FUTURE SEAFOODpascal @ surimi.hk - tel +33 6 76 20 59 15Vietnam +84 974 398 922- Thailand +66 86 385 0347

SURIMI MARKET UPDATENovember 2018

SURIMI SUPPLY

GLOBAL SURIMI PRODUCTION : 820,000 MT in 2017 (decreased by -30,000 MT vs 2016

-> reduced production of tropical fish surimi in China and Vietnam)

280,000 MT COLD WATER FISH SURIMI : stableAlaskan Pollock, PW, SBW, Hoki, NBW

480,000 MT TROPICAL FISH SURIMI: - 30,000 MTItoyori, Eso, Flying Fish, Sea Bream, Ribbon Fish, etc

50,000 MT FRESH WATER FISH : stableSilver Carp (Aquaculture, China)

10,000 MT OTHER : stableSardine, Mackerel, etc

Tropical Fish(Itoyori, etc)480,000 MT

Thailand, Vietnam, India, China, Indonesia, Malaysia,

Pakistan, Myanmar …

WORLD SURIMI PRODUCTION2017 : 820,000 MTAlaska

Pollock207,000 MT

USA

Pacific Whiting

30,000 MTUSA

North Blue Whiting3,200 MTFrance

ChinaSilver Carp50,000 MT

Japan Pollock30,000

MT

Southern Blue Whiting & Hoki8,000 MT

Argentina/Chile

SURIMI SUPPLY 2005-2018Since the last crisis in 2013, the surimi market in S.E. Asia is relatively stable:

2014 -2016: -> production increased + 40,000 MT (AP, PW, India, Vietnam)demand stable -> carry-over of inventories between seasons -> soft market

2017 : decreased production in S.E. Asia in the high season (September-December)-> tension on prices for tropical surimi

2018 : alaskan pollock surimi cannot meet the demand, decrease in production expected againin S.E. Asia in the high season

-> tight market – low inventories : further increase in prices for tropical surimi?

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GLOBAL SURIMI PRODUCTION 2005-2018 (MT)

Pollock Quota at high level ; pollock surimi production stable, slightlydecreasing due to increased production of fillets

204,000 MT in 2016 ; 207,000 MT in 2017, 202,000 NT in 2018

Japan pollock surimi production at its lowest historical level (30,000 MT pollock – total less than 40,000 MT) - no sign of recovery

Inventory in Japan slightly higher than last yearStrong demand for pollock surimi, market prices keep increasing (+10%)

Pollock Surimi Production: Alaska + Japan -> 240,000 MT

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POLLOCK SURIMI 2005-2018 (MT)

Cold Water SurimiPollock and Whiting Surimi Production Trend for 2019

Even though the stocks of Pollock remain healthy, they have decreasedby more than 1 million MT in East Bering Sea in 2018 according to last survey, possibly a result of increased water temperatures in Alaska.

Since the effects of this temperature change remain unknown, this is a matter of concern for the future of the pollock fishery. If the TAC is expected to be similar in 2019 as 2018, it is likely to decrease in the following years. Another effect of global warming is the resource moving further North which adds distance to the shore plants and may affect the fish quality. Surimi production is expected to decrease in 2019 due to the strong market for fillet block and demand that supply cannot cover.

On the Russian side, the quota should be decreased by 5% and will continue to decrease over the next few years. On the other hand, with incentive from the Government, the large russian Pollock surimi processors are heavily investing intonew factory trawlers and shore plants.

Russia should then also become again a surimi processor by 2020-2023 with capacitybuilding up both on-shore and off-shore.

PW Large quota -> surimi production increase : 25,000 MT in 2016 ; over 30,000 MT in 2017, should be the same in 2018 (limited due to processing capacity and limited by market demand (+ pbs of by-catch). The stocks are healthy and quota for 2019 should bethe same as in 2018.

