frozen ($90 million); hair tail, frozen ($81 million); Alaska pollack roe, frozen ($80 million); shrimp, frozen ($51 million); Alaska pollack surimi, frozen ($49 million); and, poulp squid, frozen ($40 million).
Korea also exports a large volume of fish products. In 2002, Korea exported 429,884 metric tons valued at $1.16 billion. The major species exported to other countries in 2002 were tuna ($274 million), oysters ($76 million), squid ($65 million), conger eels ($58 million), imitation crab meat ($44 million), and flat fish ($42 million).
The Korean government has used the higher adjustment tariffs ranging from 30 to 70 percent for 12 fish species to protect select domestic seafood, mainly from China. The normal applicable tariffs are between 10 percent and 20 percent. To further support the domestic industry, the Korea government is focusing on aquaculture in shallow waters to secure a stable supply of fish and working hard to purchase fish quotas from other countries, including Russia.
Korea and China reached an agreement on the fishing quota for 2003, which allows Korean vessels to catch 60,000 tons inside China's EEZ and in return, Chinese vessels can catch 93,000 tons in the Korean zone. Korea also agreed with Japan on the 2003 fish catch quota in each other's EEZ, which allows each country to catch 80,000 tons.
One of the pending issues on fishery products the U.S. has with the Korean government is the 70% adjustment tariff applied to frozen croaker. The U.S. fish industry is very interested in exporting croaker to Korea. The Korean tariff for croaker is "unbound" within the context of the World Trade Organization, meaning there is no ceiling on the rate. For further detailed information on the croaker, please refer to "Croaker Product Brief" KS2039 dated September 4, 2002, available on the USDA/FAS website.
Constraints built into bilateral and multilateral fishing accords will further impact total harvest from on/off-shore fishery zones. On/off-shore fish species consist mainly of squid, mackerel, corvina, hair tail and anchovy. Government efforts to boost aquaculture production in the shallow sea areas clearly indicates the importance of this sector as a future seafood resource. In order to cope with the depletion of fishery resources in the adjacent waters and restrictions of fish catch in the neighboring countries' waters, the Korean government accelerated the downsizing of Korea's fishing fleet and plans to reduce it further over the next several years. Recognizing the potential economic impact of this and other fishery accords, the Korean government is undertaking an in-depth study of the aquaculture industry and how to secure fish catch quotas in foreign waters.
Fish importers distribute their products to all types of entities in the marketing chain: processors, distributors, wholesalers, retailers, restaurants, hotels and end-users.
Consumers purchase seafood products through many different outlets. According to an industry survey conducted in April 2001, 32 percent of consumers said that they purchase seafood at the conventional or open-air markets. The following table provides a breakdown of where consumers purchase seafood in Korea.
Flatfish is a popular dish in Korea. All flat fish are freely importable. Live halibut is in high demand for its popularity as Sashimi. Imported U.S. halibut is high priced and generally distributed to hotels and upscale restaurants. Stiff competition comes from locally-farmed flatfish. Russia, China, the E.U. and Guinea Bissau are our major competitors for flatfish.
Ground fish composed of major commercial species, such as Alaska pollack and cod, appears to offer a promising market for U.S. suppliers given Korea's production outlook. The Korean government has applied an adjustment tariff of 30 percent on frozen Alaska pollack instead of 10 percent normally applied to frozen fish. Russia, Japan and China are our major competitors.
Frozen surimi imported by Korea is processed into ground fish sausage and imitation crab meat for both local and overseas markets. Vietnam, China, Thailand, Canada, Malaysia and India are major competitors for US suppliers.
The Korean market for Korean Alaska pollack roe is large. For U.S. suppliers, imported roe is processed for local consumption and re-export. Alaskan pollack roe is the most popular and is used for salted/spiced roe. It is a very popular and traditional side dish over rice at the Korean table. Russia, though the dominant supplier, may have difficulties fully servicing Korean demand if its resources continue to deplete rapidly. Russia, China, Japan and New Zealand are major U.S. competitors.