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Economic Indicators Update
October 2012
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1. Introduction
This is the seventh in the series of economic indicators that attempt to monitor key parameters of the WCPO tuna fishery and its impact on FFA members. This report divides into broad headings of ‘Economic conditions – Purse seine fisheries’ (Section 3), Economic conditions – Longline fisheries (Section 4), ‘Domestic development indicators’ (Section 5) and Summary and conclusions (Section 6). An overview of catch trends at the global level (Section 2) sets the context for which production trends in the WCPO is a major determinant.
All catch and effort data in this report for WCPO/WCP-CA and FFA member waters are based on SPC-OFP provisions, noting that there have been important revisions to previous data used and that data for 2011 may change further. Data from other RMFOs are also used. With respect to domestic development indicators, data has been provided by agents at the national level commencing in early 2009, supplemented with other sources to cater for some of the shortfalls.
2. Global tuna production
Global tuna catch of the four major tuna species (albacore, bigeye, skipjack and yellowfin) declined in 2011 for a second year in a row to 4.08Mt million, the lowest since the peak year in 2005 (almost 4.5Mt million) (Figs 1 and 2). This was a decline of 4% from the previous year driven by a 9% (223,000Mt) decline in the WCPO that more than offset the increase of 13% (~70,000Mt) in the Eastern Pacific. The decline in the WCPO catch occurred at the time when purse seine effort was at its all time high. The predominance of La Nina conditions in the last two years that forced effort concentration in the Western Pacific and which may have led to local depletion in these waters partly accounted for these recent trends. (The Indian and Atlantic
Oceans assume the same catch levels
as in 2010 as data for 2011 still not
available). Despite the apparent overall decline in global production, the 2011 level remains at more than 4.0Mt million, the volume attained since 2002.
The distribution of catches by ocean area since peak production at almost 4.5Mt million in 2005 has changed noticeably for the WCPO and Indian Oceans but little for the Atlantic and Eastern Pacific Oceans. In 2011 the WCPO share of global catch was 55% (50% in 2005), Indian Ocean 20% (26%), and Atlantic and Eastern Pacific Oceans respectively at 10% (9%) and 15% (15%). The rise in the WCPO share corresponded with significant increases in purse seine catches while the decline
Figure 2 Production trends by Ocean area
Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT
www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 1 Global tuna production by ocean
Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT
www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
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in the Indian Ocean share corresponded with the decline in effort in part because of piracy threat in the area.
3. Purse seine fishery
3.1 Economic conditions in the fishery
3.1.1 Lightmeat canning grade tuna supply
Global purse seine as well as most of the pole and line productions (skipjack, yellowfin and bigeye) is targeted for lightmeat canned tuna.
The global production trends for lightmeat raw material by ocean area since 1980 are provided in Fig 3. Against the overall doubling in supplies from below 1.5Mt million prior 1983 to more than 3Mt million since 1997, there have been stagnancies over several periods (e.g. 1991 to 1997, 1998 to 2001. The long-term trend of lightmeat production is underpinned by purse seine production trends in the WCPO (FFA and Non-FFA waters) that commanded 61% (2Mt million) share of total production in 2011 valued at $1.9 billion. FFA member waters alone have accounted for between 30% and 40% of global supplies between 2007 and 2011, up from between 20% and 25% between 1990 and 2006 accounted for largely by transfer of purse seine effort to PNA waters as a consequence of two highseas pocket closures as of 2010 (Fig 4).
In the period between 2005 and 2011, however, there has been an apparent decline from a peak of 4.1Mt million in 2005 to its lowest of 3.2Mt million in 2011, an estimated decline of 21% (860,000Mt).
3.1.2 WCPO Lightmeat raw
material prices and estimated
delivered values
The purse seine lightmeat raw material market from the WCPO is primarily Bangkok with an estimated tonnage of more than 500,000Mt valued at more than US$600 million delivered to that market in 2011.
Figure 3 Global supply of raw material for lightmeat canned tuna
Sources: WCPO and EPO from SPC (2012), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 5 Bangkok Prices: SKJ (4-7.5lbs, cif) and YFT (20lbs+, cif)
Source: FFA database
Figure 4 Distributional shares of supply of raw material for lightmeat
canned tuna by waters Sources: WCPO and EPO from SPC (2012), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
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Bangkok benchmark prices for SKJ (4-7.5lbs, cif) and YFT (20lbs+) improved significantly in 2011 resulting in new peak prices in 2011 and through to 2012. These have resulted in the 12-month running average prices at above long term average prices of US$954/Mt for SKJ and US$1,447/Mt for YFT (Fig 5).
