I recently was asked to "explain" in a training brief, "how" the tuna fishery aimed at canning operates in the Pacific... a daunting task per se, but one I took as it was good for me to condense a lot of of information I had into one document, so here I transcribe some of the findings. But if you have more up dated data, let me know please and I make the corrections :-)
Thankfully a lot was done on a great publication by my friends and colleges Hamilton, McCoy, Campling et all "Market and Industry Dynamics in the Global Tuna Supply Chain" published by FFA/DevFISH II in 2011.
Annually, at least 2.5 million metric tonnes of the global tuna catch is destined for canning; the majority of which is caught by purse seine vessels. Given canned tuna is a price competitive and nutritional source of protein, overall demand has increased markedly over the past three decades and remains strong. To match this growing demand, the canned tuna fishing industry has experienced massive growth in terms of vessel numbers, vessel catching capacities and total catch. The level of complexity of the canned tuna fishing industry has also deepened due to factors such as resource sustainability issues, stricter regulatory requirements, increasing operating costs, developments in consumer demand, changing preferential market access regimes, to name a few.
Globally, there are currently at around 580 industrial-scale tuna purse seine (PS) vessels in operation in four major ocean regions - Western and Central Pacific (260), Eastern Pacific Ocean (230), Indian Ocean (50) and Atlantic Ocean (40). Total capital investment in purse seine fishing vessels is in the order of US$ 5.8 billion, representing over 30% of total capital investment in the global canned tuna industry (around US $15 billion).
In the last years there has been significant additional investment in vessels (at least $1.2 billion worth); the majority of new investment being for vessels based in the WCPO. Interestingly, this investment occurred despite increasing operational and regulatory challenges for the tuna industry including overcapacity and sustainability issues, increased regulations and newly introduced fishing restrictions, erosion of tariff preferences, as well as the global financial crisis.
The big players in the tuna canning game are:
- The Japanese purse seine (JP-PS) fleet is stable in terms of vessel numbers and catch volumes – the fleet has been comprised of 35 vessels since 1997 and annual catch volumes consistently exceed 200,000 mt;
- Japan Fisheries Agency regulation limiting PS vessel size to 1,096 GRT has been relaxed, enabling three companies to trial three new larger vessels (1,800 GRT) with helicopters, in an effort to improve the competitiveness of the Japanese fleet relative to other fleets operating larger vessels (notably, Korea and Taiwan).
- While a Government regulation has been relaxed which stipulates that JP-PS vessels must return to Japanese ports to offload catch rather than transhipping catch in fishing grounds, most vessels are still opting to return to port at this stage. If the Bangkok skipjack price continues to strengthen relative to the Japanese skipjack market, transhipment volumes will likely increase.
- The majority of the JP PS fleet’s catch is sold to katsuobushi processors (60%); 20% to low-end sashimi markets (ULT-portion of catch); 10% to Japanese tuna canners; 10% to Thailand tuna canners.
- In response to PNA countries’ calls for greater domestic investment from DWFN, several fishing companies have established joint venture PS fishing operations in PNG, FSM and Kiribati. Japanese companies are more likely to invest in ‘islandisation’ projects that centre on joint fishing ventures and/or technical cooperation, rather than investing in processing facilities, given negative experiences of Japanese companies in tuna processing investments in the Pacific region in the past.
- The Taiwanese purse seine fleet expanded rapidly during the late 1980s and early 1990s. Despite the introduction of a Taiwan Government regulation limiting the number of Taiwan-flagged vessels to 34, the fleet has continued to expand through alternative flagging arrangements.
- In 2014, there were an estimated 60 Taiwanese-owned purse seine vessels operating exclusively in the WCPO - 34 Taiwan-flagged; 20 Vanuatu-flagged; 4 Marshall Islands , 2 PNG flagged; 3 joint ventures (Marshall Islands, Tuvalu). A further 18 Taiwanese-owned vessels operated as US vessels under the US Multilateral Treaty.
- A long-standing Government prohibition on the importation of used purse seine vessels resulted in the development of a domestic shipbuilding industry in Taiwan that has been able to carefully refine vessel design and size to be economically efficient in purse seine fishing and transhipping in the WCPO. The ongoing success of the Taiwanese purse seine fleet has meant that financing new vessels and operations has not been difficult for experienced operators.
- Total estimated catch of Taiwanese-owned/controlled vessels was approx. 430,000 mt in 2014 (excluding US-flagged vessels). The majority of catch (90-95%) is marketed to trading companies and transhipped to Bangkok.
- To ensure ongoing fisheries access in WCPO waters, some Taiwanese vessels owners are forming strategic alliances with PIC-based processors and/or establishing joint fishing ventures in a several PICs (FSM, RMI, Kiribati, Solomons).
