FFA Fisheries Trade Study 2007 Part 4A
Transcript of FFA Fisheries Trade Study 2007 Part 4A
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Principal Markets and Pacifc Island TunaExports
PART 4
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CHAPTER 15
The canned tuna
industry is global and
PICs only play a very
minor active part in it.
There are a large number
of tuna processors
in multiple countriesproducing for a relatively
small number of principal
markets.
INTRODUCTION PACIFIC ISLAND
COUNTRIES AND THE GLOBALCANNED TUNA INDUSTRY
15.1 Introduction
ThepurposeofthisintroductorychapteristobrieysituatePICsinthewidernetworksof
theproductionandtradeincannedtuna.Thereasonforfocusingoncannedtunarather
than,forexample,freshchilledisbecausetheformerindustryissocomplexandcanned
tunaisthemostimportantcannedshproductintheworld,bothintermsofthevalueand
volumeofworldproduction.TheprincipalmarketsforPICtunaexports(includingcanned,
freshchilled,frozenwhole,loinsandllets)areaddressedinthefollowingchapters.In-
stead,thisintroductiondrawsoutsomeoftheinterlinkingaspectsoftheindustrythatarenotaddressedinthemarket-specicchapters.Theemphasisisonthefactthattheindustry
isglobalandthat,incommercialreality,PICsonlyplayaveryminorpartinit.
Thischapter andthefollowingoneson principalmarketsdonot claimtoprovidemar-
ketanalysisinthesenseofmakingrecommendationstoindustryonwhichmarketsthey
shouldtarget.Instead,thissectiononmarketsaimstoprovideanoutlineofstructures,key
playersandtrendsinPICprincipalmarkets.Pricedataisusedforillustrativepurposes,
butwiththecaveatthattounderstandtheowanductuationoftunaprices,especially
sashimigrade,exportersneedacommercialdatasetbaseduponspecies,size,grade,area
caught,etc.
Inaneffort toemphasise theglobalnatureoftheindustry,Figure5.providesavisual
overviewoftheworldproductionofcannedtunaandtunaloins.Therearetwohighlightsof
particularnoteinrelationtothisgure:
Intermsofthegeographicaldistributionofproductionfacilities,thereisasignicant
distancebetweenPICsandtheirprincipalmarkets.Mostotherproducersareclustered
closeto the largemarkets(i.e. theEUandtheUS)with theimportantexception of
SoutheastAsia,whichhasthebenetoflowerlabourcosts,higherlabourproductivity
andmorecompetitivefreightrates.
Alongsimilarlines,thereareclearlyalargenumberofprocessorsinmultiplecountries
producingfor,ineffect,asmallnumberofprincipalmarkets(mainlytheEUandtheUS).
Insodoingtheyarealsoutilisinganitelyexploitablenaturalresource,thus,regardless
ofgrowthinmarketdemand,therewillalwaysbealimittotheabilityofprocessorsto
supplyit.Inaddition,manycountriesaresimultaneouslydumpingthesamegoodonto
theworldmarket, increasingexport volumes [is]not necessarilyaccompanied byincreasedexportvalues.Inotherwords,pricecompetitionbetweenexportersisonly
likelytointensify.
USITC998:35. Kiely007:7.Recentempiricaleconomicresearchonthisproblemforotherproductshaspointedouttheassociatedlimitstoexport-
ledgrowthalongmuchthesamelines(i.e.itisafallacyofcompositionresultingfromsimultaneousexportpromotionbyanumberofdevelopingcountries).RazmiandBlecker004:i.
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Figure 15.1: Geography of World Production of Canned Tuna and Tuna Loins
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Supermarkets have a
large inuence over the
way that tuna is bought
and sold.
15.1.1 Key Terminology and Concepts
Thechaptersonprincipalmarketsusesomekeytermsasshorthandforcomplexproc-
esses.Whileallattempthasbeenmadetoavoidtechnicaljargonthroughoutthisreport,thefollowingtermsareeitherincommonusageorsuitablysummarisecomplicatedissues.
What is a Global Commodity Chain?
Aglobalcommoditychainillustratesthelinkagesbetweeneconomicsectorsfrompro-
ductionthroughtoconsumption3.Inotherwords,ratherthanfalselyseparatingshing,
manufacturingandretailing,theapproachseesthemasinextricablylinkedandattempts
toanalysetheminthisway.Aswillbecomeapparentfromthechaptersonprincipalmar-
kets,thisapproachhasbeenutilisedthroughout.