Recent price uptrend have been particularly impacted upon by variations in fishing conditions (relatively poor fishing conditions coinciding with dominance of La Nina conditions during 2010 and 2011), fuel / food cost trends and management measures (especially the three-month FAD closure measure in the WCP-CA; the closure of the two highseas pockets simply resulted in transfer of effort and catch to PNA EEZs). The ability of processors to pass on the increased raw material prices to consumers was also a factor that supported recent price increases. However, consumer resistance to further price increases has already emerged with the highly price-sensitive US market having reduced its canned tuna import volume in 2011 (down 4% compared to 2010) while a similar trend has only occurred in the EU market over the first half of 2012. As well, increasing consumer preference for sustainably harvested and processed tuna products is also increasingly becoming an important factor.
3.1.3 Estimated delivered value of
WCPO lightmeat raw materials
The estimated “Delivered” value of the purse seine fishery represents the value of the catch at the point at which it is unloaded at its final market destination whether it is delivered by the fishing vessel or transhipped1.
The trends in the estimated “delivered” value of the WCPO purse seine fishery are provided in Figures 6 to 8 by fishery, area (aggregated by national waters of FFA members, other national waters and international waters) and vessel flag (aggregated by vessels flagged to FFA members and other flags) respectively.
The estimated WCPO purse seine fishery by grouped waters in the last five years is provided in Table 1. In 2011, of the total value of almost $3.1 billion, 77% ($2.4 billion) was from FFA EEZs. Prior to introduction of highseas pocket closures in 2010, the FFA EEZs’ share of the purse seine catch value was typically 60%.
This trend, along with the significant increases in prices, would have benefitted FFA members in terms of access fees as these are linked to price
1 Examples of each of these exist in the WCPO tuna fishery with some US and Japanese purse seine vessels unloading directly to canneries in Pago Pago and Yaizu respectively, and Taiwanese and other vessels unloading to a transhipment vessel in say, Majuro, and the fish then transhipped to Bangkok.
Figure 7 Delivered value of the WCPO purse seine fishery by waters
Figure 8 Delivered value of the purse seine fishery by flag
Figure 6 Thai frozen SKJ import price and crude oil cost trends Source: FFA database; World Bank
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Figure 6 Delivered value of the WCPO purse seine fishery by species
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and catch performances.
Table 1. Estimated delivered value of WCPO lightmeat raw material by area of catch
Area 2007 2008 2009 2010 2011
US$M %
Total US$M %
Total US$M %
Total US$M %
Total US$M %
Total
FFA member EEZs 1,513 60% 1,998 60% 1,454 61% 1,926 77% 2,380 77%
PNA waters 1,498 59% 1,973 59% 1,440 60% 1,911 76% 2,328 75%
Non-PNA waters 15 1% 25 1% 13 1% 15 1% 52 2%
Other EEZs 644 25% 813 24% 514 22% 465 18% 556 18%
Phil / Indonesia 575 23% 750 23% 469 20% 425 17% 498 16%
Other 69 3% 64 2% 45 2% 40 2% 58 2%
Highseas 385 15% 520 16% 423 18% 123 5% 157 5%
HS Pocket 1 26 1% 40 1% 17 1% 3 0% 2 0%
HS Pocket 2 252 10% 313 9% 253 11% 21 1% 33 1%
Other 107 4% 167 5% 154 6% 99 4% 122 4%
Grand total 2,542 100% 3,331 100% 2,391 100% 2,513 100% 3,092 100%
3.1.4 Catch rates and revenue per effort day
Figures 9 and 10 provide comparisons of average annual catch rates and revenue per effort day in waters of the Parties to the Nauru Agreement (PNA) and in international waters for all of the major DWFNs (Korea, Taiwan, Japan and US) over the period 1997 to 2011.
The overall catch rates for each of the fleets considered have experienced consecutive declines in the last two years from what generally appears to have been exceptionally good performances in 2009. The 2011 catch rates compared to 2009 saw Korea fleet CPUE at 31Mt (down from 41Mt), Taiwan 21Mt (27Mt), US 26Mt (32Mt) and Japan 27Mt (38Mt). Catch rates appear to have trended down in the PNA waters in the last two years while a more mixed performance by fleet occurred in the international waters (noting the closure of the two highseas pockets as of 2010).
Despite the drop in catch rates during 2011, the average value per day for most of the fleets increased with Korea fleet to $55,000 ($50,000 in 2010), Taiwan fleet to $37,000 ($34,000), US
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Figure 9 Comparative catch rates among fleets in PNA waters and international waters, 1997-2011
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fleet to $46,000 ($37,000) while the Japan fleet at $58,000 broadly levelled to previous years day value. Figure 10 illustrates the trends in day values in PNA waters, international waters and their average between 1997 and 2011.