NBW surimi production stable : 3,200 MT

SBW-Hoki stable around 8,000 MT (Argentina: 6,000 MT, Chile: 2,000 MT)

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OTHER COLD WATER WHITE FISH SURIMI 2005-2018 (MT)

TROPICAL FISH SURIMI PRODUCTION in 2018 should be similar or decreased (China, India) compare to last year (around 520,000 MT including the 40,000 to 50,000 MT of silver carp surimi produced in China)

TROPICAL FISH SURIMI PRODUCTION TREND 2016-2017-2018 : - decreased in 2017 – stable in 2018 THAILAND (58,000 MT -> 52,000 MT -> 55,000 MT)

VIETNAM (170,000 MT -> 160,000 MT -> 160,000 MT)- decreased in 2017 and 2018 CHINA (200,000 MT -> 160,000 MT -> 150,000 MT ?)

- increased in 2017 – decreased in 2018 ? INDIA (75,000 MT -> 95,000 MT -> 85-90,000 MT?)

- Stable in 2017-2018 MALAYSIA (20,000 MT), INDONESIA (30,000 MT), PAKISTAN (8,000 MT), MYANMAR (3,000 MT)

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TROPICAL FISH SURIMI 2005-2018 (MT)

Problems with IUU in Europe: Thailand was forced to take drastic conservation measures and reduce the number of fishing vessels in activity (IUU yellow card should be removed by 2019).

-> strict control of fishing vessels : new regulations include restrictions on fishing seasons, compulsory licensing for the vessels, registration of fish landings, etc

-> production decreased from 75,000 MT to 52,000 MT between 2014 to 2017and should see a slight increase with a production of 55,000 MT in 2018

-> Import surimi prices from Vietnam - the main exporter to Thailand - increasing through2018 as a result of short supply of raw material resulting in higher production cost for the Thaireprocessors of surimi products.

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THAILAND SURIMI PRODUCTION 2005-2018 (MT)

Thai surimi production is stabilized around 55,000 MT. Thai surimi import in 2018 continues to increase in 2018 to reach 56,000 MT . The surimi import is mainly from Vietnam and USA.Thai Surimi Export decreases year after year as a result of decreased domestic production and increasing consumption.The production of Thai Surimi Products (130,000 MT) keeps growing by 5-10% per year. Exports of thai surimi products to the neibour countries (Cambodia, Laos, Vietnam, Myanmar, …) is expanding at double digit. Ref : Anucha Techanitasawad

Andaman Surimi Industries

India surimi production and exports 65,000 MT in 2015 to 75,000 MT in 2016, 95,000 MT in 2017, 90,000 MT in 2018?

- Fish size is decreasing : itoyori high grade surimi is replaced by medium grade- Increased production comes from other species giving surimi of lower quality:kintokidai, eso, tachiuo, shiroguchi and mixed fish.

Prices of Itoyori increase due to competition between producers and increasing fuel porices.

New factories (4 new factories are being built in Mangalore with total capacity of 500 MT/day) threaten the position of the historical processsors.

Surimi production in India has been somehow erratic since the beginning of the new seasondue to heavy rains and storms.

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India Surimi 2005-2018 (MT)

VIETNAM Surimi Production in 2016 was at its peak level of 170,000 MT (export data not including transborder shipments to China).

Despite increase production capacity (new plants & expansion of existing factories) Surimi Production decreased by 10,000 MT in 2017 down to 160,000 MT

For 2018, production is stable despite a general decrease in fish supply due to closed accessfor the Vietnamese vessels to foreign fishing grounds (Indonesia, Malaysia). Because of the increased price paid by the surimi factories for raw material, surimi processors capture some supply that used to go to other destinations than surimi (fish market, frozen fish, dried fish and fish meal). Higher raw material prices also result in an increased fishingefforts from the Vietnamese trawlers.

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Vietnam Surimi exports 2005-2018 (MT)

The factories, in total 14 by 2018, are located primarily in Java (11 factories) . Withthe largest fish resource in S.E. Asia and a fast growing domestic market for finishedproducts, Indonesia has the largest potential to grow surimi production in SE Asia.