Chapters6(onJapan),7(ontheUS),8(ontheEU)and9(onThailand)allhighlightthe
importantroleofsupermarketsininuencingthewaythattunaisboughtandsold.Ineffect,
thesebigbuyersofnaltunaproducts(whethercanned,freshorfrozentunainitsvarious
forms)actaslead rmsinthechain.Thatis,theirbuyingpowerallowsthemtoinuencecertainfunctionsinthetunachainandplacedownwardpressuresonpricesothattheycan
bettercompeteintheirdomesticmarkets.Thisallowsthemtobothmaintaintheircustom-
erbaseandtoattractmoreconsumersthatpreviouslyshoppedatothersupermarkets.In
fact,supermarkets are even becoming of increasing importance in developing countries,
especiallyinAsiaandLatinAmerica,butalsoinpartsofsub-SaharanAfrica 4.Thusthe
trendtowardsincreasedsupermarketpowerisonlylikelytoincrease.
Acommonterminpolicyandcommercialcirclesinrelationtoanygivencommoditychainis
thepossibilityforupgrading.Thiscanbedenedasthepossibilityfor(developingcountry)
agentstogetbetterreturnsfromtheiractivityinagivenvaluechain,bychangingwhatthey
doand/orhowtheydoit 5.Forexample,itmightentailshiftingfromshingtoprocess-
ing,orthepurchaseordevelopmentofbrandsbyaprocessingrm.Largermsinretail
andcatering/foodserviceusetheframeworkoftotalsupplychainmanagementtobetterunderstandhowtoimproveproductowthroughouttheirprocurementsystems.Drawing
uponthis,itisarguedthatshers(i.e.vesselowners)shouldbecomemoremarketdriven
thanproductiondriven,andfocusonrelationswithcustomers6,presumablysoastobetter
understandandthusfullcustomerdemand.
What is a Production System?
Thefollowingchaptersonprincipalmarketsusethetermproductionsystem.Thisisbe-causeeachofthesemarketshasitsownshingeetandprocessingcapacity,andna-
tionaleetsgenerallytradethemajorityoftheircatchwithnationalprocessors.Clearly,
theseinterlocking industriesneedto beassessed in theirentirety.Thus forshorthand,
we use the term production system to denote these national shing-processing-
marketlinkages.
3 Geref994;GibbonandPonte005.4 Reardonetal003.5 BernsteinandCampling006a:45.6 Mller003:6.
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INTRODUCTION PACIFIC ISLAND COUNTRIESAND THE GLOBAL CANNED TUNA INDUSTRY 15
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Industrial tuna eets
and national tuna
processing in the EU,
Japan and the US are
closely linked.
Aproductionsystemisnormallypartofatunacommoditychainbutitgenerallydoesnot
constitutetheentirechain.Asnoted,thetermisbeingusedtospecicallyhighlightonefun-
damentalpoint:thattunashingeetsandprocessingplantsareoftenverycloselylinked.
Theselinkagescaneitherbe:
Directviathesameownership(i.e.oneisasubsidiaryofanother.
Direct vianancial share (i.e. aprocessing rmpart nancinga vessel or eet, or
viceversa.
Directviacontractualarrangements(i.e.supplyagreements).
Indirectvialong-termrelationshipsand/orpersonalnetworks.
ThesystemthatproducescannedtunainFrance,ItalyandSpainusestariffsandcommer-
cialrelationssoastolock-inEUbasedprocessorstosourcesupplyfromtheEUDWF.Ina
similarway,cannedtunaandKatsuobusiprocessorsinJapanrelyextensivelyontunaand
skipjackcaughtbyJapanesevessels.And,untiltherecentdeclineoftheUSeet,alarge
percentageofsupplytothetunacanneriesinPagoPago(whichareownedbybrandsmar-
ketingtoUS)camefromtheUSeet.
Insum,thetermproductionsystemisusedtopointoutthatindustrialtunasheriesand
nationaltunaprocessingintheEU,JapanandtheUSareinextricablylinked(although
oftenwith several commercialtensions andcompetitivecontradictions).Theselinkages
areoftencementedcommerciallythroughnancial or contractualrelationships, andby
governmentpolicythroughprotectivetariffsonimportedcompetitionandstrictrulesof
originforpreferencereceivingcompetitors.Allofwhichhaveimportantimplicationsboth
forwhytariffsarestructuredliketheyareand,asaresult,forimprovedmarketaccessfor
PICexporters.