3.1.5 Costs and fleet profitability
Vessel operating costs vary between fleets and within fleets. The primary drivers of differences between fleets include differing levels of skipper skill, vessel size and age, crew, bunkering and insurance costs. Differing levels of skipper skill and the size and age of vessels also drive differences in the cost structure of vessels within a fleet.
Fuel costs comprise a significant component of total operating costs (15-40% depending on the fuel price). As fuel prices vary significantly over time operating costs also vary significantly over time. While fuel costs do drive up operating costs raw material for canning prices are correlated with fuel prices (Figure 11) and rises in fuel costs are likely to be offset by increases in fish prices and therefore tend to maintain profitability.
4. Longline fishery
Longline vessels target both albacore, predominantly destined for the whitemeat canning market, and yellowfin and bigeye, predominantly destined for the sashimi markets.
In this section of the report we examine conditions relating to South Pacific albacore and the whitemeat tuna market and for sashimi longline caught bigeye and yellowfin in the WCP-CA.
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Figure 11 Fuel price vs skipjack price Source: FFA database (2012)
Figure 10 Comparison of day values in PNA and international waters by the respective fleets
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4.1 Economic conditions in the fishery
4.1.1 Supply
4.1.1.1 Albacore – Whitemeat raw
material
Global catch levels of albacore rose rapidly through the 1990s rising from 153,400 MT in 1991 to around 258,600Mt in 1999, an increase of 69%. This increase was driven primarily by a large increase in catch from the North Pacific Ocean where catch increased more than three-fold from 35,300 to 118,400Mt (Figures 12 & 13). Since 2002, global catches have been on a downward trend with catches in 2011 of under 236,000Mt about 11% below the record 2002 level, driven by substantial declines in the North Pacific (down by 27% to 77,000Mt) and Atlantic Ocean (down by 32% to 40,700Mt).
Albacore catches in the South Pacific Ocean have followed a different trend with catch ranging between 32,700 and 40,500Mt between 1991 and 2000, before increasing dramatically in 2002 and 2010 to reach more than 67,000Mt. Catches broadly maintained at around 60,000Mt between 2002 and 2008 but have been more than 75,000Mt in each of the last three years.
The decline in catch from the North Pacific in recent years and the corresponding increase in catch from the South Pacific Ocean has resulted in a significant change in the composition of global catches since 1999. The proportion of the global albacore catch taken in the North Pacific declined from 46% in 1999 to 32% in 2010, while the proportion of the global catch taken in the South Pacific rose from 14% to 30% over the same period. The proportion of the global albacore catch taken from the Atlantic has decreased from 26% to 18% over this period while the Indian Ocean component of the catch rose from 15% to 18% (Figure 14).
Figure 14. Proportional shares of albacore production by Ocean Area Sources: South and North Pacific Oceans from SPC (2011), Estimates of Annual Catches in the
WCPFC Statistical Area (2011); Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 12. Global whitemeat production by ocean area
Sources: South Pacific and North Pacific Oceans from SPC (2011), Estimates of Annual Catches in the WCPFC Statistical Area (2011); Atlantic Ocean from ICCAT
www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 13. Global albacore production trends by Ocean Area Sources: South and North Pacific Oceans from SPC (2011), Estimates of Annual
Catches in the WCPFC Statistical Area (2011); Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
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4.1.1.2 Longline caught Bigeye
Figures 15 and 16 provide a breakdown on global longline caught bigeye catches by ocean area over the period 1997-2011. Over this period the annual catches broadly levelled at around 300,000Mt between 1991 and 2004 but have since declined steadily to less than 200,000Mt by 2010 and declining further in 2011 to 178,000Mt. The Indian Ocean traditionally has been the major source of longline caught bigeye tuna, accounting for between 30-40% of annual global productions. The steady decline as of 2005 occurred because of the declines in catches from almost all ocean areas, including from the Indian Ocean. As such, the Indian Ocean proportional share of catches has remained broadly unchanged until 2008. Since 2008, the catches from the WCPO (which has been the next most important source since 2002) exceeded those from the Indian Ocean. The WCPO and Indian oceans presently provide the main sources of bigeye tuna catches (60-70%) but with WCPO accounting for a greater proportion of their combined production (Figure 17).