- Taiwanese-owned longline vessels targeting albacore for canning operate in the WCPO, Atlantic and Indian Oceans (estimated total catch of 40,000 mt in 2008). The number of Taiwan’s large-scale longliners has decreased worldwide (359 in 2013), largely due to high operational costs, particularly fuel. Conversely, the number of small-scale longliners has increased (over 2000 in 2012), as they are more fuel efficient and less impeded by Government regulations. An estimated 40 large-scale and 60-80 small-scale longliners targeted albacore in the Pacific in 2012. These vessels utilise port facilities in American Samoa and Fiji for unloading and re-supply, with the majority of catch marketed through trading companies.
- The Korean purse seine fleet is comprised of 28 vessels, owned predominantly by three large diversified companies. The fleet peaked at 39 vessels in 1990, but has remained stable at 28 since 2004.
- The Korean fleet operates almost entirely in the WCPO. In 2009, total catch was a record 280,000 mt – the first year in which Korea has been the highest catching fleet in the WCPO. Catch volumes from 2010 onwards have been affected by high seas closures, while the impact of FAD closures has been less severe than for other fleets, as Korean vessels fish more on free-swimming schools.
- Catch is transhipped to Korean ports for domestic processing or to export markets. Annually, around 120,000-130,000 mt is unloaded in Korea. In 2012, 160,000 mt was exported; 80% of which was destined for Thailand.
- Several ‘islandisation’ projects are underway with PICs – two vessels are reported to be commencing a joint fishing venture with Kiribati; Dongwon (owner of 15 PS vessels and major US tuna brand, StarKist) has been talking of establishing a canned tuna processing facility in the Solomon Islands, but not much has happened so far.
- Some industry operators are nervous about ongoing access to PNG waters (an historically important fishing ground for Korean purse seine vessels), as Korea has no existing onshore investments in PNG, with related second-generation access arrangements for vessels.
- In terms of broader fisheries access in WCPO waters, Korea is potentially vulnerable due to the lack of absence of any significant aid programme and a lack of close diplomatic ties with most PICs.
- In the 1980s and 1990s, the US purse seine fleet was comprised of 30-50 vessels. The fleet was deeply affected by international competition and declining fish prices in the early 2000s and contracted significantly to 11 vessels. Since 2007, the fleet has burgeoned again as a result of external investment, with 38 vessels active in the WCPO in 2012.
- The US fleet is now characterised by two vessel groups – the ‘old fleet’, being US-built and owned vessels which have been historical players in the fleet (18 vessels in 2012); and, the ‘new fleet’ (20 vessels in 2012), being Taiwanese-built vessels which have come under US flag since 2007, under joint venture arrangements between US nationals and foreign investors.
- US vessels spend the majority of their time fishing in the WCPO, with 40 licences available under the US Multilateral Treaty. Occasionally, US vessels will fish in EPO waters. With fleet re-expansion in 2007, total catch volumes in the WCPO expanded rapidly.
- Around 20% of the US fleet’s catch is offloaded in American Samoa for processing, mostly by the ‘old fleet’ which is based in Pago Pago. The majority of catch (80%) is transhipped from WCPO fishing grounds to tuna processors in Thailand and Latin America, largely due the ‘new fleet’ utilising the Taiwanese operational model.
- The US Treaty expired in 2013 and negotiations have been ongoing between the US Government, US industry and Pacific Island Parties (PIPs) for the Treaty’s renewal. In light of overcapacity in the WCPO purse seine fishery and related sustainability concerns, PIPs have been seeking to apply fishing effort restrictions to US vessels under the Vessel Day Scheme. In addition, PNA members in particular, have been pushing for greater economic returns in the form of domestic development, increased broader cooperation and preferential market access to the US.
- The Philippines has one of the largest purse seine fleets operating in the WCPO – in 2012, 40 large vessels (>250 GRT) and 55 smaller vessels (<250 GRT) were on the WCPFC vessel register.
- Around 22 large PS vessels currently fish in PNG waters under bilateral access arrangements; a further 18 operate under charter arrangements in PNG (and are regarded as part of the PNG fleet) and eight vessels have re-flagged to PNG. However from 2015 onwards most of the charter ones will be re-flagged to PNG
- Catch rates of Philippines vessels are significantly lower than those of the larger and more modern vessels operated by other DWF fleets operating in the WCPO (e.g. Japan, Taiwan, Korea). Total catch by domestic vessels in Philippines waters in 2012 was estimated at around 148,000 mt, with a further 71,400 mt caught in PNG waters by foreign access vessels.
- Catch from Philippines domestic vessels is largely processed by Philippines canneries (around 130,000 mt), with the remaining catch exported to Thailand and possibly, Vietnam. A portion of catch by PNG-based vessels is processed by PNG processors (owned by Philippines investors), with the rest either exported to Philippines domestic canneries and Thailand.
- The Philippines domestic fleet has been significantly hampered by the loss of access to Indonesia waters in 2007, as well as the recent closure of several WCPO high seas areas.
- To maintain catch levels, the Philippines fleet is under pressure to find alternative fishing grounds, which will likely see increased fishing in PIC EEZs by existing vessels, as well as additional vessels seeking licences in association with new processing plants (in PNG and the Solomon Islands).
