High H&G prices likely to be unsustainable in the long run

High H&G prices likely to be unsustainable in the long run

SDC Market Watch – May 29, 2018

Recently, large FAS producers have been enjoying higher H&G prices, especially for Atlantic cod. This has been due to lower supplies in the market compared to last year. The question of interest is whether the current prices are sustainable in the long run. If we look at the monthly export prices for frozen H&G from Norway to China we can see since September 2017 the average monthly FOB export prices have increased from USD 3350/MT to around USD 3700/MT or by more than 10%.

 

In 2018 the SDC Atlantic cod H&G Index prices indicate weeky fluctuaton in the range from USD 3620/MT to USD 4140/MT.

The United Kingdom is an important market for both single frozen fillets and double frozen fillets processed from H&G raw material and the retail prices for frozen Atlantic cod fillets in Tesco in the UK have been in the US 12/kg range for the last several months.

As the retail prices in the UK have been largely unchanged it appears to be difficult for the sellers of products roll out prices increases of raw materials to the market. Based on this it appears to be unlikely that the large increases of raw materials are sustainable in the long run especially when considering that the yield ratio for H&G into fillet cannot be improved anywhere close to what would be needed for match the price increases. Therefore we would expect that the H&G prices are close to max given the current market conditions.

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