Globalisation will remain an indispensable part of the fish industry
This article was featured in EUROFISH Magazine 3 2020.
The coronavirus has largely brought public life to a standstill. Stock markets have plunged into the red, freedom of movement has been severely restricted in some places, and the consequences for the global economy are not foreseeable. One thing is certain, however: the longer the standstill lasts, the more profound will be the disruption in the global fish industry. Familiar market structures could change, raising fears and anxieties about the future for many of those affected.
Well-known epidemiologists had long prophesied that a Pandemic X was imminent. The presumed starting point of the global epidemic would probably be Asia which, due to its high population density and close contact with live animals, offers optimal conditions for the development of zoonotic viruses, i.e. viruses that can be transmitted to humans from animals. And that is where we are now: the ominous predictions have come true. Although not yet fully confirmed, most virologists assume that the origin of the coronavirus Covid-19 will be found at the Huanan Seafood Wholesale Market in Wuhan in China. It is a lively market with tightly packed stalls, one of thousands of its kind in Asia. Locals and visitors go there not only to buy fish, shrimp and other seafood, or for poultry, pork and beef, but also for bizarre offerings such as wild animals from fox and badger to bamboo rats, hedgehogs and snakes. Although trade in wild animals is officially prohibited in most places, live animal markets are not sufficiently controlled. Because the genetic code of the new coronavirus is 96 identical to the genetic Corona pandemic changes markets and consumer behaviour material of bats, experts believe that they are the starting point for the pandemic. The virus was probably transmitted to humans via snake meat. The likelihood of this is high because the animals are usually skinned at the markets which leads to germ-contaminated blood and other body fluids being finely atomised as aerosols in the air and then, through inhalation, entering the lungs of many people. The closure of the Huanan market on January 1st and the ban on the sale and consumption of wild animals on February 24th came too late. The virus was already spreading rapidly with dire consequences. No country has been spared, tens of thousands of people have already fallen ill, some of them will not survive the virus. Bad enough, but in addition to the health effects, Covid-19 is also taking its toll with economic effects and is spreading just as rapidly in that sector. Countries close their borders, global supply chains are disrupted, the flow of goods comes to a standstill. Festivals, conferences and concerts are cancelled, restaurants, hotels and everything that is not absolutely vital are closed, city centres are declared restricted zones. Everyday life is changing, for some people beyond recognition. Global financial and currency systems are tottering, share prices are collapsing, stock markets are reporting record losses, the global economy is facing a recession.
Severe restrictions for global seafood businesses
It would be a miracle if the international fish industry were not affected by the corona crisis and its consequences. Everyone in the industry is feeling the effects, on the producer and supplier side as well as on the consumer side. After all, hardly any other sector of the global economy is as interlinked and interdependent as the fish industry. Fish and seafood account for about half of world trade in animal proteins. Fisheries and aquaculture, production companies, freight forwarders, service providers, reefer and cargo providers all suffer when international supply chains are disrupted. Seafood suppliers are left sitting on their goods, processors are short of raw materials, and a lot of customers have lost their appetite for the seafood delicacies they once loved since restaurants are now closed and consumption of fish would mean that they would have to prepare the meals themselves in their own kitchen. Holidays are being cancelled, tourists are no longer flooding the well-known resorts. Cruise ships and airlines, which are among the most loyal customers for lobster, caviar and scallops, have reduced or completely stopped operations. This development has resulted in cascade effects with serious consequences, particularly since fisheries and aquaculture are already suffering from global climate change. Many seafood companies now face debts that are growing at the same rate as sales and revenues are falling. This has led to reduced working hours and layoffs, which are intensifying the recessionary dynamics. And this is particularly fatal wherever the fish industry provides an important basis for a population’s food supply. Well-intentioned efforts by politicians to mitigate the economic consequences through short-term financial help seem rather helpless in view of the scale of the crisis, which has long since taken on global dimensions. Seafood demand and consumption is limited to an unavoidable minimum in many places. The trade war started by US President Donald Trump is now taking revenge on US and Chinese seafood companies. Many fish products, including frozen Pacific wild salmon and cod, are subject to tariffs of up to 25 per cent, something which is causing extreme problems for North American suppliers in particular. But for the rest of the global fish industry, too, the coronavirus epidemic came at the worst possible time: Chinese people consume particularly large quantities of fish and seafood during their traditional New Year celebrations, and prices rise then accordingly. However, demands by the authorities on China’s population to stay at home and avoid mass gatherings led to slumps in out-of-home consumption. Orders were drastically reduced or cancelled altogether and the Chinese food service market has in the meantime shrunk to a fraction of its former size. Alternative markets are saturated or blocked by import bans, and many products can only be sold at discounts, if at all.