4.1.1.3 Longline caught Yellowfin
Figures 18 and 19 provide a breakdown on global longline caught yellowfin catches by ocean area over the period 1991-2011. Over this period the annual catches declined from a peak of 300,000Mt in 1993 to 160,000Mt by 2011. As for the longline bigeye tuna, the Indian Ocean traditionally has been the major source of longline caught yellowfin tuna, but accounting for a greater proportion of catches Figure 18 Annual global trends of yellowfin production by Ocean Area
Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 16 Global trends of Bigeye production by Ocean Area Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 15 Annual global trends of bigeye production by ocean area Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 17 Proportional shares of Bigeye by Ocean Area Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
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between 40-60%. Yellowfin catches in the WCPO for the most part have been steady at between 55-75,000Mt annually and the WCPO has been the next major source of longline yellowfin. The overall global steady decline over the years occurred because of the declines in catches mainly from the Indian Ocean and to a lesser extent the declines in the Eastern Pacific Ocean while catches in the Atlantic have broadly remained stable. As of 2008, catches in the Indian Ocean fell below those in the WCPO. The WCPO and Indian oceans presently provide the main sources of yellowfin tuna fishing but with the WCPO accounting for more than half global production as of 2009 whereas the Indian Ocean accounts for just more than 30% (Figure 20).
4.1.2 Price trends
The price indicators for longline caught fish are as follows: For fresh longline prices, the Japanese fresh yellowfin and bigeye import prices from Oceania are used. For yellowfin caught by frozen longline vessels Yaizu market prices (in Japan) for longline caught yellowfin are used. For bigeye caught by frozen longline vessels frozen bigeye price at selected major Japanese ports are used. For albacore caught by fresh and frozen longline vessels Thai import prices are used.
4.1.2.1 Albacore
The trends in Thailand frozen import prices (cif) for albacore are shown in Figure 21. The trends show that prices have fluctuated widely over the years with lows of less than $2000/Mt and highs exceeding $2,800/Mt. Relatively high prices at more than US$3,300 have been witnessed in 2011 and higher still in the first half of 2012 at more than $3,700. The supply factor owing to less favourable fishing conditions, especially in the Indian Ocean, played a central role in the recent escalation of albacore prices.
4.1.2.2 Longline caught bigeye and yellowfin prices
Figure 22 illustrates movements in average annual prices of selected indicator prices. Over the period 1997-2011, the Japanese longline prices broadly showed stagnations owing to unfavourable economic conditions, oversupply, the long-term change in consumer preference in Japan, increased competition from alternative sashimi products such as from farmed fish, purse seine yellowfin
Figure 20 Proportional shares Yellowfin by Ocean Area Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from
ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
Figure 21 Thai import frozen albacore prices Source: Thai Customs Dept (http://customs.go.th/Statistic/StatisticIndex.jsp
Figure 19 Proportional shares yellowfin production by Ocean Area Sources: WCPO and EPO from SPC (2011), Atlantic Ocean from ICCAT www.iccat.int/atl.asp; Indian Ocean from ww/w.iotc.org/English/data.php
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catches, and so on. However, tighter management measures at the global level and voluntary reductions in longline fleet sizes among DWFNs have produced some favourable results in recent years with some improvements in prices. The magnitude of improvements may be overstated when consideration is in US$ terms (as done here), however, given the extent to which the US$ has weakened internationally in recent years.
Japan fresh import yellowfin longline prices averaged $7.20/Kg during the period 1997-2007 but averaged higher at $9.80/Kg during the period 2008-2011, an improvement of almost 38%. On similar trends, frozen longline yellowfin prices (Yaizu ex-vessel) averaged $4.17/Kg during the period 1997-2007 but improved significantly by 70% to an average of $7.09/Kg during the period 2008-2011 (Figure 22).
Japan import fresh bigeye longline prices averaged $8.55/Kg during the period 1997-2007 but averaged higher at $10.42/Kg during the period 2008-2011, an improvement of almost 34%. On similar trends, frozen longline bigeye prices averaged $6.67/Kg during the period 1997-2007 but improved significantly by 56% to an average of $10.42/Kg during the period 2008-2011 (Figure 23).
The US market prices for fresh longline sashimi and non-canned tuna products also showed improvement trends recently but were relatively stagnant in prior years.
4.1.3 Delivered value of the longline fishery in WCPO
“Delivered” value represents the value of the catch at that point at which it is unloaded at its final destination whether it is delivered by the fishing vessel, transhipped or air-freighted. Total estimated delivered value of the WCP-CA longline fishery in 2011 was $1.9 billion ($1.7 billion in 2010), 33% (35%) of total estimated delivered value of US$5.5 billion ($4.8 billion) of WCPO values.
4.1.3.1 Values by species
Bigeye tuna catch in the WCP-CA normally represent the highest value compared to other longline target species of yellowfin and albacore (Figure 24). For 2011, however, of the total estimated longline value of $1.9 billion, 42% was the value of bigeye, 42% yellowfin and 16% albacore.
