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USDA GAIN: Fish Production


26 April 2013

USDA GAIN: South Korea Seafood Products Market Brief 2013USDA GAIN: South Korea Seafood Products Market Brief 2013

In 2012, Korea imported $169 million in U.S. fishery products making the United States the fourth largest supplier with a 4.6 percent market share. Total Korean imports of seafood in 2012 were $3.65 billion, down 5 percent from 2011 due to the worsened economy and reduced demand by food service industry and export business. U.S. seafood is generally considered high quality and safe, but less price competitive when competing with other origins. Fish Surimi, Flatfish, Monkfish, Alaska Pollack Roes, Skate, Hagfish, Cod, Glass Eel, Atka Mackerel, etc. are some of the major species imported in large quantities from the United States.

USDA GAIN: Fish Production

Korean Seafood Market Overview

In 2012, Korea’s seafood import from all origins was $3.65 billion, down 5 percent from $3.83 billion in 2011. The United States was the fourth largest exporter of seafood products to Korea. The largest seafood supplying country in 2012 was China at $1.03 billion, followed by Russia at $653 million, Vietnam at $497 million, USA at $169 million, Thailand at $139 million, Taiwan at $132 million, Norway at $113 million, and Japan at $111 million. These eight countries accounted for 78 percent of Korea’s total seafood imports in 2012.

Korea imported $169 million of U.S. seafood in 2012, up 19 percent from $142 million in 2011, providing the United States with 4.6 percent market share. In Korea, U.S. seafood including aquaculture is generally considered high quality, but higher in price compared to that of competing countries. Until 2011 the United States has been the fifth largest exporter of seafood in Korean market following China, Russia, Vietnam and Japan but in 2012 Japan turned its rank over to the United States due to Korean consumers’ withered demand for Japanese seafood products after the nuclear power plant incident. Surimi, Flatfish, Monkfish, Alaska Pollack Roes, Skate, Hagfish, Cod, Glass Eel, Atka Mackerel, etc. are some of the major species imported in large quantities from the United States and increased value of U.S. seafood exports to Korea can be accounted for by Frozen Flatfish ($24.5 million, up 28 percent – this is one of the three TRQ fish products under KORUS FTA), Frozen Skate ($8.9 million, up 14 percent – reduced supply from Canada and Uruguay), Live Glass Eel ($6.5 million, up 2,700 percent – demand for U.S. product exploded due to skyrocketing domestic prices of live eels), Frozen Alaska Pollack Roes ($9.5 million, up 12 percent – local demand is growing), and Live Hagfish ($7.6 million, up 17 percent – short supply of local hagfish).

Until 2000, Korea was a net exporter of seafood. However, growing domestic demand and limited supplies have reversed the situation. In 2012, Korea exported $1.97 billion of seafood and imported about $1.68 billion more than it exported. Imports are expected to continue to outpace exports ensuring that Korea will remain an important market for U.S. seafood suppliers.

KORUS FTA and Customs Duty

KORUS FTA

The Korea-U.S. Free Trade Agreement (KORUS FTA) implemented on March 15, 2012 is expected to deepen the longstanding economic alliance between the United States and Korea. With respect to the seafood sector, the KORUS FTA is expected to create more opportunities for U.S. seafood exporters. Customs duties for fishery products imported from the United States were cut to zero immediately or will be phased out over the course of 3 to 10 years. For instance, the Customs duty for Frozen Sockeye Salmon was cut to zero immediately. In contrast, Customs duties for U.S. trout and sea bass will be reduced to zero in 3 and 10 years, respectively. The Customs duty elimination will be prorated equally every year over the phase-out period.

There are three fish species which are subject to Tariff Rate Quotas (TRQ) under the Agreement. For instance, the Customs duties are zero for imports of 1,652 metric tons of Frozen Flatfish and for 4,360 metric tons of Frozen Alaska Pollack in 2013. The quantities shall enter on a first-come, first-served basis.