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The primary involvement
of Pacic island countries
in the global commodity
chain for canned tuna is as
a source of supply of raw
material from their EEZs.
15.2 PICS and Trading Companies in the Canned TunaCommodity Chain
Thissubsectionhighlightstwoimportantaspectsoftheglobalcommoditychainincanned
tunatheplaceofPICsandtheroleoftunatradingcompanies.Othermajorcross-cutting
issuessuchastheroleoftradetariffs,sheriessubsidies,andstandardsaredealtwith
elsewhereinthisreportinseparatechapters.Issues,trendsandprocessesspecictothe
principalmarketsofinteresttoPICexportersareaddressedindepthinthefollowingchap-
tersonJapan,theUS,theEU,ThailandandAmericanSamoa.
Transhippingtunain-port.LaeBay,PapuaNewGuinea.Photograph:LiamCampling
15.2.1 The Position of PICs in the Global Commodity Chain in Canned Tuna
TheWCPOtunasheryisthemostproductiveintheworld.Around50%ofthetotalglobal
tunasupplywascaughtthereannuallythroughouttheperiod994-004.Intermsofspecies
breakdownoverthesameperiod,WCPOcatchaccountedfor63%ofglobalskipjackcatch,
55%foralbacore,35%yellownand5%bigeye7.
Inrealeconomicterms,theprimaryinvolvementofPacicislandcountriesintheglobal
commoditychainforcannedtunaisasasourceofsupplyofrawmaterial,mainlyinthe
sensethattunaiscaughtbyDWFNsinandaroundtheirEEZs:Domesticindustriesstill
accountforlessthan30percentofthevalueoftunaharvestedintheregionsEEZs,anda
muchsmallerproportionofhighseascatches8.
7 Hamilton006:3-5.8 Hamilton006:7.
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Historically,thedominantDWFNpurseseineeetswereownedbycompaniesinJapan,
Taiwan,Korea,theUSandtheEU,butsincethe990sonwardsnewentrantshaveplayed
anincreasedrole,namelythePhilippinesand,toalesserextent,ChinaandNewZealand.
Inadditiontothis,PICaggedpurseseinevesselsareofrisingimportance,especiallydo-
mesticallybasedforeign-ownedvesselsaggedinPNGandSolomonIslands.Mostofwhich
areentitledtoshundertheFSMArrangement9.(SeeBox.foranoverviewoftheFSM
Arrangement.)
However,theincreasedroleofPICaggedvesselsusingtheFSMArrangementisprimarily
duetoarecentrise in second-generation access arrangements(i.e.ownershipremainsin
thehandsofnon-PICcountries,particularlyTaiwanandthePhilippines).Moreover,asig-
nicantproportionofthiscatchistranshippedatseaorinport,withaminorproportionof
supplyendingupinPICprocessingfacilities0.(Formoreonsecond-generationaccesssee
Section.3).
Apartfromexertingsomeactual(andpotential)inuenceovertheresourceitself,onshore
processinginvestmentinPICsareofvastsocio-economicimportance.Figure5.providesasketchofthepositionofPIC-basedprocessorsinthechain.Asisclearfromthesche-
maticthereare two general types or models of PIC-based rm.
Integrated shing-processing operations: includes RDTuna Canners andFrabelle
bothinPNG,whichareactiveparticipantsinthechain,fromshingthroughtoeventual
salestoimportingrmsinprincipalmarkets(mainlytheEU).
Contract processors:includesPafco(Fiji),Soltai(SolomonIslands)andSouthSeas
TunaCorporation(SSTC)(PNG),whichareprimarilycontractedprocessorsthatnever
actuallyowntheshitself.Instead,thetwotunatradingcompaniesFCFandTriMa-
rineplayacentralroleintermsofsupply,procurementand,inthecaseofloinspro-
ducedatSoltaiandSSTC,onwardsales.(Anoverviewofthesecompaniesisprovidedin
thefollowingSection.DetailedoverviewsofthePIC-basedrmsareprovidedinChapter
3andChapter.)
AfewotherpointsaboutFigure5.shouldbehighlighted:
Thegureonlyattemptstoshowtheowofthecommoditychainasitintersectswith
PICprocessingfacilities.Therealityis,ofcourse,farmorecomplex,especiallyinthe
Re-processing/BrandingandMarketsections.
Theownershiparrowsareincludedtodemonstratethatthreeoftheveplantsnever
actuallybuythetuna.Thisabsorbsthemfromrisk,butitalsocancelsoutopportunity
forprot.