Figure 24 Delivered values of longline fishery within the WCP-CA by species
Figure 22 Japan and US fresh and frozen prices
Figure 23 Japan and US fresh and frozen yellowfin prices
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4.1.3.3 Values by fleet
The longline fleets with considerable importance in WCP-CA include Taiwan, Japan, Korea and China. The combined annual values by these fleets typically represent around 70% of total longline catch values. In the last three years the combined value has exceeded $1 billion (Figure 25). The value of catch by the FFA flagged vessels has steadily risen over the years to reflect increasing member country participation in the fishery especially through domestic fleet expansion and/or domestic basing of foreign fleets. In 2011, the total delivered value for the FFA flagged longline fleet came to $312 million or 16% of the total longline catch value of $1.9 billion. It is noted, however, that as in the case with FFA purse fleet, a number of these vessels are foreign-owned such that the benefits from these can be considerably less than from domestically owned and operated vessels as such. 4.1.3.2 Values by water
The highest proportion of between 40% and 50% of longline catch values is from international waters. In 2011 the proportion of longline catch value from international waters was 45% while from other national waters 24% and FFA waters 31% (Figure 26 and Table 2).
Table 2. Estimated delivered value of WCPO whitemeat and sashimi grade raw material by area of catch
Area
2007 2008 2009 2010 2011
US$M %
Total US$M %
Total US$M %
Total US$M %
Total US$M %
Total
FFA member
EEZs 281 24% 321 23% 374 23% 426 25% 442 24%
PNA waters 201 17% 222 16% 269 17% 331 19% 288 16%
Non-PNA waters 80 7% 99 7% 105 7% 95 6% 154 8%
Other EEZs 430 37% 474 34% 537 34% 542 32% 576 31%
Phil / Indonesia 104 9% 147 11% 192 12% 155 9% 162 9%
Other 326 28% 327 24% 345 22% 387 23% 414 22%
Highseas 457 39% 593 43% 689 43% 739 43% 835 45%
Grand total 1,168 100% 1,389 100% 1,601 100% 1,707 100% 1,853 100%
4.1.4 WCP-CA Longline CPUE values
Values per unit of effort of major longline fleets in PNA and international waters in terms of per hundred hooks and per day basis are provided below. The DW fleets considered are those of China, Japan, Korea and Taiwan. As shown, all fleets have experienced overall declining and stagnant per unit of effort values until the more recent years (Figure 27).
Figure 26 Delivered values of longline fishery within the WCP-CA by area
Figure 25 Delivered value of longline fishery within the WCP_CA by flag
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In 2011, the average value per hundred hooks (Hhks) ranged between $230 and $360 with Taiwan fleet at the lower end and Korea fleet at the upper end. The average day value for 2011 ranged between $6,000 and almost $10,000 with Taiwan/China fleets at the lower end and Korea fleet at the upper end.
Figure 27 Annual average values per unit of effort (US$/Hhks, Left; US$/day, Right) for selected DWFN fleets, 2000-2011
4.1.5 Fuel costs and fish prices
Diesel oil price is the single most important operational cost for fleets. Given that different fleets access different supply sources for their fuel, crude oil price (average spot Brent, Dubai and West Texas crude) is used as proxy to generalise about fuel cost trends.
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The trends at which fuel cost has escalated over the years, relative to fish prices, has been a continuing threat to the viability of longline fleets. Figure 28 below illustrates the trends of frozen sashimi prices and albacore prices relative to that of fuel cost trends.
For the sashimi product prices it is evident that the decline and stagnancy between 2000 and 2006 is contrasted by the escalation in fuel costs as of 2004 and even more through to 2008. Despite some upturn in fish prices in 2008, the rate at which fuel costs escalated would probably more than wipe out any gains from fish price increases. In 2009, the fuel price escalation reversed sharply while fish prices were at 2008 level or improved. In 2010/2011 to the present, the fuel price trends have been broadly tracked by fish price trends.
For the frozen albacore prices, the trends relative to fuel price trends indicate that probably the worst years were in 2002 when albacore prices plummeted against relatively stable fuel prices and more recently in 2007 and 2008. In 2007 albacore prices once again plunged while fuel costs increased sharply, continuing into 2008. In 2009/2010 albacore prices sustained at relatively high levels but escalated in 2011/2012 against relatively stable and even declining fuel prices. These trends would have importantly contributed to improving economic conditions for the fleets.
