Korea: Seafood Anuual Report 1995
AGR Number: KS5048

From: American Embassy, Seoul
To: USDA/FAS Washington D.C.
Country: KS
Year: 1995
Report Code: 54 Post Report Sequence Number: 002
Report Title: Seafood
Report Type: A - Annual Report
Report Subject: SEAFOOD ANNUAL REPORT - 1995
Approved By: DAVID M. SCHOONOVER
Drafted By: D. B. VOBORIL/S. C. CHOI
Security Classification: UNCLASSIFIED, NOT OFFICIAL USDA DATA
Date Due (MM/DD/YY): 09/18/95

Report Code: KS9554A
AGR Number: KS5048
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Seafood

General Summary

Until recently, the Korean domestic seafood market was highly protected, leading to high domestic prices and limited market access for a variety of seafood products. This, however, has begun to change due to both the 1993 Uruguay Round Agreement and the Balance of Payments (BOP) agreement signed under the auspices of the GATT.

Thus, Korea is a relatively new and rapidly developing market for U.S. exporters and competitor countries. On one hand, this presents several opportunities for various species, including lobster, monkfish, salmon, and Alaska pollack. On the other hand, Korea can be a very difficult market and presents several risks to new-to-market suppliers.

Of the products liberalized in 1995, best prospects for U.S. suppliers include frozen fillets of Alaska pollack and frozen fish surimi of Alaska pollack. In 1996, liberalized products include frozen mackerel, frozen Alaska pollack, frozen cuttlefish, and canned/prepared mackerel. For 1997, liberalized products include live eels, frozen hairtail, frozen peeled shrimp and prawns, frozen squid, dried cuttlefish and squid, dried laver, and canned tuna.

In terms of the various species, imports of salmon should continue to grow at a modest pace. However, it will take a long time to significantly increase the overall salmon consumption in Korea due to its unfamiliarity among the Korean consumers.

For crabs, the market turned dramatically in 1994 as importers sought the blue swimming crab from Asian suppliers. The United States has lost much of this market to China, Vietnam, and Thailand.

For roe, the market remains volatile due to swings in local\regional production and international prices. Alaskan pollack roe is the most popular roe and is used for salted/spiced roe. Russia will remain the dominant supplier though opportunities will continue to exist for U.S. suppliers.

For flatfish, the market is relatively stable with annual consumption approaching 50,000 MT. Total supply is fairly evenly split between domestic production and imports. The United States is the dominant exporter, with around 75 percent of the export market.

For groundfish, this sector annually accounts for approximately 20 percent of the total seafood consumed in Korea, making it the largest category among the items covered in this report. Alaska Pollack is the major imported species, with Russia the dominant supplier.

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Seafood

General Summary

In terms of the 3-5 year outlook, Korea should offer one of the best growth markets in Asia for U.S. suppliers. Besides market liberalization, other factors include structural limitations on domestic production, rising personal incomes, changes in the Korean diet, a continued strong economy.


Exchange Rate: Korean Won 760 per US$ on September 1995.

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Seafood

Total Edible Fishery Prods.

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PRODUCTION

General

The Korean peninsula's geographical location offers excellent opportunities for a diversified fishing industry. On the east coast, the Eastern Sea (also known as the Japan Sea) provides deep sea fishing with a deepest point of 4,049 meters and an average water depth of 1,700 meters. Warm and cold water alternate each season, with temperatures rising to 20 degrees centigrade (C) in summer and falling to below 10 C in the winter. It is known for its alaska pollack, cod, squid, king crab, hairing crab, turban shell and abalone.

On the west coast, the Yellow Sea has an average water depth of 44 meters with water temperature rising up to 25 C in the summer and falling below 8 C in the winter . Major species include corker, hairtail, mackerel, surf-clam, large clam abalone, lobster, Japanese paste shrimp and blue crab.

On the south coast, warm currents move from the Pacific Ocean toward the northeast. This brings diverse fishery resources such as anchovy, mackerel, oyster, mussels, shellfish, octopus, beka squid, laver and sea mustard. Water temperature and can reach 30 C in the summer and seldom falls below 10 C in the winter .