- As China only began to develop its WCPO purse seine fleet in 2001, it is a relatively new player in the fishery. In 2010, Chinese firms owned 16 purse seiners, with twelve registered in China, four in Marshall Islands and one in FSM. In 2012, total catch by Chinese-flagged PS vessels was approx 77,000 mt.
- PS fishing companies without direct ties to processing facilities market their catch to the three major trading companies, the majority of which is sent to Thailand. Some catch (~15,000-20,000 mt) is likely sent to China for processing. The Marshall Islands registered vessels will offload a portion of their catch to the newly re-opened Chinese loining plant in Majuro, with the remaining catch sold to a trading company.
- While China operates longline vessels in the Atlantic, Indian and Pacific oceans; vessels targeting albacore specifically for canning operate exclusively in the WCPO, using Fiji (Suva) as a primary operating base. An estimated 90 or so Chinese-owned vessels operated from Fiji since 2008, with some fishing in Fiji waters, while others operated outside of Fiji waters (in adjacent high seas areas, as well as Vanuatu and Solomon Islands EEZs), while using Fiji as a base. Total reported catch in 2012 was almost 22,000 mt, with albacore supplied to canneries in Levuka (Fiji) and American Samoa.
- Most of the impetus for China’s entry and expansion in the tuna industry, both in the WCPO and globally, has come from state-owned enterprises. Government policy is strongly supporting expansion in the agriculture sector, which includes overseas tuna fisheries. Hence, China is a ‘developmental’ mode in terms of the WCPO purse seine and longline albacore fisheries. Given the dominant role of state-owned enterprises there is adequate capital available for expansion and government subsidies (i.e. fuel, shipbuilding) to assist new and existing operations. Fleet expansion, including increased vessel registration in PICs, in some cases in association with joint fishing ventures and processing investments, is inevitable.
Papua New Guinea (PNG)
- Since 2010, the PNG purse seine fleet (that being, vessels whose catch is attributed to PNG) is comprised of around 45 vessels – PNG-flagged vessels (fishing in PNG archipelagic and EEZ waters); Philippines-flagged chartered vessels operated by PNG-based processors (fishing in PNG EEZ); and, PNG home-party vessels operating under the FSM Arrangement (fishing in PNG waters and beyond). However many of these vessels have been flagged to PNG during 2015 under the new Tuna Management Plan
- All vessels are privately-owned, mostly by Philippine and Taiwanese companies with investment in onshore processing and net repair facilities in PNG, as well as fishing/ processing operations elsewhere.
- PNG’s second generation access agreements link vessels to PNG-based processing plants and other onshore developments, with catch unloading provisions included in the agreements whereby vessels must unload a portion of catch to domestic processors. In 2010, 30% of the PNG fleet’s catch was processed onshore in PNG, with the balance transhipped and exported mostly to Thailand and the Philippines. PNG has a long-term goal to locally process 100% of tuna catch from within its EEZ.
- PNG is committed to enhancing the value of catch taken from PNG waters through fishing-related onshore investments in processing. As such, fisheries access will be geared even further towards second-generation access agreements where fishing licences will be tightly linked to onshore processing obligations and investments.
- The EU purse seine fleet is the largest in the world and is comprised of some of the most powerful purse seiner businesses in the world. In 2012, an estimated 88 vessels were owned or controlled by EU-interests; 56 of which were flagged by EU member states (Spain, France and Italy), and 32 (at least) which carried foreign flags. The EU fleet is active in each of the world’s main tropical tuna fisheries; the main fishing grounds being the Eastern Central Atlantic and Western Indian Ocean.
- The EU is a very minor player in the WCPO, with only four Spanish-flagged vessels actively operating in the region to date under fisheries partnership agreements with Kiribati. Two El-Salvadorian fagged purse seiners (but Spanish owned - Calvo) also fish in Kiribati waters (8,824 mt in 2009). Given the current complexities associated with implementation of the Vessel Day Scheme in the WCPO, EU vessel owners have indicated that they are unlikely at this stage to extend their current levels of activity in the region beyond the existing network of FPAs.
- EU vessels that are owned by vertically integrated companies supply catch to their processing plants or those with whom they have financial connections, with any surplus catch sold on the global market. Specialised boat-owning companies supply the global market. Given catch by EU-vessels is Rules of Origin (RoO) compliant under preferential trading arrangements between the EU and ACP countries, vessels are generally orientated towards supplying ACP-based tuna processing facilities.
- EU import tariffs and preferential RoO are central to the commercial survival of the EU fleet. The provision of ‘global sourcing’ RoO for processed tuna under the P-ACP Interim EPA is a deep source of concern for the EU fishing and processing sectors.
- In contrast to other large industrial tuna purse seine and longline fleets operating in the WCPO, Indonesia’s tuna fisheries are largely artisanal in scale and multi-gear/multispecies by nature. Commercial-scale purse seine and longline vessels account for only 3% of the total number of inboard-powered vessels (~200,000 vessels).
- In 2012, approx 180 commercial-scale purse seine vessels (<2,000 GT) were licensed to fish in two Fishery Management Areas in Indonesia’s Pacific EEZ waters. There is very little fishing outside domestic waters by Indonesian vessels by virtue of their generally small size and limited range.