Figure 28 Monthly price trends (Jan 2000-August 2011): Japan frozen sashimi grade fish vs. crude oil prices (Left) and Thai
import frozen albacore vs. crude oil prices (Right)
5. Domestic tuna industry development indicators
5.1 Access fees
Bilateral access agreements, prior to the purse seine VDS, have been generally framed in terms of a rate of return of 5-7%. The actual rate of return however may vary from this for reasons including:
Assumed catches and prices based on historical figures varying significantly from actuals. This would be expected to cause the access fees to be both higher/lower than target rate as current prices and catch may be below or above historical levels.
Current bilateral agreements are usually structured so that an access licence is required to be paid for all vessels from the DWFN in question. That is, for example, under an agreement between say Japan and a PNA member, all the 35 Japanese vessels that can be licensed under the arrangement will be required to take out a license to operate in the respective PNA member’s waters. Many of these vessel will not land fish of a value for which, for example, 5% is greater than the access fee they pay.
Additionally, any vessels that do land fish of a value for which 5% is less than the access fee they pay are required to pay an additional amount such that their fee is equal 5% of the value of their catch. In effect at a vessel level the 5-7% value cited is a minimum rate of return and often a significant proportion of a DWFN fleet is paying a significantly higher rate.
Access fees have not been possible to collect the extent desired. This is understandable given the sensitivity around this data, specifically fees under bilateral arrangements, although the Secretariat would only publish aggregated data to reduce this sensitivity.
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2,000
4,000
6,000
8,000
10,000
12,000
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00
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(J
ul)
US
$ p
er
Mt
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20
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60
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US
$ p
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Bb
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Crude oil: Av. Spot Brent,
Dubai, WTI
Japan (major ports) frozen
LL BET (ex-vessel)
Japan Yaizu Fresh/Frozen LL YFT
(ex-vessel)
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500
1,000
1,500
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(Ju
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$ p
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20
40
60
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100
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US
$ p
er
Bb
l
Crude oil: Av. Spot Brent,
Dubai, WTI
Thai frozen import ALB (cif)
13
For purposes of highlighting the possible trends and magnitude of benefits from access fees over the years, what follows is aggregation of multilateral fees under the US Treaty and FSMA with 6% of value of purse seine catch by bilateral fleets and 5% of value of longline catch by bilateral fleets.
The total estimated fees from the bilateral purse seine fleets in 2011 was about $100 million compared to $75 million in 2010. A further flow from the multilateral arrangements of almost $30 million was recorded (almost similar to previous year) while estimated fee flows from longline fleets came to almost $10 million. Figure 29 illustrates the trends of access fees over the period 2000 to 2011, with 2011 totaling $140 million.
5.1.1 Potential future returns under the Vessel Day Scheme
Under the Vessel Day Scheme, PNA members as of mid-2011 agreed to impose a minimum rate for VDS fishing days sold to foreign bilateral partners of $5,000 per day. Since this agreement was reached prices for purse seine caught tuna have risen considerably with, for example, the Bangkok price for 4-7.5lb skipjack rising from around US$1,650 per metric tonne in July 2011 to around $2,300 per metric tonne currently (September 2012). While fuel prices and other production costs have also risen over this period the increase in prices has more than offset this leading to an increase in the profitability of operating in the fishery and the value of obtaining access to it.
Based on previous work at FFA, Figure 30 provides estimated rents2 per VDS fishing day based on a catch rate of 30Mt per VDS fishing day under a number of scenarios with prices range from US$1500/Mt to US$2500/Mt and production costs (including a sufficient return to vessel owners to justify long term participation in the fishery) ranging from US$800/Mt to US$1,400/Mt. With prices at US$2,000/Mt a vessel with production costs of US$1,400/Mt would be making rents (super profits) of U$18,000 per VDS fishing day while for vessels with a production cost of US$1,000/Mt rents would be US$30,000 per VDS fishing day. At $2,250 per metric tonne even a vessel with high production cost of $1,400 per metric tonne would be making rents in excess of $25,000 per day. These figures indicated that given current market prices for purse seine caught tuna there is
2 Rents (or super profits) are the profits that a vessel makes over and above the profit required for them to undertake fishing activity. For example, if a
vessel operator expects revenues of US$60,000 per day but requires revenues of US$35,000 per day to cover all costs, including a return sufficient to justify remaining in the fishery over the long term, a rent of US$25,000 per day is made. As this rent is beyond what is required to undertake the activity the operator if left with no alternative and acting rationally will be prepared to pay US$25,000 per day to gain access to the fishery as under this payment the return required to justify remaining in the fishery is still obtained. This is not to say that all rents in this situation can be captured by the seller of the right as other factors, such as, the strength of the seller’s bargaining position and their ability to sell the days to others will influence the outcome.