Korea's industrialization and urbanization has led to a dramatic decline in the number of families directly involved in fishing. Since 1980 the number of fishing families has fallen from 157,000 to 110,400. Total population classified as "fishing population" is 390,000 out of the total South Korean population of 45 million. Aquaculture fishing families remain the largest fishing sector with a ratio of 36 percent.

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Total Edible Fishery Prods.

PRODUCTION

1/ Including the number of 23,000 fishing families, who provided their labor alone without fishing facilities.
Source: The Ministry of Agriculture, Forestry and Fisheries (MAFF)

1/ 1994 official data will not be released until the end of September 1995.
Source: National Fisheries Administraion (NFA)

1/ 1994 official data will not be released until the end of September 1995.
Source: NFA

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PRODUCTION

Aquaculture Harvest-Wild Catch Production Factors

The Korean fishing industry consists of On/Off-Shore, Deep Sea, Aquaculture, and Fresh Water fishing. Production annually exceeds 3 million metric tons (MMT) and consists of 90 different types: 50 types of fish, 15 types of shellfish, 10 types of seaweed, and about 15 other types of sea animals and vegetables.

Major trends include modest increases in aquaculture production and annual fluctuations in on\off shore and deep sea production. The continued development of the aquaculture industry highlights the shift  to "cultivation" from "catching". Fresh water fishing remains relatively insignificant.

Total commercial catch in 1995 is estimated at 3.6 - 3.7 million MT (MMT) taking into account of the amount of catching fishery production for the first half of 1995. This compares to 3.47 MMT in 1994 and 3.33 MMT in 1993. Increases in deep sea production in 1994 and continued growth in aquaculture more than offset the modest decline in on\off shore production.

Major on/off-shore catches were squid, mackerel and anchovy. An increase in mackerel production only partially offset declines in anchovy and squid production. Production in 1994 from on/off-shore slightly decreased to 1.49 MMT, down 2.7 % from 1993 levels. This was partially due to a reduction in harvested area affected by water pollution and land reclamation projects. On-shore fishing usually refers to fishing vessels of less than 8 tons while Off-shore fishing refers to fishing vessels over 8 tons.

Aquaculture in coastal waters produced 1.07 MMT in 1994 compared to 1.04 MT in 1993. In 1983 the Korean government officially targeted the aquaculture industry as a key industry to be supported by the government. Over the past several decades the industry has developed as follows: from seaweeds (laver and sea mustard) in the 1960's; to shellfish (oysters and ark shell) in the 1970's; and to high-priced species (fishes and pearl oysters) in the 1980's. In the 1990's, the industry continues to develop rapidly. Approximately 40 species are being cultivated, mainly bastard halibut, seabream, rockfish, shrimp, oyster, clam and seaweed. Seaweed production, however, continues to dominate and accounts for approximately 75 percent of total aquaculture production.

Fresh water production totalled only 31,000 MT from landing and aquaculture combined. Fresh water occupies slightly over 203,000 ha in Korea, or about 2 percent of total land area Fresh water areas are composed of 63,000 ha of dam and lake, 92,000 ha of river and stream, and 48,000 ha of water reservior. There are about 20 different species, including common carp, carp, pale chub, eel, trout, and Israel carp. Israel carp accounts for nearly 40 percent of total production in this sector. Aquaculture in the fresh waters produced 21,000 MT from 2,180 ha in 1994. Major species of fresh aquaculture are Israel carp, Eel and Trout.

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PRODUCTION

Korea's deep-sea fishing industry began in 1957 with tuna fishing in the Indian Ocean. The industry grew dramatically until implementation of the Exclusive Economic Zones (EEZ) and other international regulations. Today, the industry consists of approximately 642 fishing vessels in all five oceans. Deep-sea fishing includes Alaska pollack, tuna, and squid. In 1994, deep sea  production increased to 887,198 MT, up 20 percent from 741,017 MT in 1993.  The increase was due to large increases in Alaska pollack and tuna production.