- Production figures for Indonesia tuna fisheries are generally incomplete or uncertain due to the difficulties of monitoring catch and effort artisanal vessels offloading to multiple landing points. Total purse seine catch in 2009 may have been in the order of ~190,000-200,000 mt.
- An increasing volume of catch is processed locally by tuna canneries (~90,000 mt/year), and smaller volumes are smoke-dried for katsuobushi production. Catch is also exported to Thailand and Vietnam-based processors.
- Since production levels and exports cannot be quantified with any level of certainty, it is difficult to ascertain Indonesia’s significance in the canned tuna supply chain. Indonesia remains an important middle-level supplier of raw material to WCPO canneries and its own growing domestic canning industry, but no major increases in supply is anticipated in the short term.
Other Fleets – EPO
- In 2012, there were 220 licences purse seine vessels operating in the EPO. The two largest fleets in the region are Ecuador and Mexico, each comprised of 40-50 vessels.
- Both fleets primarily supply domestic processing industries, which are also the two largest processing countries in the EPO. Panama and Venezuela have fleets consisting of 20-30 vessels each, while Colombia has 11 vessels. Nicaragua, Peru, Vanuatu, Spain and Honduras (mostly spaniush owned) each have less than 10 vessels operating in the EPO fishery. Current total purse seine carrying capacity in the EPO is the highest in history (~212,000 m3).
- Total skipjack catch in EPO waters (for all gear types) was around 305,000 mt in 2008. In 2012, skipjack catches reached a record low, resulting in EPO processing plants sourcing a considerable volume of raw material from the WCPO.
Others Fleets – WCPO
- In 2012, the Solomon Islands fleet consisted of five purse-seine vessels and three pole&liner, which supply Soltuna processing plant based in Western Province. They produce for the local and regional markets as well exports of cooked loins to Italy and Spain
- Catch over and above Soltuna requirements is transhipped and exported to other markets.
- With productive skipjack resources and encouragement from the Solomon Islands Government for onshore investment, there may be more locally-based purse seine fishing and processing developments in the near future.
- The FSM purse seine fleet consisted of seven vessels in 2010, five of which have FSMA status. Total catch in 2009 was 19,143 mt, but much of this catch was taken outside of the FSM EEZ, given five vessels are licensed to fish in other PNA members’ EEZs. All catch by FSM vessels is exported to Thailand.
- In 2010, the Marshall Islands (RMI) fleet consisted of eight purse seine vessels, five of which were licensed under the FSMA. In 2010, total catch was around 44,000 mt. The fleet will increase to ten vessels in 2011, with an additional two vessels (of a total of four licences) commencing operations in conjunction with the recently re-established loining plant in Majuro, which is now owned and operated by Chinese interests (Pan Pacific Foods (RMI) Ltd.). While some of the fleet’s catch is processed by the loining plant, the majority of catch is exported for processing elsewhere (i.e. Thailand, Philippines, Japan).
- In 2010, 19 purse seine vessels were Vanuatu-flagged, although 13 of these were classified as PNG home party vessels under the FSMA (with catch attributed to PNG).
- Vanuatu’s vessels are generally owned by Taiwanese investors and are some of the most efficient in the entire WCPO fleet. Total Vanuatu PS catch in 2009 was around 38,000mt; all of which was transhipped. In 2009, four vessels switched to US flag to operate under the US Treaty.
- The Kiribati purse seine fleet consisted of five vessels in late 2010, comprised of three vessels of Ecuadorian origin and two Japanese joint venture vessels. With the introduction of the Ecuadorian vessels in 2009, total catch increased from 6,000 mt in 2009 to over 21,000 mt in 2009. Prior to 2009, the entire Kiribati PS catch was exported to Thailand. Now, the catch from the three Ecuadorian vessels is exported mostly to Ecuador-based processors.
- Four New Zealand vessels were licensed to operate in the WCPO, with a recorded catch of 26,600 mt in 2012. The majority of catch is unloaded in Pago Pago, with small volumes exported to Thailand and other markets via Majuro. From 2015 onwards the the NZ fleet is only two vessels.
Longline-Caught Albacore for Canning
- The estimated catch of albacore in the WCPO was 120000 mt in 2012. Longline catches comprised close to 70% of this total. Taiwan and Vanuatu (Taiwan owned) vessels accounted for the largest share of longline albacore catch, closely followed by China and Japan.
- PIC-flagged fleets (mostly foreign owned) operating in the South Pacific albacore fishery also made a significant contribution to the WCPO catch (i.e. Fiji, Samoa, Tonga, Cook Islands) (around 65,000 mt in 2012).
- Most of the albacore longline catch is destined for canning, with the US being the primary market. Some at-sea transhipping occurs for export to Thailand, as well as unloadings to processing plants in Fiji, American Samoa and French Polynesia.