The industry forecasts that Korean consumers will take advantage of lower prices resulting from elimination of import duties to demand more glass eel/live, Sockeye salmon/frozen, flatfish/frozen, salad eel/live, Pollack surimi/frozen, lobsters/live/frozen, Pollack/frozen, monkfish/frozen, cod/frozen, Pollack roes/frozen, fish fillet/frozen, fish surimi/frozen and shrimps/live, fresh or chilled.

Negotiated customs duties on certain seafood products under the KORUS FTA are higher than the current MFN applied base rate, which Korea lowered after the trade agreement was negotiated.

However, the MFN applied rate will be used when it is lower than the KORUS duty. The KORUS duty will take effect when it is lower than the MFN rate.

Suppy, Demand and Market Opportunities

Supply

In 2011, Korean seafood production increased to 3.26 million metric tons, up 4.7 percent from 3.11 million metric tons in 2010. Production from adjacent waters increased 11.1 percent and production from shallow-sea aquaculture increased 4.6 percent from the previous year. The total local seafood production value also increased due to the reduced catching and grown prices of hairtail, squid, and mackerel. However, it is expected that Korean domestic fish production volume will not increase significantly in the future due to reductions in fish resources in adjacent waters and the enforcement of Exclusive Economic Zones by Korea's neighboring countries. Constraints built into bilateral and multilateral fishing accords will further impact total harvest. The harvest from adjacent waters fisheries consists primarily of squid, mackerel, corvina, hairtail and anchovy. Government efforts to boost aquaculture production in the shallow sea areas clearly indicate the importance of this sector as a future seafood resource.

The number of fishing vessels has been steadily decreased reflecting the reduction in fishery resources. 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 the reduction in fishery agreements, the Korean government is undertaking an in-depth study of aquaculture and researching how to secure higher fish catch quotas in foreign waters and is working hard to purchase fish quotas from other countries, including Russia.

As seafood export opportunities with China, EU and Japan grow, the Korean government is also focusing on aquaculture in shallow sea areas to cope with the shortage of fishery resources in the adjacent water and restrictions in neighboring countries’ waters. Shallow sea aquaculture is expected to continue to increase in the future due to the government’s plan to have the country’s annual seafood export reach $10 billion by the year 2020.

To insulate select domestic seafood producers from imported products (mainly from China), the Korean government has set higher “adjustment tariffs” ranging from 22 to 50 percent for nine fish species which are not subject to tariff bindings under WTO agreements. Prior to implementation of the adjustment tariffs, imports of these nine species were subject to tariffs ranging from 10 to 20 percent.

Demand

Korean consumers place high value on freshness, place of origin, taste, low cost, and food safety in the course of making seafood purchasing decisions. Overall performance of the Korean seafood market will depend greatly on production and consumption. Due to the shortage of ocean resources, seafood production is not expected to increase in the near future. Despite this, consumption of seafood continues to grow as consumers view seafood as a healthy source of protein.

Price, quality and timeliness are the most important factors affecting U.S. trade. U.S. fish are generally considered to be high quality and, in turn, more expensive than other countries products. Fortunately, the major species imported from the United States are species that Koreans enjoy and that other suppliers do not supply in large quantities.

The Korea Rural Economic Institute reported in its 2011 Food Balance Sheet that annual per capita seafood consumption in Korea was 53.5 Kg (fishery products and shellfish = 37.8 kg and seaweed = 15.7 kg) in 2011. The major seafood species that Koreans consumed are anchovy, shrimp, squid, tuna, Alaska Pollack, mackerels, yellow corvina, saury, hair tail, flat fish, monk fish, eel, rock fish and cod, etc. The success of Korean industry efforts to change consumer perceptions 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.

Thanks to increased income and improved standards of living, seafood family restaurants are growing in popularity in Korea. They are expanding their business due to good business environment. Todai, Seafood Ocean, Bono-Bono, Marisco, Ocean Star, Ocean Family, and Muscus are popular seafood family restaurants. These restaurants are using imported seafood as well as locally produced seafood.

Koreans eat fish in various states: fresh fish, chilled fish and lastly, frozen fish in the order of preference. Some fish are consumed raw (“Hoi”, or “Sashimi”), and commands a price premium. Korean consumers assume fresh fish tastes better than frozen fish after cooking. Accordingly, fresh or chilled fish tend to be substantially more expensive than frozen fish.