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PRODUCTION

1/: Albcaore, Yellowfin, Bigeye, Bluefin, Skipjack, and Other tuna
2/: White Marlin, Black Marlin, Blue Marlin, Striped Marlin, Sword Fish, Sale Fish, and Other Manns
Source: MAFF

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CONSUMPTION

General

Korea's per capita fish consumption rose to 32.1 kg in 1994 compared to 30.2 kg in 1993. Domestic consumption in Korea is still largely tied to local production. Thus, an increase in production has directly led to an increase in consumption. Other factors in increased consumption include a strong economy, higher incomes, and import liberalization. Increased consumption came about despite dramatically higher prices for popular items such as anchovies, squid, and fresh Alaskan pollack.

The trend in increased consumption is expected to continue, boosted by additional factors such the perception by consumers of fish as a healthy alternative to red meat and the industry's effort to diversify fish products, improve the quality, and develop processing technology.

The biggest jump over the past several years has been in seaweed consumption. This growth has corresponded to the government's development assistance in the production of seaweed within the aquaculture sector.

Utilization Patterns:

Consumption patterns have diversified into more processed products from fresh fish products. Fish used to be a subsidiary material served with rice. Now, it is increasingly becoming a main entree at Korean meals. The industry has tried to take advantage of this by targeting its marketing at the younger generation. The industry has also continued to develop its processing industry with significant increases over the past ten years in consumption of frozen fish, surimi, and dried seaweed.

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CONSUMPTION

Substitution Patterns:

As incomes continue to rise, the trend in increased per capita consumption of meat and fish products will continue while consumption of grains and other food crops will decline. Since 1985, per capita consumption of starchy food crops has declined from 182 kg to 161 kg, while consumption of all poultry, livestock and seafood products has increased from 82 kg to 128.5 kg in 1994.

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TRADE

Trade Trends

Imports of fishery products in 1994 increased to 381,261 MT on the actual product basis, up 7 percent from 1993. This is due to both increased demand and continued import liberalization. Items affected by liberalization in 1994 include frozen sea bream, frozen puffers, frozen allaska pollack roes, frozen crabs, and frozen shrimp. In 1995, frozen Alaska pollack surimi and frozen monkfish are the key items that were liberalized.

Imported products are utilized for both re-export and domestic consumption. In addition to the recently liberalized products noted above, major products include squid, cod, Alaska pollack, mackerel, and rockfish. Major suppliers are the United States, Russia, China, Argentina, Japan, New Zealand and Chile. These countries accounted for 79 percent of total Korean imports in 1994.

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Korea export seafood to approximately 65 countries around the world.  Exports have steadily risen over the past three decades. During this period, however, seafood exports as a percent of total exports have declined to 1.7 percent from 17.7 percent. During the first three years of the 1990's, seafood exports declined on an annual basis. This trend was reversed in 1994, however, as a significant increase in frozen fish exports helped push total exports to 385,446 MT in 1994 compared to 370,764 MT in 1993. Exports to Japan were boosted by the strong yen. Key items included fresh eel and flat fish; frozen horse mackerel, frozen chub mackerel, and frozen squid; and seaweed.

Korea traditionally exports tuna, shell fish, frozen\canned products, and seaweed. Japan is by far the largest destination, annually accounting for nearly 78 percent of Korea's total seafood exports on a value basis. The United States was second in 1994 at 7.2 percent. Total exports to the United States decreased due to a decline in Alaska pollack fillets.

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TRADE

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Factors Affecting U.S. Trade

Korea is a relatively new and rapidly developing market for  U.S. exporters and competitor countries. On one hand, this presents several opportunities for various species, including lobster, monkfish, salmon, Alaska pollack, etc. On the other hand, Korea can be a very difficult market and presents several risks to new-to-market suppliers. It is therefore imperative that new-to-market exporters establish personal relationships with reliable and experienced importers.

Overall, prospects are bright for U.S. suppliers of seafood products. Consumption will continue to expand, domestic production will remain at or near current levels, and import liberalization will lead to a much more competitive environment. The United States faces stiff competition, however, from several countries, including Russia, Argentina, China, Japan, New Zealand, Canada, Norway and Australia.