But foreign investors have found a difficult a business environment with high corruption and little support from theadministration and racket by the local mafia. The uncertainty regarding the fishery policy (a ban of trawling has been announcedand cancelled for the past 3 years) does not give incentive even for the local producers to invest in production.

Since Indonesia banned the thai freezer vessels that used to operate in the easternseas of Indonesia, this very large resource remains untapped.

INDONESIA

14 factories

Stable Production :2017-2018: 30,000 MT

Surimi Production is Malaysia is around 20,000 MT and stable with 7 factories. QL, the main producer of surimi and surimi products, is also present in Indonesia.As a result of the market growth for surimi seafood, Malaysia exports are decreasingwhile import increase year after year following the same trend as Thailand

MALAYSIA

2015 2016 2017

IMPORT 14,633 13,701 13,790

EXPORT 11,111 9,183 6,448

The other countries processing surimi in S.E. Asia include :

- Myanmar : 3 factories2,000 MT in 2017 / stable in 2008potential resource … but most of the fish is exported to Thailand

- Pakistan : 4 factories (one new factory in 2018)8,500 MT in 2017 / expected to grow over 10,000 MT in 2018Production should keep growing in the coming years while theresource is far from being fully exploited.

OTHER S. E. ASIA

China surimi production decreased from its highest level of 240,000 MT in 2012 down to 200,000 MT in 2016 and 160,000 MT in 2017. In 2017, ribbon fish production dropped by 40% in Zeijiang province (from 70,000 to 40,00 MT). The same trend continues in 2018 and production is expected to decrease down to 150,000 MT.

In Guanxi and Guangdong production of Mix Fish also decreased by 20 to 30% down to 60,000-70,000 MT. On the other hand, Sea Bream production was much better this year.

Finally, f resh water surimi (silver carp) production (around 40,000 MT in 2017) is expected to decline due new regulations to protect environment and water resources despite the growinginterest and investment by the largest surimi seafood processor.

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CHINA SURIMI

China started the year 2018 with low stock of mix fish and almost zero stock of ribbon

fish and silver carp after decreased production in 2017 caused by tighter environmental

control and deteriorating fish resources. As a result ribbon fish price jumped from

8,000 RMB/MT in the middle of 2017 to 11,000 RMB/MT in Feb. 2018, right

before the Chinese New Year. Mix fish and silver carp price also went up by

around 1,000 RMB/MT at the same time.

Before the high season, prices remained at high level and most buyers buy just

enough, hoping for a reverse trend in the second half year. But strict

enforcement of the fishing ban is resulting in larger size fish that goes to market

leaving the surimi factories with little supply of raw material. As a result of the

short supply, fish prices and surimi prices increased further to 12,000 RMB/kg.

The situation for Mix Fish is not better. Production of Mix Fish Surimi AB (GS

150up) and A grade (GS 200-300) has been limited. The price of Mix A grade is

now around 15,000 RMB/MT and AB grade 13,000 RMB/MT.

On the other hand, the beginning of new season saw big landings of seabream

in Guangdong, Guangxi and Fujian province and raw material prices dropped to

record low levels. But only a few thousand tons had been made among those

provinces before fish price went back to normal.

New season of silver carp is just starting now so the trend is yet to see. The total production is expected to drop by 10-20% due to a new policy to ban fish farming in all natural waters. However, the industry leaders in surimi seafood are moving aggressively into this area to build their own supply base, which may counter-balance the effect of the new policy. Current price for silver carp surimi is around 15,000 RMB/MT, same as last season end.

In the past 3 years, surimi imports to China have been limited to a small volume of medium and high grade surimi that was not available from domestic production. Main exporters were Vietnam, Indonesia and India. But in the past few months, imports picked up to compensate the shortage resulting from decreased domesticsupply.