Figure 29 Estimated access fees, 2000-2011
Figure 30 Rent per day under varying scenarios for fish price, production
costs and a 30Mt CPUE
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considerable potential for PNA members to achieve returns from each VDS day sold considerably greater than the current minimum benchmark price.
5.2 FFA fleets – Local and Locally-based foreign
The FFA fleet has grown substantially in the last decade or so, facilitated by domestication policies that have resulted in growth of both domestic and domestically based foreign purse seine and longline vessels. The trends in the growth of the purse seine and longline fleets are shown in Figures 31 and 32. The last two years has witnessed considerable growth in both the purse seine and longline vessels, some as joint venture fleets while others through reflagging or charter arrangements. Not all FFA-flagged vessels render the same amount of benefit as local vessels, however, as these do not offload, employ locals nor make port calls to the state flagged under while at the same time contributing to the mounting pressure on the resource.
5.3 Tuna fishing contribution3 to GDP
Measurements of the contributions of fishing by the local and locally based foreign fleets are facilitated using estimated value added ratios. The aggregated values are presented in Figure 33. As shown, the overall contribution of tuna fishing to GDP in nominal terms has markedly increased over the years parallel with the trends of increases in value of catch.
Estimated tuna fishing contribution (by domestic and locally based fleets) in 2011 was $321 million, a rise of 34% from the previous year on account of substantial increase in catch value. The overall trend of contribution is largely determined by the contribution from the purse seine fleet because of the significance of the value of catch by this fleet relative to other fishing. The contribution by the pole and line and other fisheries are almost negligible.
3 Tuna fishing contribution to GDP were derived by obtaining the estimated delivered values of fleet productions by local and locally-based fleets,
reducing these by 15% and 25% for purse seine and longline values respectively to get dockside values, inflating the same by 5% and 10% respectively to account for by-catch value, and applying the estimated country and fleet-specific value-added-ratios to the respective catch values. The value added ratios were obtained from recent studies conducted under DEVFISH to estimate the economic contributions of domestic longline and purse seine fleets to FFA members. The conveniently flagged and some joint-venture vessels known to operate and based outside of flag state port have VARs of zero and therefore having zero conributions. The values so derived are only estimates of likely tuna fishing contributions to GDP..
Figure 31 Local and locally-based foreign purse seine vessels in FFA member
countries
Figure 33 Tuna fishing contribution to GDP by gear type, 1997-2011
Figure 32 Local and locally-based foreign longline vessels in FFA countries
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5.4 Employment
The data presented in this report is on employment by various sectors in tuna related activities including onshore processing, crew on local and foreign vessels, observers at the national and regional level, government staff at the national levels, and regional organisations (Figure 34).
The quarterly trends indicate that there has been a steady increase since the mid 2010 from around 12,000 to a new peak of almost 16,000 in the second quarter of 2012. This trend is underpinned by the trends in the onshore processing sector that clearly accounts for the greatest share. Between the second quarter 2010 and the second quarter 2012 the total employment in the shore processing sector rose from below 8,000 to more than 10,000.
It is expected that in the short to medium term, greater opportunities will open up for employment especially in the onshore processing sector as expansions to existing facilities and new investments are being implemented including those in Solomon Islands, PNG, and Kiribati.
5.5 Tuna volume processed
The present annual volume of tuna processed in the FFA member countries is around 100,000Mt, most of which is into canning and loining. Increasingly, however, other value added fresh/frozen products have featured in country productions and exports. The quarterly trends of volume landed and processed, (against which the tuna sector-wide employment trends) is compared, is illustrated in Figure 35.
The volume presently processed in FFA member countries, though anticipated to increase significantly in the short to medium term in relation to currently implemented and planned investments, is relatively small compared to the volume presently harvested in FFA member waters. The total volume harvested in FFA member waters in 2011 totalled 1.4Mt million of which lightmeat raw material 1.3Mt million, whitemeat 40,000Mt and sashimi grade products 33,000Mt.
5.6 Exports
Export data from FFA member states are not available through collecting agents. The alternative source is from export destinations and the import trends presented below are from these sources. Focus is on import trends in three major export destinations - EU, US and Japan markets.
Figure 34 Tuna industry related employment in FFA member countries and institutions
Figure 35 Volume processed and and sector wide employment in FFA member countries and institutions
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5.6.1 EU market imports
The EU principal import from FFA member countries is canned tuna with Fiji, Papua New Guinea and Solomon Islands as the only sources. The EU also imports from these sources tuna loins and minimal fresh and frozen tuna products. Total value of imports into the EU market in 2011 was $44 million, $28 million (64%) of which was value for canned tuna. Figure 36 shows the overall trend of imports and the respective components from the the FFA states between 2000 and 2011 .