Trade Matrix

See PS&D Table

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TRADE

STOCKS

Total supply and demand of fishery products in 1994 reached approximately 4.6 MMT. The National Fishery Administration has projected both local production and consumption to decline in 1995. Supply consisted of 3.48 MMT from domestic production, 792,000 MT from imports, and 360,000 MT from beginning stocks. Demand was divided into 3.1 MMT for domestic consumption, 1.06 MMT for exports and 460,000 MT for ending stocks. Data are based on the raw materials recalculated by the National Fisheries Administraion. The amount of processed fishery products was converted into raw material basis.

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POLICY

Resource Management Policy

The Korean government is facing an increasing amount of domestic pressure as the local industry feels threatened by market
liberalization and international agreements placing restrictions on deep sea fishing--such as the Law of the Sea under UN Convention and Local Autonomy System.

On/Off Shore Fishery Policy:

The local industry cites the following challenges within this sector:
1) Depletion of fish resources in adjacent waters caused by industrial pollution and an oil spill in July 1995.
2) Reduction of fishery ground because of land reclamation projects.
3) Labor shortage as young people seek other job opportunities.
4) Illegal fishery.
5) Market liberalization.

To assist the industry meet these challenges, the government--through the National Fisheries Administration (NFA)--has established a Fishery Rationalization Taskforce Team.

The team's strategies focus on the following:
1) Promotion of a clean sea movement.
2) Development of a resource management plan for adjacent waters.
3) Implementation of stricter penalties for illegal fishing.
4) Improvement of distribution facilities by reducing licensing and registration requirements.
5) Reduction of restrictions on foreign investment.
6) Delegation of authority to local agencies for port development.
7) Development of a vessel modernization and reduction plan.

Deep-Sea Policy:

The local industry cites the following challenges within this sector:
1) Increased restrictions, reduced quotas, and rising fees in foreign economic zones due to international conservation agreements, including the Law of the Sea under UN Convention signed in November 1994.

2)Declining productivity and financial pressures caused by increased fees and labor costs.

3) Plunging export prices due to alleged dumping by competing countries such as China.

4) Labor shortage.

5) Obsolete fishing vessels.

According to local officials, these conditions have caused over 100 companies to go bankrupt, insolvent, and\or undergo court management since 1990.

To assist the industry, the government has taken the following measures:
1) Increase the annual budget for the deep-sea sector to 205 billion won (US$ 270 million) in 1995 from 170 billion won (US$224 million) in 1994.

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2) Develop international relationships and actively participate in international fishery conventions\organizations to maintain existing fishing grounds and resource conservation. Korea is seeking to sign fishery agreements with Peru, Argentine and Angola. To date, Korea has signed agreements with 14 countries. (See "International Relations" for details about multilateral and bilateral issues.)

3) Establish joint ventures with foreign countries. The number of firms entering into joint ventures to date is 49 involving 15 countries. Major imported items under these arrangements are squid, jack mackerel, Alaska pollack and surimi.

4) Seek inroads into new fishing grounds using modern techniques in Mexico (squid angling), West Africa (angling), South Atlantic (trawl to develop "mero" resources). Seek re-entry into the North Pacific, which has been prohibited since 1993.

5) Maintain operations in Chinese and Russian waters. In 1994 five companies recorded catches of 3,632 MT in Russian waters and eight companies caught 1,997 MT in Chinese waters.

6) Allow companies to recruit foreign seamen.

7) Allow companies to purchase second-hand ships and third country flag vessels and reduce restrictions on the ownership of vessels.

8) Extend approval period from the current one year (selectively five years) to five years and revise regulations on fishery grounds and methodologies.

International Relations:

The following fishery conventions, agreements and bilateral issues occurred during the period of June, 1994 through August 1995:

Multilateral:

1) CCSBT (Commission for the Conservation of Southern Blue Fin Tuna) is asking Korea to join as a signatory country. Existing member countries are Japan, Australia and New Zealand.

2) Korea joined PICES (Pacific International Commission for Exploration of the Sea) in September 1994.