In a word, the situation of Chinese surimi producers remains hard so far into 2018. Many efforts have been made by the industry members in a search for alternatives to declining domestic supply. Silver carp surimi is so far the biggest success. Some companies also made attempts to pioneer surimi production in new places like Africa so far without success but many believe it is only a matter of time before some company will succeed in building the first large overseas Chinese surimi factory since it seems to be the only long term solution.

CHINA SURIMI

Ref: Dr Ji - LUF

SURIMI SEAFOOD MARKETSWestern world (Europe, USA) and Russia: crabstick -> Salads, Snacks

Japan, Korea, China, Taiwan : fish balls, fried fish cakes, many items-> Hot pot (steam boat, oden) & Snack food, Barbecue

-> Mature markets, stable / slightly decreasing or increasing throughpromotions, new products innovations, new modes of marketing

South-East Asia : fish balls, fried fish cakes, dried snacks-> New Markets, quickly growing

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JAPAN SURIMI IMPORTS 2010-2017

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Japan Surimi imports per countries in Jan-Jul 2016/2017/2018,MT

Despite a decrease of import

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inventories remain at normal

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Japan. Nevertheless this

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KOREA SURIMI IMPORTS 2013-2017 (MT)

Surimi imports to Korea are stable around 120,000 MT since 2013.

The market has been slightly growing and the main volume is low grade

surimi coming from Vietnam (55,000 MT) and China (30,000 MT).

Alaskan Pollock imports doubled from 10,000 to 20,000 MT between 2012

and 2014 and keep growing since to reach 26,000 MT in 2017.

For the beginning of this year, imports are in line with 2017 with some

increase of imports from Vietnam while China decrease.

SOUTH-EAST ASIA - THAILAND

South-East Asia is a growing market of 240,000 MT of finished products absorbing 80,000 MT

of raw material.

The largest producer of surimi products and largest market is Thailand with a total production

in 2017 of 124,000 MT of finished products out which 64,000 MT are consumed in domestic

market and 52,000 MT exported overseas. Both domestic consumption and exports continue

to grow in 2018 and should result in 10% increase compared to 2017.

Thailand domestic surimi production declined down from 100,000 to 52,000 MT between 2012

and 2017 and was expected to be stable in 2018.

Exports decreased from 56,000 to 24,000 MT in the period and the main export country is

Japan which takes over 80% of the export volume while Russia and Korea share the remaining

20%.

Thailand became a net surimi importer in 2016 with an import volume growing from 12,000

MT in 2012 to 45,000 MT in 2017 and should reach 55,000 MT in 2018.

Vietnam covers over 80% of the surimi imports from Thailand (30,000 MT in 2017) while the

US, pakistan, Indonesia, China and India share the remaining volume.

After several years of solid growth, the Thai domestic market tends to be stagnant but

production keeps increasing to fuel the development of exports to neighbor countries (Laos,

Cambodia, Myanmar, Vietnam and Malaysia). As a result, surimi imports should also keep

increasing due to limited fish supply for domestic surimi production.

OTHER SOUTH-EAST ASIA MARKETS

Other markets in South-East Asia include Singapore (50,000 MT), Taiwan (50,000 MT), Hong Kong (20,000 MT), Indonesia 20,000 MT), Myanmar (18,000 MT), Malaysia (15,000 MT), Philippines, Vietnam, etc representing over 150,000 MT of finished products.

If the largest importing markets like Thailand, Taiwan or Singapore have reached a maturity and see limited further growth potential, new markets like Indonesia, Myanmar, Vietnam, the Philippines, Myanmar, Laos, Cambodia, etc see a rapid growth and large potential to further expand in the coming years.

The European Union

The European Union is a 50,000 MT surimi market that reached maturity around 2011-2012 after 15 years of double digit growth. The import volume declined in 2017 down to 46,000 MT from 49,000 MT in 2016 probably as a result of inventory adjustment but it recovered in the first half of 2018 with the import of large volumes of pacific whiting surimi from the US. US Surimi covered 80% of the supply to the EU in 2017 and may reach even higher percentage thisseason. As a result of the demand for pollock surimi prices increased again by 10% this seasonwhile the prices for pacific whitinh remain more reasonable.