Canned Tuna Trading Companies – The ‘Big Three’
In the simplest sense, tuna trading involves the procurement of raw materials from multiple fishing vessels and coordinating transhipment of catches into reefer carriers for sale and delivery to tuna processors. Canning-grade tuna trading companies have grown to a position of relative dominance in the supply chain, largely due to the effectiveness of the services offered to vessel owners. Engaging a trader enables vessel operators to channel their energies into fishing, rather than having to deal with the financial, administrative and logistical hassle and risk associated with marketing catch.In the case of processors, purchasing raw material from tuna traders removes the complexities of dealing with a large number of vessel owners selling small volumes of catch. Working with trading companies also ensures that processors have continued access to large volumes of raw material. Tuna trading is a highly competitive business; as limited profit is made per shipment, trading companies capitalise on economies of scale and attain profits through trading high volumes of product.
Three major companies dominate canned tuna trading activities in the WCPO - Tri Marine, Itochu and FCF Fishery Co. Ltd. Collectively, these companies handle annually over 1,350,000 mt of raw canning material; around 70% (900,000 mt) of which is sourced from vessels operating in the WCPO.
Of the three companies, FCF handles the largest volume of raw material (around 650,000 mt per year) and is by far the most prominent tuna trader in the WCPO region. While Tri Marine handles lower volumes than FCF (500,000 mt/year), it has a much stronger global presence (especially in the European market and other oceans) and has a more vertically integrated business model. Itochu is the most conservative of the three, operating almost exclusively in the WCPO and trading the smallest volume of raw material (200,000 mt annually).
The canned tuna trading business in the WCPO grew significantly in the 1980s, largely in conjunction with the development of Thailand’s tuna packing industry. Tuna traders established an integral role for themselves since WCPO fishing grounds are located a fair distance from Bangkok and Thailand did not have an established domestic purse seine fleet from which to source raw material, nor a sufficiently sizeable local market for finished product. Originally, there were 20 or so trading firms supplying raw material to Thai processors. However, by the mid 1990s, FCF, Tri Marine and Itochu emerged as the dominant players and nowadays, collectively supply Bangkok-based tuna processors with around 80% of their raw material needs.
The ‘Big Three’ tuna traders have established an integral position for themselves in the WCPO tuna fishery and, to an extent; the global canned tuna supply chain as a whole. Their position is unlikely to change or be challenged anytime soon given their well established long-term relationships with fishing and processing clients, strong financial backing to fund trading transactions and sophisticated market intelligence systems. It is unlikely that any new trading companies could enter the market and compete with FCF, Tri Marine and Itochu in the WCPO.
Canned Tuna Processors
The contemporary global canned tuna processing industry developed in the mid 1950s, in conjunction with the development of industrial-scale tropical tuna fisheries, with significant growth experienced in the late 1970s-early 1980s. Originally, the US mainland, EU and Japan were the dominant canned tuna processors. Commencing in the early 1980s, with the development of tuna canning industries in the Philippines and Thailand, and later in other lower-cost production sites in South East Asia, Central/Latin America and the Indian Ocean, the dominance of the former three major producers diminished. Today, global canned tuna production exceeds 1.7 million metric tonnes (net finished weight) annually.
Globally, there are at least 144 tuna processing facilities in operation producing canned tuna products and/or frozen cooked loins. In 2008, global maximum processing capacity was around 14,220 mt/day of raw material and estimated annual production was 3.05 million mt (whole round equivalent). Currently, Thailand processes almost one-quarter of the world’s canned tuna (736,000 mt in 2008). The second largest processing site is Ecuador which accounts for almost 12% of global annual production (362,400 mt in 2008).
Total global capital investment in canned tuna processing facilities is estimated to be around $1.3 billion. In 2009, it was estimated that new capital investment in processing facilities over the three years prior was around $0.5 billion, around 40% of which went into onshore investments in the WCPO region ($186 million).
Developing world players have risen in dominance in the past 20-30 years due to these countries’ ability to achieve economies of scale, as well as other factors including some sites being located close to major fishing grounds, having access to productive and lower-cost labour sources, and in some cases, preferential access to the major canned tuna markets (EU, US). High-cost processing locations (i.e. US, EU) are increasingly switching to using frozen cooked loins for canned tuna production that are sourced from lower-costs sites of production (or outsourcing
production altogether) where labour costs are considerably less.
Like the canned tuna fishing industry, the canned tuna processing industry is both complex and dynamic. Global processing operations are currently influenced by factors such as increasing cost of raw materials and other production inputs, tuna resource sustainability issues, overcapacity, complex tariff regimes, increasingly stricter standards (i.e. labour, quality, food safety and environment) and changing consumer preferences.
- Thailand is the world’s leading producer of canned tuna and global price market leader for canning-grade whole round frozen tuna. Over the past 30 years, Thailand’s tuna canning industry has grown exponentially, with annual total production of canned tuna and cooked loins now exceeding 700,000 mt.
- In late 2010, there were 30 canned tuna processors operating in Thailand; with a total combined annual processing capacity of 3,000 mt/day. Facilities are currently operating at around 85% capacity (2,500 mt/day).
- The industry is dominated by two large-scale processors, Thai Union (1,000 mt/day) and Sea Value (850 mt/day). Several medium-scale operations process around 300 mt/day (or less), with the remaining processing firms being mostly small companies.
