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The Nikkei Weekly (Japan)

November 20, 2006 Monday

Japan losing leverage in seafood trade

LENGTH: 684 words

Japan losing leverage in seafood trade 
Japan has been losing its dominant position as a fish buyer due to slack domestic demand and rising fish consumption in Western countries and China. 
When major seafood company Maruha Corp. negotiated with a U.S. marine products processing firm in October to buy ground cod meat, its offer was rejected. An executive at the U.S. company said that other countries were offering 10-20 cents more per kilogram for cod. 
Japan is the world's top consumer of surimi, the main ingredient in kamaboko, or steamed fish paste. The country had long led the process in determining the price.   
However, the situation has changed with the rising popularity of crab-flavored kamaboko in Western countries. Japan's surimi consumption has fallen to 52% of the global total, from 65% five years ago. Since domestic retailers do not accept price hikes for kamaboko, Japanese surimi importers are often beaten by their foreign rivals on prices. 
In July, a container ship carrying Alaskan red salmon left Yokohama Port for Europe. The vessel had brought 1,500 tons of the salmon to Japan, but importers, such as Hanwa Co., were offering $1.80 per pound while the producer wanted $2. Hanwa was unable to obtain more than half the shipment, and the producer decided to sell the remainder in Europe. 
One reason Japanese seafood companies and trading houses have weakened as buyers is that European buyers are aggressive on the euro's appreciation against the yen. The euro has risen 35% against the yen over the past five years, boosting European buying power.  
In 2005, Japan's imports of coho salmon from the U.S. dropped 30% in volume from 2000, while imports by the U.K. and Germany grew eightfold. Import prices in the U.K. for coho salmon are nearly 40% higher than the $3,335 per ton paid in Japan. 
According to data released by the United Nations Food and Agriculture Organization, per-capita seafood consumption in countries belonging to the European Union increased by 32% from 2000 to 2002 from 30 years earlier and soared more than fivefold during that time in China. Although global seafood production grew by 30% from 1992 to 2003, supplies remain tight due to the faster growth in demand. 
Rules, rules, rules 
Japan's obsession over food safety and appearance is also a factor. This year the Japanese government strengthened regulations on chemical residues in marine and agricultural products. As well, Japanese importers often fuss over trivial flaws that their overseas counterparts would ignore. Foreign seafood producers prefer to sell to other countries when the Japanese offer the same price, according to a source at trading house Mitsui & Co. 
Soaring prices and declining imports are hurting earnings at Japanese companies. Maruha on Nov. 13 posted its consolidated net profit for the first half ended September at 1.17 billion yen, one-third initial projections, due to rising prices.  
As it is difficult to pass on higher prices, importers and wholesalers have been forced to absorb the higher prices, cutting their profit margins. Rumors abound that some tuna-processing firms and wholesalers have fallen into financial difficulties. 
The severe domestic business environment has prompted some trading houses to emphasize overseas markets. 
At Marubeni Corp.'s U.S. subsidiary that processes salmon, crab and other seafood, two-thirds of its annual sales of $120 million are accounted for by Western countries.  
Meanwhile, sales to Japan have fallen to one-third from half the total just three years ago. Masatoshi Yamada, general manager of Marubeni's seafood department, said, "When we consider business efficiency, we have to shift more of our operations to other countries." 
Sojitz Corp. exports tuna to Europe from its plant in China. Nippon Suisan bought three overseas seafood firms, including the largest U.S. frozen seafood producer. 
Koji Hayashi, vice president for marine products at Sojitz, worries that Western countries and China could end up with all the high-end fish, including bluefin tuna, in about 10 years. 
(The Nikkei Weekly 11/20/2006 Edition) 

LOAD-DATE: November 21, 2006

LANGUAGE: ENGLISH

PUBLICATION-TYPE: Newspaper

Copyright 2006 Nihon Keizai Shimbun, Inc.