3) Administrator of the NFA participated in the FAO committee on fisheries which was held to talk about UNCED recommendations on global fishery and acquaculture.

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4) In 1995, the UN conventions on Straddling Fish Stocks and Highly Migratory Fish Stocks were held to discuss conservation of the high seas. The conventiona were closed August 4, 1995 when the final act was signed at the sixth convention.

5) 47th IWC (International Whaling Commission) was held in May, 1995 and discussed the allowance of scientific research under the condition of non-catch basis (by visual observance only).

6) Korea joined NAFO (North Atlantic Fishery Organization) seeking re-entry into trawl fishing in the Atlantic (mostly for red fish and flounder) in November 1993. Member countries are Canada, EU (including Spain) and Japan. Korea was allocated a quota of 2,000 tons of squid in 1995.

Bilateral:

1) Korea-Russia Fishery Cooperation Consultations were held in Moscow in October, 1994. Joint ventures with Russia provide an important alternative source of Alaska pollack. In 1995, Russia allowed 22,000 tons of free charge quota in exchange for sardines from Korea. For the commercial (fee) based quota, Russia agreed to allow 55,000 tons of quota (all Alaskan pollack). Fees were designated at $336\MT for spawned pollack and $205\MT for non-spawned pollack. In addition to the above quota, private companies entered into a commercial deal with Russian partners. In 1995, 189,400 MT of private quota were allocated to Korean fishermen.

2) In March 1995, Korea held consultations with China to discuss measures to reduce the alleged illegal fishing by Chinese fishermen in Korean waters and to develop resource conservation measures in the high seas between the two countries.

3) In July 1995, Korea reached an agreement with France on fishery ground access.

4) Following seizures by the U.S. Coast Guard of Korean fishing boats in the US EEZ this past year, the United States has proposed an MOU to prevent such actions in the future. However, the Korean government has stated that it will abide by the recently signed UN agreement on straddling stocks and migratory stocks. Thus, according to the Korean government, a seperate bilateral agreement with the United States is unnecessary.

Production Policy/Price Support

The Korean government continues its efforts to protect the coastal fishing grounds from industrial pollution. The government plans to complete current projects aimed at cleaning up the fishing grounds by 1997. Cleaning operations were implemented under a government budget of 11.9 billion Won (US$15.7 million) through 1993 with an additional 11.3 billion Won (US$14.9 million) in 1994.

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Korea has established Artificial Breeding Grounds. These are man-made breeding areas built along the coast to facilitate spawning. Government investment from 1971-1994 has totalled 166.4 billion Won (US$218.9 million). The total area has reached to 89,262 hectares with an additional 17,160 hectares slated for construction in 1995 under a 43 billion won budget.

The government has also supported the fishing industry's efforts in the area of hatcheries. Since 1973, construction has led to new facilities at 11 regional locations. Another new regional location is under construction, scheduled for completion by the end of 1995 with the budget of 5.9 billion won (US$ 7.7 million). Annual production reached 74.7 million fry in 1994 with a total investment of 26.9 billion Won (US$35.4 million).

The fry production of 1994 was composed of fish: 2.4 million head; shell fish: 6.2 million head; crautacea: 33.5 million head; others 32.6 million head (such as sea urchin and sea cucumber). Cumulative fry production has reached 327 million head from 1976 to 1994. The government has invested 163 million won (U$0.2 million) to purchase 33 million fry produced by fry farmers to support their industry. The government purchase program has totalled 171 million fry from 1986 to 1994.

Under the motto "New Economy ", the Korean government is attempting to restructure the fishery sector, maintain an adequate fleet, modernize fishing facilities, improve the living standard of fishing villages, expand port facilities, and to educate community leaders in selected fishing villages. Substantial funds will continue to be invested in this area.

Export Subsidies

To support seafood exports, the government spent 18.2 billion won (US$24 million) in 1994 to purchase raw materials for processing intended for export. The government also budgeted funds to support processors on standardization  measures totalling 26.5 billion won (US$ 34.7 million). 

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Tariff Policy

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Non-Tariff Barriers

The seafood liberalization program is outlined in the table below.

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