- Around 85% of raw canning material for processing is imported by Thai tuna processors. The majority of raw material is sourced from the WCPO (~90%) through trading companies. Thai canners experience difficulties attracting Thai workers and rely heavily on migrant labour from Burma (50-60%). The most significant markets for canned tuna exports from Thai tuna processors are the US, EU Middle East, Australia and Canada.
- The most notable recent industry developments include the takeover of major EU processor and brand owner, MW Brands by Thai Union and Thai Union’s investment in a joint processing facility in Lae, PNG.
- Given Thailand’s huge processing capacity and related economies of scale, global competitiveness, industry know-how and market share, it will continue to dominate the global canned tuna processing industry. The industry is considered to be relatively stable; it is unlikely that there will be any new entrants in the short-term.
US – Mainland
- The US was the first and the largest contemporary tuna canning industry in the world.
- As low cost competition emerged from Southeast Asian countries, the US switched production to the US territories of American Samoa and Puerto Rico to combat high wages and strict environmental regulations on the US mainland. Since 1979, twelve canneries based in the US and its overseas operations have closed.
- In 2010, there were two tuna canneries operating in mainland US – Bumble Bee (Santa Fe Springs) and Chicken of the Sea (Georgia). Both plants only process cooked tuna loins in highly productive, capital intensive production systems. In 2010, total combined maximum processing capacity of the two US mainland facilities was 60,000 mt of frozen loins.
- The US has three major branded tuna processing firms - Bumble Bee Foods, Chicken of the Sea International and StarKist Seafood Co; each of which have investments and/or managerial control over processing plants in third countries.
- The WCPO is a critical source of supply for the three major US brand firms.
- The vast majority of product produced by the US ‘big three’ is destined for the North American market, primarily the US. The ‘big three’ brand labels command upwards of 80% of the US market.
US – American Samoa
- In the 1950s, Chicken of the Sea International and StarKist invested in processing plants in American Samoa (Pago Pago). With production capacities of well over 100,000 mt per annum each, the plants were two of the biggest operators globally. One of American Samoa’s major strengths has been in the processing of high value albacore (white meat).
- Canned tuna processed in American Samoa is destined for the US market, as it enters duty free.
- Beginning in the 2000s, the Pago Pago plants began to lose their competitive edge as wage costs were far higher than competitors in Asia and Latin America. In 2007, minimum wage legislation was passed in the US, requiring American Samoa to incrementally increase wages by more than double. This was a significant blow to the two canneries and a major contributing factor to Chicken of the Sea closing its plant in 2009 and relocating to the US mainland (Georgia).
- StarKist remains operational, but is making significant changes to its production system to remain as competitive as possible, including reducing its labour force and processing increasing volumes of loins. In 2010, StarKist processed 70,000 mt of skipjack and 32,000 mt of albacore.
- The former-Chicken of the Sea facility was purchased by Tri Marine in October 2010 and will recommence operations (under the name of Samoa Tuna Processors Inc.), albeit processing smaller volumes under a completely different business model.
- The Government of American Samoa was attempting to protect its canning industry through the proposed Protection of Industry, Resources and Employment (ASPIRE) bill, which if passed by the US Congress, would subsidise tuna processors in Pago Pago. However, Aspire never happened.
- Tri Marine's cannery in American Samoa is now up and running and is ramping up production. The battle now is preserving access to productive fishing grounds in the Western and Central Pacific for the American Samoa based U.S. flag fleet. Without access to nearby EEZ's, the American Samoa purse seiner fleet will have to relocate and become a transshipment fleet just like the rest of the U.S. fleet, the one that is joint ventured with Taiwanese interests and managed effectively in Taiwan. (Thanks Joe Humby for the update! 09/08/15)
- The most important canned tuna processor in the EU is Spain, which accounted for around 60% of annual EU canned tuna production from 1998-2007. In 2012, Spanish production was approx. 230,000 mt.
- There are five major Spanish processing firms (Calvo, Jealsa, Frinsa, Garavilla and Salica); four of which own their own fishing capacity. A further four major non-Spanish companies are also involved in canned tuna production (Bolton, Princes, MW Brands and Thunnus Overseas Group); only one of which is owned by ‘European’ capital (Bolton).
- Given relatively high labour costs in the EU, considerable attention is paid to labour time/ cost and fish yield; canneries source large-sized whole round fish (i.e. yellowfin over 10 kg) to enhance labour productivity through high recovery rates (average 48.5%).
- Investment in processing facilities in the developing world (i.e. Sub-Saharan Africa and Ecuador) is central to the production strategy of most EU-based firms and is closely connected to EU trade preference schemes.
- The vast proportion of canned tuna processed in Spain, Italy, France and Portugal are sold within the European Union.
- The survival of EU-based canned tuna processing firms will continue to depend on tariff protection against relatively low cost imports and cost-reduction strategies. Some of the major Spanish players are moving away from a focus on market share growth to increasing operational profitability, and as such are focusing increasingly on value-added products to minimise the impact of rising raw material price.