BaseduponFigure5.andthefollowingchaptersonprincipalmarkets,itisclearthat
eachofthePICfacilitiesunderaprocessingagreementconstituteoneofmanysources
ofsupplyopentotheRe-processing/Brandingsection.Inotherwords,whilePICtunaprocessorsareofimportancetoPICeconomies,theyareofrelativelymarginalimpor-
tancetotheglobalcommoditychainasawhole.
Aprivatelabelproductisproducedforalargeretailer(i.e.supermarketown-brand)
andanationalbrandislabelledfor(orby)amanufacturewithawell-knownproduct
(i.e.JohnWestinAustraliaandtheUK,StarkistintheUS,etc).
AdditionalinformationonPICprocessors,theroleofdomestictradepolicyandtradingrela-
tionsareprovidedinChapter3andChapter.
9 Hamilton006:6-7.0 Multipleinterviews,PICgovernmentandindustryrepresentatives,internationalsheriesspecialists,anddirectobservation,005/6. Soltaiownstheshcaughtbyitsownpoleandlineeetusedforkatsuobushiproductionandcanningforthelocal/regionalmarket.
TunafromNationalFisheriesDevelopment(NFD)boatsarecontractprocessedintoloinsandcateringcansbySoltaiforTriMarineforonwardsaletoEUmarkets.
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Trading companies play a
pivotal role in the Pacics
canned tuna industry.
15.2.2 Tuna Trading Firms and the Coordination of the Canned Tuna Commodity Chain
Therearethreemajorrmsspecialisinginthetradeintunaforcanningoperatinginthe
WCPO.Theyplayapivotalroleinthecontemporaryglobalcommoditychainincannedtuna.Beforewedirectlyanalysetheroleofthesermsinthecannedtunachainanddraw-out
theimplicationsforPICs,thefollowingcompanyoverviewsprovidesomebackgroundtothe
specicsofeachoftheserms.
FCF Fishery Co, Ltd
FCFisthemostimportanttunatradingcompanyactiveinthePacic,andprobablythe
world.Itwasestablishedin97withstatesupportastheTaiwanesegovernmenthadan
interestinthedevelopmentofdomestictunashingcompanies,notleastastheyprovided
(andcontinuetoprovide)animportantinowofforeignexchange 3.FCFisaprivateTai-
wanesermthatemploysaround0people.IthasitsheadofcesinKaohsiunginthe
southofthecountrywhereabout70staffarebased,itisfromherethatbusinesscoordina-
tionandinstructionsonpricingareltereddownthroughtoregionaloperationalofces
(i.e.inLevuka,Suva,PagoPago,Bangkokandelsewhere).
Thecompanymakesmoneyfromcommissionsonthetrade,andinmanycasesitdoesnot
eventakeownershipofthesh.Accordingtooneveryexperiencedindustryinterviewee:They
havenothing,onlygoodbrains4.FCFisdividedintothreespecialisedbusinessdivisions:tuna
longline,tunapurseseine,andsquid.ThepurseseinedivisionpurchasesshfromTaiwanese,
Korean,Philippineand,veryoccasionally,USvessels.Thepurchasesareeithermadeatsea
wherethecargoistranshippedontoreefercarriersthathaveeitherbeenwhollychartered
orwhereanallocatedspacehasbeenchartered(FCFreportedlydoesnotownanyreefers),
orinport.
Tri Marine
TriMarineisaprivatecompanywithanannualturnoverofUS$700million.Havingbeen
foundedinSingaporein97bytheItaliangovernment,itwasprivatisedin986andis
nowownedbytwoItalianandtwoTaiwaneseinvestors.TriMarinehandlesmorethan
400,000mtoftunaperannum.Itownsorhasprocessingagreementswith5plantstopro-
ducetunaloinsand/orcannedtuna:3inLatinAmerica,inMombassa(Kenya)andSoltai
inthePacic5.ThemainbrandedprocessorsitsellstoareStarkistandChickenofthe
SeaintheUSandtheBoltonGroupintheEU.TheyalsoselltopackersinBangkok.(For
overviewofthesebrandedrmsandonThaiprocessorsseethefollowingchapters.)
