Cod prices falling, but collapse 'not likely'

Cod prices are under downward pressure, but players in the industry do not feel a collapse like 2009 will happen this year.

“The highs last year were around $3,950 (€3,106) to $4,000 (€3,145) per metric ton. Prices are roughly down to $3,400 (€2,673) to $3,500 (€2,752) now.”

Prices are under pressure downwards, he said. “How much more is difficult to say it has already fallen $400 (€314.5) to $500 (€393.1) from the top in 2011, but could be a little more before it stabilizes.”

Prices for H&G look set to continue to decline, said the top executive of a fishing company operating in the Barents Sea, where Norway and Russia share a quota of 751,000 metric tons for cod and 318,000 metric tons for haddock.

“All the vessels that came in at the end of last year are seeing lower prices at the auction,” he said.

Prices are down between 5 percent and 10 percent, he said. “Prices are high for the end users -- if it is buyers in the UK, in southern Europe or processors in China -- and they are not willing to keep on paying these prices.”

Arild Aarvik, managing director of Norwegian fishing company Carisma Fish, is seeing the drop in prices but is also confident they will recover.

Southern Europe will be a big focus in terms of how much the clipfish business takes, he said.

Portugal is the largest single market for frozen cod from Norway, both in clipfish finished products and raw material for processing.

However, the Norwegians are concerned about possible high inventory levels in Portugal.

“I’d like to get a sense of the level of inventory that the Portuguese processors have,” he said.

Despite the cautious viewpoint on the Portuguese -- and Italian -- markets, Norwegian exporters are bullish on demand for cod from Brazil.

“One positive is the strong economic situation in Brazil -- strong demand for clipfish,” said the CEO of a Norwegian fishing company.

“Sales to Southern Europe are down, but sales to Brazil are booming. So this is a plus to the lower sales we are seeing in southern Europe,” said Aarvik.

The tight situation on the credit markets is also having an impact on the cod and haddock markets, as it is for other seafood commodities.

“This is one of the reasons why cod and haddock prices are under some pressure, but this does not apply only to cod and haddock,” said the top executive from the Norwegian fishing firm.

“It is not credit from the banks which is the biggest problem, this is the problem relating to credit insurance, and that applies to all fish species.”

The major insurers have reduced credit limits after the financial crisis in 2008, which means exporters do not get the same coverage on customers. “The result of this is that the banks do not want to give the same credit lines as before, but the start of the problem lies in the credit insurance reduction, and then ends up in the banks' reluctance to give the same credit.”

Increased quotas for Barents Sea cod and haddock in 2012 are positive for processors, he said.

However, this is likely to be counteracted by the credit situation.

“Companies are unable to keep inventory, because of the lack of credit. This means fishing companies have to sell on stock instead of holding it, and processors are unable to hold stock also.”

Access to credit is particularly an issue in southern Europe, said the sales director from the Norwegian processing company. “It’s a concern. The banks are more restrictive and there is less funding available.”

Demand and prices for frozen-at-sea fillets is solid, said a sales executive with an Icelandic fishing company which sells mainly into the UK and US markets.

This is good news for the Icelandic fleet, which is mainly equipped for fillet production.

The H&G price is coming down, but the fillet prices are not suffering, he said.

Ocean Trawlers, one of the leading suppliers of Barents Sea cod and haddock, has diversified its sales more into the US, which is keeping up prices in the UK, he said.

The price for 32+ cod fillets from Iceland was £4.60 (€5.6/$7.1) per kilogram at the start of last year and is now £5.18 (€6.3/$7.9), he said.

Prices are coming down slightly now -- which is usual for this time of year when there is supply and buyers don’t want to build up inventory, said the Icelandic source.

The minimum fresh cod price in Norway has also been reduced.

Although fresh prices are not directly linked to frozen, some frozen buyers will also try and force lower prices if the prices for fresh cod have come down, said sources.

The minimum price dictated by Norges Raafisklag -- the Norwegian fishermen’s association -- has been reduced for 2012, as of Jan. 9.

For cod of a minimum size of 6 kilograms, the price is down NOK 1.25 (€0.16/$0.21) to NOK 17.25 (€2.2/$2.9).

For cod from 2.5-6 kilograms, the price is down NOK 1 (€0.13/$0.17) to NOK 14.50 (€1.9/$2.4); and the price for cod from 1-2.5 kilograms is down NOK 1 (€0.13/$0.17) to NOK 12.50 (€1.6/$2.1).

“This does not necessarily correspond with the prices that will be agreed and what the price will be on the frozen fish, but it will possibly for some time create come uncertainty,” said the executive from the trading company.