World trade has largely come to a standstill
Visible signs of the crisis are the postponements and cancellations of important trade fairs such as the major seafood shows in Boston and Brussels or the Hamburg Internorga, one of the leading trade fairs for the entire out-ofhome market. Trade fairs are international meeting places and thus significant economic factors. Medium-sized seafood companies, in particular, trust and rely on personal contacts to their customers, and they cannot yet be replaced by digital solutions. The globally networked fish industry with its complex purchasing and customer structures relies on personal contacts for building effective business relationships. But it’s not only the internationally operating seafood companies that are hard hit by the corona pandemic for the virus often threatens the very existence of private fishermen and small family businesses. Just a few weeks a
go, for example, fishermen in the Baltic Sea were complaining about the drastic cuts in fishing quotas. Now they are finding it difficult to get rid of even their greatly reduced catches in a reasonably profitable way. Due to the absence of tourists and the closure of restaurants, hotels, hospitals, canteens and snack bars, first-sale prices at the fresh fish market have fallen to a record low, and some species of fish can hardly even be sold at all. Their fellow fishermen in the UK are not doing any better: 2,500 fishing boats have to cope with the collapse in demand due to the corona pandemic: not only those who had specialised in catching high-quality species for the Chinese market, but also suppliers to local restaurants, where guests are now absent. Self-employed fishermen thus find themselves in a dire situation as their monthly fixed costs (wages, loan instalments for the vessel, insurance, contributions to the seamen’s fund and trade associations) continue to add up. Their vessels have to be fully operational and the berth in the port must be paid for. Given such existential needs it is hardly surprising that the tone of exchange is getting harsher. Irish fishermen prevented Spanish and French trawlers from landing their catches in the port of Dingle (County Kerry) in late March. Not for fishing reasons, but because their crews were entering Irish towns without prior health checks and were not subject to quarantine. In corona times foreign crews are considered a risk factor. This also makes longer fishing trips more difficult because before leaving port, the captain must be absolutely certain that no one on board is infected with the Covid- 19 virus. This makes it even more difficult to put together crews since foreign crew members can face problems due to national travel restrictions and risk delays on their way to their trawlers.
Market shares of certain products are shifting
Each individual sector of the fish industry has its own worries, fears and needs. Shrimp fishermen in the North Sea, who already suffered economic losses in 2019, hope that the EU will not close its external borders because it would cut them off from peeling capacity in Morocco. A stop would endanger the existence of many companies. Stocks are high and demand is weak because shrimp are usually eaten in restaurants that are now closed. Traditionally, catches pick up again in April and May, which gives rise to fears of additional price falls. Basically, the fish industry is in a better position than other industries because people have to eat even during the corona crisis. But that does not mean “business as usual”, or that there are no changes in actual demand behaviour. While demand for fresh fish with a relatively short shelf life tends to be lower, fish and seafood products with a high degree of convenience that can be prepared quickly and easily become more attractive. Instead of fresh fish, customers often prefer frozen products. The lower sales rates of classic gastronomy products cannot be compensated for by increased offers for the food retailing industry, however, because in times of the corona crisis buyers are usually quick to adapt their product ranges. Processing companies are often affected by the crisis in several different ways. Many of them have only a thin capital cover and so their very existence is threatened and they will probably only survive the pandemic if it doesn’t last too long. In addition, there is a shortage of raw materials because many fishing vessels are not leaving port, containers with imported goods are absent, and buyers can no longer travel around to search for alternatives. Most companies only have stocks to cover a few days because in a globalised world “just in time” deliveries were deemed the order of the day. Suppliers who afforded themselves the luxury of expensive warehousing were often criticised by controllers and business consultants for wasting money and not keeping up with the times. Some fish and seafood products are still in demand, but others are not. Above all, the shutdown of the restaurant and food service sector, normally not only a safe and reliable but also a high-demand customer group, is a burden on business. To avoid long-term stockpiling many companies are having to reduce their capacities and putting some of their employees on short-time or asking them to take holidays. Where work is still possible, it is often done in alternating shifts so that – if the Covid-19 pathogen is detected in an employee – there is still a replacement workforce.