TriMarineboughtStarKistspurseseineeetin00,apparentlyusingproceedsfrom
thesaleoftheirsharesintheChickenoftheSeacanneryinPagoPago6.Thishelpedto
improveTriMarinesassuranceofregularsupply.Butbymid-006itspurseseineeethad
beenreducedfrom4to7vessels(yingUS,Panama,andSolomonIslandsags).Fourof
thesewereactiveintheWCPOandtheother3intheEasternTropicPacic.Italsooper-
ated5reefercarriers.However,theamountofshproducedbyTriMarinesownboatsis
onlyasmallpercentageofitstotalbusiness.Moreimportantsourcesofsupplyoftunaare
thefollowing:
SupplycontractswithnumerousotherpurseseinevesselownerswithwhomTriMarine
alsoprovideslogisticalsupport.7
Transhipmentservicesusingcharteredcarrierstotunavesselsaroundtheworld.
Brokeringthroughspottransactionsorpurchasesfromvesselswithwhomtheyhave
nootherrelations.
ThefollowingcompanyoverviewsarebaseduponmultipleinterviewswithindustryandgovernmentrepresentativesandinternationalsheriesspecialistsinJapan,PICs,theUSandThailand,005-6.Unlessotherwisespeciedall informationistakenfromcross-referencingand(asmuchaspossible)triangulatinginterviews.
3 ThiswaspartofamuchwiderdevelopmentstrategywheretheTaiwanesestateplayedanimportantroleinpickingwinnersintheeconomy.4 Interview,Thaiindustryrepresentative,006.5 Anotherplant,TriMarineFishCo.(basedinSanPedro,California),processorssardine,mackerelandsquid.Directobservation,006;
Hedlund006:6;interviews,industryrepresentativesandinternationalsheriesspecialists,006.6 Gillett,McCoyandItano00:6.7 Interviews,industryrepresentatives,006;Hedlund006:6.
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Figure 15.2: Schematic of Pacic Island Tuna Companies in the Global Commodity Chain in Canned Tuna
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* = Relationship to chain is a processing agreement with the owner of the sh.
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TriMarinestraditionalbusinesswastradinginwholeroundtuna,butitshiftedtosupplying
tunaloinsand,evenmorerecently,tonishedcannedgoods,primarilybecauseofcus-
tomerdemand.Inshort,theynowproducenishedgoodstoorder.
Itochu
ItochuisahugeJapanesecompanythattradesinjustabouteverythingandhasitshead
ofceinTokyo8.Establishedin858,ithasacapitalvalueofUS$.67billionand4,33
employees.ItochusFoodCompanyhousestheMarineProductsDepartment,whichisits
tuna-tradingarm.ThisDepartmenthasfoursectionsofwhichthreedealexclusivelywith
tunaandtogethertotalanestimated70%oftheDepartmentssales.
SectionNo.:purseseinetunatrading.Onthesalessideithasbusinessrelationswith
canneriesinThailand,PhilippinesandIndonesia,andoccasionallytotheEU,American
Samoa,andEasternPacic.OnthepurchasingsideitdealswithTaiwan,Korea,Philip-
pinesandJapan,allshingintheWCPO.
SectionNo.:Tunarelatedwetpetfood.SalesaremainlytoJapan,buthaverecentlyshiftedtomarketingoverseas,especiallytheUS.PurchasingismainlybyThailand.
SectionNo.3:Longlinecaughtsashimiproductsand,morerecently,farmed/ranched
bluen.SalesaretoJapan.PurchasingfromlonglinersismainlyfromTaiwanandKo-
rea,andforfarmedtunafromAustralia,Spain,Malta,Greece,andMexico.
SectionNo.4:Othermarineproductitems(e.g.shrimp,octopus,etc)
LikeFCFandTriMarine,SectionNo.sometimeschartersreefers,butalsopurchases
spaceonreefersonthespotmarket.Itdoesnotownanyshingorreefervessels.
15.3 Roles and Impacts of the Big Three Trading Firms in the
Canned Tuna Commodity Chain19
Itochuheadofces.Tokyo,Japan.Photograph:LiamCampling
8 Itochu is splitinto thefollowingsix companies:Textiles;Machinery; Aerospace,Electronicsand Multimedia;Energy,MetalsandMinerals;Chemicals,ForestProductsandGeneralMerchandise;Food,and;Finance,Realty,Insurance,andLogisticsServices.Seehttp://www.itochu.co.jp).
9 ThefollowingisbaseduponmultipleinterviewswithindustryandgovernmentrepresentativesandinternationalsheriesspecialistsinJapan,PICs,theUSandThailand,005-6.Unlessotherwisespeciedallinformationisdrawnfromcross-referencingand(asmuchaspossible)triangulatinginterviews.