- Ecuador is the most significant canned tuna processing player in the Americas, with a total daily maximum raw material processing capacity of 1,865 mt/day (~450,000 mt annually). In 2012, there were approximately 18 processing plants located in Guayaquil (1), Posorja (1) and Manta (16). In 2012, Ecuador processed around 360,000 mt of raw material, making it the world’s second largest producer behind Thailand.
- In 2010, plants in Ecuador were suffering from supply constraints (both overall and of RoO-compliant fish) due to poor catches in the EPO (an estimated 40% lower than 2009 catches). Plants undertook several strategies to respond to supply shortages – operating at below capacity and extending planned maintenance closures, expanding cold storage capacity to stockpile raw material, and importing larger volumes of fish (mostly from WCPO).
- Two critical factors are cited for Ecuador’s success in canned tuna processing - an efficient, productive and stable labour force, and in the case of several plants, vertically integrated business models including purse seine fishing operations.
- Ecuadorian processing plants produce primarily for the EU and US markets; it is the top volume supplier of tuna loins into the European Union (mostly to Spanish and Italian canned tuna processors)
- There is also increasing production for the growing Latin American market. Ecuadorian processors are interested in expanding supply for the regional market, in part to reduce their dependence on sourcing RoO compliant fish for the EU and US markets.
- Philippines’ canned tuna processing industry developed during the late 1970s and 1980s and it has become the second largest processor in the WCPO, following Thailand. Seven canneries are currently in operation (six of which are based in General Santos).
- In 2009, annual production was ~220,000 mt (daily processing capacity 850 mt/day); a reduction from a peak in 2006/07 of 250,000 mt.
- Several of the canners are part of vertically integrated operations, sourcing at least some of their raw material requirements from their own company fleets in Philippines or overseas (PNG, and formerly, Indonesia).
- The majority of Philippines cannery production is exported, mostly to the EU and US market (10.4 million cases (83,604 mt) in 2009), with around 10% of canned tuna consumed locally.
- Production in domestic Philippine canneries seems unlikely to expand due to raw material supply problems (i.e. declining domestic catches and reduced access to Indonesian waters). Any strategy for major expansion in production capacity will more likely involve the construction of new processing plants elsewhere in the WCPO (i.e. PNG, Indonesia).
- The establishment of the Korean tuna canning industry is a relatively recent development, beginning in the early 1980s.
- There are currently five major Korean canneries in operation, with a combined daily processing capacity of 500 mt. In 2009, total annual production was around 125,000 mt. Production is entirely for domestic consumption.
- All fish currently processed in Korean canneries is sourced from catches in the WCPO by the Korean purse seine fleet. Two of the canning companies are vertically integrated operations with their own fishing vessels (i.e. Dongwon and Sajo).
- The most significant recent industry development has been Dongwon’s acquisition of StarKist from Del Monte Foods in 2008.
- Future growth in the Korean domestic processing sector is possibly limited. Any expansion of Korean processing capacity will likely be linked to the establishment of overseas operations, with export rather than domestic markets to be found for the product.
- The Japanese canned tuna processing industry was originally export-orientated, supplying the US market primarily. Due to rising competition from lower cost sites of production, Japan’s canned tuna processors changed their focus to produce exclusively for the domestic market.
- Since the mid-1980s, canned tuna production in Japan has declined markedly due to diminishing consumer demand, and increased competition from cheaper imports of finished production (mostly from Thailand).
- In 2008, fourteen canned tuna processors were operating in Japan, with a combined raw material processing capacity of 400 mt/day (annual production of ~80,000 mt).
- Japanese canners mainly source raw materials (whole round and loins) through the major tuna trading companies. Catch sourced from Japan’s purse seine fleet currently only accounts for around one-quarter of production (20,000 mt annually).
- Japanese canned tuna production is entirely for domestic consumption and is a high quality market. Hagoromo Foods Corporation, Japan’s pioneer canned tuna processing company (est. 1931), dominates domestic canned tuna production and its ‘Sea Chicken’ brand claims 60-70% market share.
- Japan’s domestic canned tuna production is likely to increasingly shift to offshore locations (either through Japanese investment in offshore facilities or increased sourcing of finished product from overseas supplies), due to several issues impacting on the competitiveness of Japan’s processing operations – labour cost and availability, strict environmental standards, stagnant consumer demand, and increased competition from Thai imports.
- Canned tuna processing in China represents a very small fraction of the country’s large and active export-driven fish re-processing sector. Processing is primarily undertaken by the private sector; the large state-owned enterprises engaged in tuna fishing do not appear to be directly engaged in the processing sector.
- Obtaining a clear picture of the sector (in terms of the number of facilities and raw material sources and processing volumes) is difficult due to China’s commodity tracking system.
- In 2010, two tuna processing facilities were likely in operation, processing between 30,000–50,000 mt of raw material.
- The US has been the largest market for canned tuna from China for the last several years\ (6,000 mt in 2009). There appears to be a general trend towards increased production and exports of loins, with exports to EU processors reportedly increasing by 300% from 2007-2009 (4,400 mt in 2009).