On the other hand, the imports of Tropical Fish surimi have dropped to 3,000 MT/year, mostlyfrom Vietnam and India.

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EU SURIMI IMPORTS 2009-2017 (MT)

Russia and East Europe

East Europe imports 25,000 MT/year surimi (Russia 19,000 MT, Belarus 4,000 MT, Ukraine 2,000 MT).

Russia and Ukraine suffered in 2015 from the economic slow-down that followed the war in Ukraine and the ban between EU/USA and Russia that followed combined with low prices of oil in the global marketbut surimi imports recovered in 2016 to similar levels as 2014.

As a result of the ban, alaskan pollock surimi imports to Russia dropped by 90% and are now limited to 1,000 MT of product smuggled through China or imported from Japan. The main supply is now tropical surimi from Vietnam and India while south-america SBW has subsituted a large portion of the high grade pollock surimi used for the high quality crabsticks.

Ukraine market that collapsed by 50% in 2015 has also recovered : the market increased by 50% between2015 and 2016 and keeps growing. The main import is Vietnamese low grade surimi that is combined to pacific whiting or flying fish surimi.

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THE US MARKET

The US market, growiung 2-3% per year, is estimated around 120,000 MT of

finished products and consumes 45,000 MT of raw material annually.

Alaskan pollock and Pacific Whiting surimi cover nearly 100% of the US

domestic production.

Seven US processors of finished products cover the domestic market and

export to Mexico and South America.

The merger of LM Foods and Aquamar in 2017 gave birth to a large

independent US surimi seafood producer of comparable size with the 2

integrated large processors (Trident Seafood, Maruha-Trans Ocean

Products).

Over the past three years the world surimi market, a stable supply over 800,000 MT met the demand and resulted in relatively stable market prices. Nevertheless since2017, the production is decreasing and surimi prices are increasing by 8-10% fromseason to season.

Despite a large production volume, the Alaska Pollock surimi supply cannot meet a growing demand and prices keep increasing season after season. This trend shouldcontinue in the next couple of years as production may start decreasing due the shortage of pollock fillet block in the market and a possible decrease of the fishingquota.

For 2019, the fishing quota of pollock should be renewed in similar volume as 2017 despite a decrease of the biomass … but the productioon of alaskan pollock surimi should decrease due to a global shortage of alaska pollock fillet block. vFor the nextyears the quota is expected to be reduced due to a series of poor recruitment yearsthat may be related to increased water temperatures.

Global warming also results on a biomass moving North further from the shore plants located in the Aleutian Islands which may impact negatively on the quality of the surimi produced by the US land-based factories.

CONCLUSION

On the other side of the Bering Sea, the quota is also expected to bedecreased around 100,000 MT over the next 5 years.

On the other hand, the Russian Goverment is giving incentive to the large conglomerates to renew their aging fishing fleet and invest in modern factorytrawlers while large processing shore-plants are also being built in East Russia. Since some of these land-based factories and factory trawlers include surimi lines in their processing equipment, Russia will make a come-back in the surimi business after 2020.

In Asia, the decreased production of tropical fish surimi due to reducedlandings of raw material in China and Vietnam since 2017 and the strongdemand in South-East Asia where surimi consumption is increasing has resulted in a short supply of itoyori surimi that had a positive impact (for surimi producers) on surimi prices.

The end of 2018 is seeing some uncertainty regarding the supply during the high season and the market is exposed to a low level of inventories. As usual, the weather comes into play in this season and a cold weather that results in higher consumption of odeng in hot pot and other surimi products wouldresult in further increases of surimi prices by the end of the year.

FUTURE SEAFOODPascal GUENNEUGUES

Kan Victual

FUTURE SEAFOODpascal @ surimi.hk - tel +33 6 76 20 59 15Vietnam +84 974 398 922- Thailand +66 86 385 0347