The EU imports from current FFA member sources presently enjoy duty free access under the Interim Economic Partnership Arrangement (IEPA - Fiji/PNG) and Everything But Arms (EBA – Solomon Islands). Nonetheless, complexity of RoO requirements under different tariff regimes, IUU Regulations, Competent Authorities, Free Trade Agreements, WTO rules, Doha conclusion and competitiveness issues for PICs point to many challenges and imminent preferential tariff erosion.
5.6.2 US market imports
The value of tuna and tuna products from the FFA member states to the US market over the past decade or so has risen, from $28 million in 2000 to $100 million in 2009 and 2010 but reduced substantially to only $57 million in 2011 (Figure 37). Tuna trade with the US is presently dominated by tuna loins with Fiji as the principal supplier. The substantial drop in tuna loins from Fiji was the single factor to drive down the values of imports in 2011.
The canned tuna exports comprise only of albacore (not in oil) but these have been minimal and not consistent with PNG the sole supplier. This is because of prohibitive tariffs. Prospects of expanding canned tuna trade to US market is limited under present tariff protections accorded to domestic processors. And even for Compact States with preferential access to this market, developmental internal constraints would not favour canned tuna processing.
The sashimi/non-canned exports to the US consist of fresh/frozen albacore, bigeye and yellowfin and other value added tuna products. Fiji is the main supplier.
5.6.3 Japan market imports
The Japanese market as the major destination for tuna sashimi grade
Figure 38 Japan fresh and frozen tuna products import from FFA countries, 2000-2011
Source: http://www.customs.go.jp/toukei/download/index_d011_e.htm
Figure 36 EU tuna products import from FFA countries, 2000-2011
Source: Eurostat ..................
Figure 37 US tuna products import from FFA countries, 2000-2011 Source: Personal communication, NMFS
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products is of great importance to countries with longline fleets targeting sashimi grade products (Japan trade data shows that bigeye tuna was not included in the import list until 2002 while the fresh/frozen tuna fillets / other product category did not appear until 2007). Exports from FFA member countries to Japan trended up from $30 to $86 million over the period 2000-2011. Exports in 2011 totalled US$70 million. Exports of fresh sashimi products (unprocessed) from FFA countries have been on the decline in recent years but the rise in fresh and frozen tuna fillets in the last two years have more than offset these declines (Figure 38).
Palau and Fiji account for the greater supply of fresh products to Japan. This is on account of the locally-based foreign longline fleet in these countries and the relatively developed infrastructure to facilitate airfreight of fresh products to this market.
6. Summary and conclusions
The economic conditions for the fleets in the WCPO in recent years overall are a substantial improvement on previous years. Significantly improved market prices and increased fleet efficiencies supported by the impact of management measures in the forms of capacity reductions for the distant water longline fleets and area and seasonal closures for the purse seine fleets contributed to the improvement. On the downside, however, was the generally poor catching performances by fleets from less favourable fishing conditions against the backdrop of the La Nina conditions that prevailed during 2010 and 2011. It is most likely that the fleets would have significantly improved profitability nonetheless.
Against the relatively favourable recent developments the FFA member countries have benefitted in several respects at least in nominal terms. The increases in the value of catches in the EEZs of PNA members because of price increases and the transfer in purse seine effort from closed high seas pockets would have translated to significantly increased access fees and opportunities to improve on this under the purse seine VDS (and later the longline VDS), are matters for FFA members to exploit. At the same time those with domestication policies in place through development of own fleets and/or accommodating foreign locally based fleets, and/or onshore processing have benefitted from increased monetary contributions to their GDPs, increased employment, exports and related spinoff effects.
Nonetheless the member countries are not without challenges and indeed these challenges will continue to intensify. Controlling the increasing trend of fishing capacity for both the purse seine and longline fleets must be realised at this time when licence concessions by distant water fleets are being sought intensively at unprecedented levels because of increasingly stringent but appropriate management measures being put in place.
The comparative advantages and competitiveness at the processing and international trade levels are continually being undermined by lower cost producing centres in Asia and elsewhere as well as increasingly stringent market access measures specifically to the EU market. It is critical that collective efforts and common stance on common issues to benefit from the comparative advantages and to prevent erosion of competitiveness be in place. Preferential access especially to the EU market must be maintained or improved (such as through harnessing of the IEPA and extension of global sourcing to unprocessed tuna products). Relatively very low labour productivity from that especially in Asia and relatively very high production and freight costs from lack of economy of scale at the national levels are the key obstacles to improvement of competitiveness that provide real challenges for FFA member states.