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1 Supply chain management
Themostimportantrolethatthebigthreecanning-gradetradingcompaniesplayisto
coordinatetranshipmentontoreefercarriersfrommultiplevesselsatsea(orinport)andoffervolumeandcontinuityofsupplytoprocessors.
Forvesselownersthisisofhugeimportance,asthecostsassociatedwithcharteringa
reeferrequireofoadingfromfourpurseseinesofaround700mtcapacitytomakethe
chartereconomic.Otherwisevesselswouldbecompelledtosteamtoporttoofoad,re-
sultinginthelossofshingdays(andrateofreturnoncapitalinvestmentforvesselown-
ers).Therefore, by simultaneously coordinatingwith several vessel owners, the trading
companies take advantage of economies of scaleandaresuccessfullyabletomanagethe
owofreeferstomultiplevessels,andifcarriersarenotfulltheyabsorbthecosts.Inad-
dition,thevesselownersbenetbecausetheyreceivepaymentassoonastheshistran-
shipped,therebyallowingthemtoensuretimelycashowforoperatingcosts(especiallyfor
fuel,butalsoforcrewsalaries,etc).Finally,becauseofthecommercialnetworksandsupply
contractsofthetradingrmstheyareabletoensurethattheshissuccessfullymarketed,therebytakingthisriskoutofthehandsofvesselowners.
Forprocessors,theserviceofferedbythetradingcompaniesallowsthemtooutsourcethe
complexanddifculttaskofensuringcontinuityofsupply.Regularbuyerswillgenerally
receivebettertreatment,notleast,asonerepresentativeofatradingrmputit,because
ourbusinessisbuiltongoodrelations.Whileprocessorsoftencomplainthatthetrading
rmscanmanipulateprice(seebelow),tradersdonotmakealotofmoneypershipment,
insteadthey achieve protability on volume.Theycanmakebiggerprotsiftheyspeculate,
butoneofthermsassessedhererecentlylostmillionsofdollarsdoingthis.
TriMarineandFCFarealso involved inonshore investment in processinginPICs0,al-
thoughtheseinvestmentshaveratherdifferentmotivations,withthelattermorefocused
onsecond-generationaccess(formoreonthisseeSection.3).TriMarinehasengaged,
inparticular,in vertical integration(i.e.fromvesselownershipthroughtoplantmanage-
ment).Importantly,TriMarinesrecentshifttocannedproductionisanadditionalserv-
icetotheircustomersandtoprocessingfacilities(i.e.ithelpsprocessorstondmarkets
fortheirproduct).Itisworthquotingoneseniorindustryrepresentativeonthistrendto
verticalintegration:
Thekeyisnottodeeplyintegrate.Wespreadourinterestsaroundtheoceans.Wespread
ourselvesouttoensuresupplyandtohedgerisk.Eachpartofourbusinessisdifferent,
forexample,evenwithourownshingvessels,eachpartnershiphasitsowndynamic.
Eachbusinesshastobetreatedasstandalone,but(despitethat)shingispartofour
largerstrategy.
2 Vessel fnancing and support
Inthe970sJapanesetradingrmsprovidedvarious types of nancing to Korean and
Taiwanese shing companies and theloanswouldbe repaid insh supplied to them.
This practice meant that trading rms were assured of regular supply. This prac-
ticedeclinedinsignicancewiththeboominglobalpurseseinecapacity(andtunasup-
ply) from the 980sonwards.However, sincetheearly000sonwardsand thetighten-
ingofsupply,onerm,TriMarine,startedinvestinginboats(althoughthissoondropped
from4 to7PSbecause ofthe difcultiesof running boat operations).Whileanother,
FCF,begantoengageinsecondgenerationaccessthroughonshoreinvestmentinSSTC
inWewak(PNG).Despitethis,reportedlyneitherFCFnorItochuareinterestedindirect
vessel nancing anymore, even though they were engaged in this practicein thepast.
0 ItochuisinvolvedinonshoreinvestmentinIndonesiaandunderitspriorcompanyname(C.Itoh)itownedandmanagedthePafcocanneryinFiji.
Comitini987:65.
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Tuna trading companies
achieve protability on
the high volume of their
sales.
Trading companies are
increasingly investing
in onshore processing
and becoming vertically
integrated.