As more and more women are working outside the home, the demand for convenience food has increased. Korean consumers are more attracted to precooked, prepared and preserved food available at supermarkets. Most recently, CJ (Cheil Jedang) Corporation launched a new canned product brand called “Alaska Salmon”. The price of a can is 4,480 Korean Won for 135 grams and it can be converted to about $13.4 per pound. Even though the price is more than two times higher than those of the regular canned tunas, the company expects this 100 percent Natural Salmon product will be a big hit in the market very soon.

Hotels and department stores generally use high quality seafood for which they charge a higher price and some of the five-star hotels and leading department stores have already done special promotions featuring U.S. seafood products such as lobsters and scallops commemorating the 1st anniversary of the KORUS FTA implementation.

However, the institutional feeding and food service sector generally uses cheaper food ingredients to reduce cost as much as possible to cope with the fierce competition in the sector. The most popular fish products in this market area include frozen flatfish, skate, croaker, Atka mackerel, Alaska Pollack roe and snow crab.

Competitors

Seafood is imported into Korea from about 100 different countries. Major suppliers of fishery products to Korea include China, Russia, Vietnam, the United States, Thailand, Taiwan, Norway, Japan, Chile and Peru. In 2012, the top ten supplying countries accounted for about 83 percent of total Korean seafood imports on a value basis. China continued to be the largest supplier, followed by Russia and Vietnam.

A dozen supplying countries including China, Russia, Japan, Norway, Thailand, Chile, Canada, Indonesia, etc. are some of our competitors that participate in the Busan International Seafood & Fisheries Expo annually. These competitors exhibit a wide variety of seafood products targeting importers, wholesalers, distributors, retailers, hotels, restaurants and food processors.

Marketing

Imports of seafood are relatively straight-forward compared to other food and agricultural products. Importers import fishery products, and generally sell to hotels and food service industry directly, and/or to distributors who sell to traditional markets and restaurants. When the volume is large, importers generally sell to retailers such as supermarkets, discount stores and department stores directly. When the volume is small, importers sell to distributors who sell to retailers. Accordingly, U.S. suppliers should contact seafood importers to sell their fishery products to Korea.

Consumers like to purchase the species that they are accustomed to, and importers tend to import the species consumers are demanding. As mentioned earlier, imports of only 33 species accounted for almost 95 percent of total seafood imports from the United States to Korea in 2012. This means that U.S. exporters should supply the species consumers prefer, and at the same time should also try to invest in building demand for other species with which consumers currently lack familiarity.

Possible sources of market information include Korean importers, U.S. state departments of agriculture, the USATO website (www.atoseoul.com) and the U.S. Department of Commerce. Lists of Korean importers, by species, can be obtained from the U.S. Agricultural Trade Office.

One way of finding potential importers while also assessing market potential is to participate in local food shows to showcase your products to a larger audience. Many Korean importers attending these shows are looking to establish reliable long-term trading relationships. Show participation enhances initial contacts with importers, agents, wholesalers, distributors, retailers and others in the food and beverage industry.

Seoul Seafood Show (3S) 2013 will be held in Seoul at COEX, April 18-20, 2013. Sponsored by the Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF) of Korea, this is the only show held in Seoul specializing in seafood, fishery, nursery, aquaculture, processing machinery and related equipment. This show is held in April every year and targets seafood buyers, users, fishing businessmen and traders. The 2013 show will be attended by NOAA Japan office.

Busan International Seafood & Fisheries Expo (BIFSE) 2013 will be held in Busan at BEXCO convention center, November 21-23, 2013. It offers an excellent opportunity to explore possible market opportunities in Korea. This show is held in November every year and targets importers, wholesalers, distributors, retailers, hotels, restaurants, food processors, media, etc. Currently it is the only seafood show held in Korea attended by ATO Seoul. ATO Seoul has been participating in this show for 10 years, in cooperation with SRTGs such as SUSTA and Food Export USA Northeast.

April 2013

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