- The major problems confronting China’s tuna processing sector are similar to those facing the country’s fish processing sector in general - increasing labour costs in a labour intensive industry, as well as rising land, water and energy costs as China’s economy develops, particularly in coastal cities.
- Given these constraints, coupled with a very limited domestic market for canned tuna, it is unlikely that China will become a major tuna loining or canning centre, in the same way as it has become a significant player in other manufacturing industries in recent years. No one geographic centre has emerged for tuna processing, which limits the opportunities for gaining economies of scale, an important factor in counteracting rising costs.
- The Indonesian tuna processing sector is showing clear signs of resurgence, after a period of decline in the late 1990s and early 2000s. Prior to this, over twenty tuna canneries were in operation.
- In 2010, there were at least thirteen canneries in operation with an estimated annual throughput of around 100,000 mt. The supply of raw material to Indonesian canners is almost fully sourced from local vessels.
- Canned tuna production is predominantly for export, with minimal local demand. Canned product is exported to a wide range of markets including the EU, US, Japan and the Middle East.
- The revitalisation of canneries in Bitung is a major development for the Indonesian canned tuna processing industry, with three plants commencing or expanding operations] in 2008-2009. A fourth plant is scheduled to open in 2011 and an inactive plant may also resume operations in the future. It is unclear whether Indonesian canning capacity will continue to grow beyond the current period of resurgence.
- Tuna canning and processing capacity in Vietnam has developed since the early 2000s, in parallel with processing of product for export markets from its very large aquaculture industry.
- There are three main privately owned tuna canners based in the Mekong Delta area; two of which are owned by overseas interests (Thailand, US). Other small seafood processors may also occasionally process small volumes of light meat. In 2009, Vietnam’s estimated production was 50,000 mt.
- The US and EU markets collectively accounted for close to 70% of the total value of exports in 2009. There is also a small local market for canned tuna.
- Vietnam’s major strength is its cheap and highly productive labour force. However, there is some pessimism about Vietnam becoming a significant canned tuna processing site in future, given several constraints, including the heavy reliance on imported raw material,
- comparatively higher freight costs, a restrictive bureaucratic environment and lack of economies of scale.
- PNG’s first canned tuna processing facility was established in 1997 by a Philippines investor (RD Tuna Canners). Since this time, two more plants have been established (SSTC and Frabelle).
- Total production capacity is estimated at 100,000 mt per year), although all plants are operating at below capacity. All three plants source fish locally from either PNG flagged or PNG-chartered vessels.
- Duty free access to the EU market, coupled with the recent RoO relaxation under global sourcing provisions, enables PNG to compete against lower cost sites of production for exports to the EU. The domestic canned tuna market is significant, accounting for 20- 30% of production by local canners.
- There has been significant interest from foreign investors to establish additional canned\ tuna processing facilities in PNG, with proposals in various stages of development for an additional four plants in 2010. New investment is driven largely by licensing incentives from second generation access arrangements.
- Despite advantages conferred by duty preferences, relaxed RoO and rich tuna resources, PNG processors continue to face many challenges including low labour productivity, a high-cost operating environment and infrastructure constraints.
- SoltTuna Fishing and Processing Ltd. (formerly Soltay & Solomon Taiyo) is currently the Solomon Islands’ sole tuna processing plant.
- The plant operated at less than full capacity during 2009 and mostly focused on loining for the EU market (Italy). In September 2010, Tri Marine became SolTuna majority investor (51%).
- Two proposals for new processing developments are in place. Philippines-owned Frabelle Fishing Corporation is proposing to establish a facility (50-100 mt/day) in either Guadalcanal or Western Province. Dongwon (Korea) has also proposed to establish a facility in Guadalcanal (200 mt/day), contingent on Solomon Islands Government establishing wharf facilities. But not nothing has happened so far.
Others - WCPO
- There is one major canned tuna processing operation in Levuka, Fiji (PAFCO) which commenced operations in 1976. It has operated since 1999 as a loining plant under contract to Bumble Bee. Daily processing capacity is 120 mt/day, but could potentially be increased to 180 mt/day if sufficient cold storage becomes available.
- A loining plant was built in Majuro, Marshall Islands in 1999. After withdrawal by the former owner and a period of inactivity for several years, the plant was purchased by a Chinese investor (Pan Pacific Foods, a subsidiary of Shanghai Deep Sea Fishing Company) in 2006. The plant commenced trial processing in 2008, but suffered technical difficulties and temporarily closed until mid-2009. Potential processing capacity is 80-100 mt/day, but to date, the plant has been operating at less than half this capacity.
Others - EPO
- In addition to Ecuador, there are a number of other Latin-American (EPO) based canned tuna processing sites) – Mexico, Colombia, Venezuela, Costa Rica, El Salvador and Guatemala. Total production capacity of these plants is 1,710 mt/ day. After Ecuador, Mexico is the second most significant EPO-based processor. Latin American processors enjoy duty free access to the EU (loins/cans) and US (pouch) markets.