FCFandTriMarinealsoprovidesignicantsupport services to vessels.Asnotedabove,
oneofthemostimportantoftheseisthecharteringandfullcoordinationofreefercarri-
erswithshingvessels.Bothalsocontributetotheorganisationofbunkeringatseaand
thesupplyofspareparts,aswellasqualityassurancewhenthevesselshitthedockorthe
transhippedshisofoadedfromthereefer.Finally,FCFarealsoinvolvedinthe negotia-
tion of access agreementsonbehalfofTaiwanesevessels,theythentakeacommissionon
theeventualallocationoflicenses.However,theTaiwanTunaAssociationremainsthemore
importantplayerintermsofrelationswithFFAanditsmembers.
3 Corporate concentration
Thereusedtobeupto0rmssupplyingBangkok-basedprocessors,butnowthereare
onlythreeandtheycontrolanestimated75-80%ofthemarketthere.Japanesecompanies
usedtobemajorplayersinthetradeinpurseseinecaughtsh,butonlyItochuremains
signicanttoday.Thereasonforthisdeclineisthehistoricalshiftinsourcesofsupplyof
cannedgradetuna(i.e.fromtheUStoMexicotoJapantoKoreatoTaiwan,andincreasingly,
toChina).Itochumanagedtofollowthesechanges,whereasotherJapanesermssuchasMitsubishididnot(althoughitremainsthemostimportanttraderinJapanforsashimi
gradetuna).Duetotheirgeographicalbases(SingaporeandTaiwan)andlinguistic(i.e.
Mandarin)andculturalties,TriMarineandFCFwerealsowellplacedtotakefulladvantage
oftheshiftingownershipofpurseseinecapacity.
Thereareseveralbarriers to entrytostartingupanewtunatradingrmnow.Thesein-
clude:existinglong-termsupplycontractstomajorprocessors,nancialandotherlinkages
withvesselowners,and(veryimportantly)theharnessingofsophisticatedcomputerised
databasesoncatch,tradeandotherdata.Thismeansthatitisunlikelythatnewentrants
willchallengethecurrentdominanceofthethreetradingrms.Forexample,oneofthe
worldslargestprocessorstriedtocharteracarriertosourceitsownsupplyofshfrom
vessels,butwereknowinglyorunknowinglyblockedbythethreetraders3.Nonetheless,
competitionforincreasedmarketsharebetweenthethreermswillremainand,moreworryinglyforthermsatleast,therehasbeenareportedincreaseinboatownersselling
directtoprocessorsinThailandandtheIndianOcean.
4 Price
Therearetwokeycharacteristicsassociatedwiththetradingrmsintermsofthepriceof
cannedgrade:attemptsatimprovedpricestabilisationandallegedpricemanipulation.
Thetradingcompaniestendtoestablishanegotiated price with processorsfora-to-.5
monthperiod,althoughthisisnormallywithinthecontextofalonger-termsupplycontract.
Whilea proportion ofthenegotiatedsupplywill alreadyhave been caughtat this stage
andwouldalreadyhavebeentranshippedontoareeferonitswaytothecustomer,the
trading rms still take on a signicant risk withthisset-up.Infact,theywilloccasionally
losemoneyinordertofulltheircontractualobligationseitherbecauseofashortageofsupplyorbecauseoftheimpactsofpricewarsbetweenthetraders.Butthiscanoftenbe
recuperatedthroughotherpartsoftheirbusiness(seeaboveonvesselnancingandsup-
port).However,becauseoftheir(necessary)highnancialbaseandthefactthattheyare
operatinginmultipleoceansandsub-regions(wherepriceandsupplyareoftensignicantly
differentiated),thetradingrmsaregenerallyabletoweathertheebbsandowsofcom-
mercialrisk.
Oneverycommonconcernamongprocessingrepresentativesandinternationalsheries
specialistswasthe possibility that because of intensied corporate concentration the
trading companies are able to manipulate the selling priceoffrozentunaforcanning.For
example,itisapparentlycommonknowledgethatThailandhasadailysupplyrequirement
of,800mt,andofcoursethetradingrmsknowthistoo.Therewereseveralclaimsby
processingrepresentatives(andothertypesofinterviewees)inJapan,PICs,ThailandandtheUSthatthetradingrmsutilisedtheirknowledgeoftunacatch,processingneedsand
Multipleinterviews,Japanese,USandThaiindustryrepresentatives,006.3 Interview,industryrepresentative,006.