Well-tried sales channels suddenly break away
Those who employ foreign workers in their business on a seasonal or regular basis often have additional problems because the recommended or imposed travel restrictions affect the return of these employees. However, the core problem of all seafood suppliers is and will remain the sales and marketing sector, especially in the fresh food sector. Even the small amount that is still available on the market can only be sold with difficulty and financial losses, because almost all traditional distribution channels have broken away. This is true on a large scale as well as on a small scale. The Italian market, otherwise a major buyer of fresh produce, has largely come to a standstill. Small coastal fishermen in the North Sea and the Baltic, who often live from the direct marketing of their catches, are suffering sales losses of 80 per cent and more in many locations. Mobile fishmongers and stallholders who sell fish rolls, fried fish or fish and chips at weekly markets and funfairs now fear for their existence. Because many events were cancelled weeks in advance – Easter is, after all, a highlight in the fish business – they have no income at all. A ray of hope in the face of changed consumer and buying behaviour is the increase in online business and delivery services. Both marketing channels are still considered rather unusual for fish and seafood sales, but in addition to delivery classics such as pizza, hamburgers or chop suey, products such as sushi, sashimi or seafood poké can now benefit at least a little. In some European countries, retail chains are also seeing an increase in sales of high-quality seafood products. Dutch retailers, for example, report that under the corona crisis shrimp sales have increased by a factor of 1.4 compared to “normal” times. However, this is not enough to compensate for the decline in the restaurant business, partly because smaller assortments are preferred in the food retail sector, while restaurants usually offer large shrimps and prawns. Despite isolated successes, customer preferences have also shifted within the supermarkets. Because demand at the fresh fish counters is lower than usual, the British Sainsbury’s chain has decided to reduce its counter staff and deploy them elsewhere in the stores and to strengthen its own delivery services. Morrisons, Tesco and Waitrose have announced similar actions. In Austria, numerous food wholesalers and cash & carry stores have now opened their doors to private customers in order to sell their large stocks of perishable foods that would otherwise risk spoilage due to the loss of customers from the hotel and restaurant sectors.
Lack of alternatives to global seafood trade
In this difficult economic situation, which often threatens a company’s very existence and is not the fault of the companies themselves, politicians are increasingly called upon to take action. With rapid decisions and aid measures they can make a decisive contribution to ensuring that the economy can to some extent survive these enormous challenges. Like a lot of others, companies in the fish industry urgently need non-repayable liquidity aid to cover current fixed costs, loans and other financial liabilities. In many cases, the only way to avoid insolvency is to reduce or defer taxes, fees and contributions. In the past, coastal fishermen who were temporarily unable to operate their businesses due to quota cuts were helped by compensation payments from the European Marine and Fisheries Fund (EMFF). This should also be possible in the event of a pandemic. The German Fisheries Association is demanding that the EU create the legal basis for this and provide the necessary funds. Furthermore, because many fishing enterprises are currently under-utilising their fishing quotas due to a lack of sales opportunities, it should be examined whether the unused quotas can be carried over to the next year, at least proportionally. This would give businesses a slightly better chance of getting started again once the corona crisis has been overcome and the economy is hopefully picking up again. Critics and opponents of globalization are currently hoping that once the virus has died down, the international division of labour and worldwide economic networking will be turned back a bit and returned to the countries of origin. They are calling for a rigorous reassessment of the global systems that have proven to be vulnerable and prone to disruption in the current crisis. The share of transcontinental freight transport in global economic output alone had recently risen to 25 per cent during the phase of “hyperglobalization”. Division of labour might be possible when manufacturing a car or a special machine but it is almost impossible in the case of fish and seafood if we want to maintain the diversity and breadth of the product range we have achieved. Alaska Pollock cannot be caught everywhere, lobsters cannot be produced economically in every location, and not every body of water is suitable for salmon farming. So even if parts of the world economy are perhaps reorganised and restructured fish and seafood will continue to be traded globally after the corona crisis. And suppliers and buyers of these products will thus continue to share “a common destiny”. Even if they are currently being put to the test in no small way.