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INTRODUCTION PACIFIC ISLAND COUNTRIESAND THE GLOBAL CANNED TUNA INDUSTRY 15
PACIFICISLANDSCOUNTRIES,THEGLOBALTUNAINDUSTRYANDTHEINTERNATIONALTRADEREGIMEAGUIDEBOOK
233
Only three companies
lead market share in the
WCPO tuna trade and
it is unlikely that new
rms will compete with
them in the foreseeable
future.
cannedtunasalesandnarroworwidensupplysoastoachieveabetterprice.Oneproces-
sornotedthateverytimeofbuyingisagame:whoevercanholdtheirbreathlongerisbet-
teroff,butpackershaveverysmalllungs.Thatis,processorshavealimitedabilitytowait
becausetheyneedtokeepproductionrunningtomeetoverheadcosts,maintainvolume
inproduction,etc.Accordingtoarepresentativeofadifferentprocessingrm:Itsgotten
toughersincethemarketconcentrationamongthebigthree,andtheyhavepushedthe
priceup
However,iflookedatfromadifferentperspective,thecaseforpricemanipulationmaywell
beoverstated.Forexample,themarketpriceforthenishedproducthasnotincreased
atthesamerateasharvestingcosts(especiallyforfuel)4,thusitcouldalsobethatthe
upwardpricetrendisareectionofrealcosts.Inaddition,asisclearfromFigure5.
above,thereissignicantfragmentation among the processing segment of the chain (even
thoughseveralplantsareownedorpartnancedbysimilarcompanies)butthereiscorpo-
rateconcentrationinthetradingsegment.Therefore,theapparentmanipulationofpricemightalsohavesomethingtodowiththefactthattherearefewsellersbutmultiplebuy-
ers,aneconomicrelationshipknownasoligopoly.Linkedtothis,anadditionalexplanatory
factorbehindtheriseinprice(andassociatedmarketpowerofthethreetradingrms)is
thedeclineinavailablesupplyontheworldmarketsincearound003.Perhapsthen,the
apparentincreaseindominanceofthetradershassimplycoincidedwithanaturaldecline
insupplyandthusautomaticallygiventhemmoreweight.
15.4 Implications for PICs of the Tuna Trading Companies
Beyondabetterappreciationoftheroleanddynamicsofthetradeintuna,therearesev-
eralkey issuesassociatedwith theserms thatare of importanceto PICgovernments
andrms.
Worker unloadingWCPO-caught skipjack intoa containervia a conveyerbelt system froma purse seinevessel.Yaizu Port,Japan.Photograph:LiamCampling
4 InfactthepriceforstandardcannedproductinoilorbrinehasdeclinedintheUSand(inaggregated)termsintheEU.SeeChapters8and9fordetails.
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INTRODUCTION PACIFIC ISLAND COUNTRIESAND THE GLOBAL CANNED TUNA INDUSTRY 15
Inpolicytermsthemostcentralaspectisthatthetunatradingrmsarereliablepartners
with indispensablemarketing links.While, of course, theirmotivations areprot-orien-
tated,theyalsohaveasignicantvestedinterestinmaintainingthesustainabilityofWCPO
stocks5:Withoutwhichtheirownbusinesswillrapidlydeterioratebecausetheydepend
uponvolumeforprotability.Inaddition,theyalsohaveaninterestinahighmarketprice
becausetheirbusinessisbaseduponapercentagecommissiononsales.Thisclearlyco-
incideswiththeinterestsofthosePICswithaccessagreementsthatarebasedupona
percentagerateofreturnonDWFNcatch6.
Asnoted,thesermshaveexcellentoutletsforwholeroundtunaaswellasloinsand(in-
creasingly)cansacrosstheglobe.Therefore,theyarepotent partners for joint ventures
and other commercial linkages.ThisisalreadydemonstrableinSoltaisrevivalinalliance
withTriMarine.Inotherwords,notonlydotradingcompaniesprovideaservicetotheir
customersintermsofensuringvolumeandcontinuityofsupply,theyarealsoproviding
aninvaluableservicetovesselowners,loiningplantsand(increasingly)canneriesbecause
theyndandsecuremarketssomethingthatisveryhardtodoaloneparticularlyifthe
loin/canningplantdoesnotalreadyown(oriscommerciallytiedto)anationalbrandin
aprincipalmarket.However,itmustalsobere-emphasisedthatthesermsareunder
substantialcompetitiveandcontractualpressurestoensuresupply,soapplicationsforon-
shoreinvestmentmustbeunderstoodintermsofthepotentialdownsidesofthenewwave
ofsecond-generationaccessarrangementsaswellastheupsides.(Formoreonthissee
Section.3.)
5 SeeforexampleRoberts004.6 Roberts005.