Duty-free Canadian lobsters ready for the European market

Canadian lobsters

The lobster species, Homarus americanus, is found along the east coast of North America, from North Carolina in the U.S. to the Labrador region in Canada.

Fisheries and Oceans Canada manages 45 lobster fishing areas, in which 10,000 licensed Canadian harvesters participate. The Atlantic lobster harvest is unique, as it is not based on quotas. Instead, it is controlled through minimum sizes (depending on district), limits on the amount caught and type of fishing gear used, closed seasons and protection of spawning female (protected since early 1870s).

Exports

The United States is Canada´s largest export market for lobster (75 percent / $1,278 M) followed by China (16 percent / $285 M) and the European countries (9 percent / $149 M).

It is predicted that live lobster exports into the EU will increase in the coming season due to the CETA agreement, which has removed the previous 8 percent tariff on live lobster. Until 2020 the tariff of 6 percent for whole frozen lobster and 16 percent tariff for frozen lobster (not whole) will gradually be phased out, opening the European market for these products.

Will CETA have an impact on lobster prices?

Some believe that the Canadian lobster industry will increase its competiveness in the EU because of the CETA agreement, and that prices for lobsters in the EU will decrease.

Category manager for the lobster business in Royal Greenland, Thomas Vorre, does not expect dramatic changes in the European price :

“It is not my impression that CETA will have a significant impact on lobster prices in the EU in general, but the price for live Canadian lobster in Europe is expected to be slightly reduced because of the duty-exemption. Further it is expected that the demand for live Canadian lobster will increase compared to local European lobster or to raw whole frozen lobster from Canada, as the frozen lobster is not yet exempted from duty. When the duty for raw whole lobster is phased out within another two seasons, the Canadian lobster industry will be more competitive in the European market, which is dominated by lobsters from the American state of Maine, due to the professional logistics setup provided by the American players.”

Thomas Vorre further explains that the volume expectation for the European market is rather limited compared to other lobster markets:

“Global supply and demand for lobster determine the price, and in a global context, the lobster consumption in the EU only represents an insignificant part of the total Canadian lobster supply. The most important markets are the USA and the Far East, hence the question is whether an overall price decrease of 6-8% will create a higher demand for lobster in EU and if it will have an influence on price development?”  

Improving EU logistics

Traditionally most lobsters from Canada have been trucked to the New England states in USA to be packaged and shipped to Europe due to limited cargo capacity out of Canada.
In recent months, Canadian seafood is starting to go directly from Canada as far as free air cargo capacity is available. The prediction is that truck traffic taking seafood to Montreal and Toronto to fill excess cargo capacity will increase since cargo capacity in Halifax Airport in Nova Scotia is already filled in the flights heading to Europe.

Royal Greenland to supply live and frozen, cooked lobsters

CETA has opened new business opportunities for the lobster business at Royal Greenland carried out by Quin Sea Fisheries Ltd in New Foundland. A shift from the narrow range of raw frozen lobster to live and frozen, whole, cooked lobster is planned. The new range will not only open doors in Europe, but also in Canadas´s largest lobster export market, the USA, since they require live or cooked, frozen lobster.

Thomas Vorre says: “Until now Royal Greenland has focused on frozen, raw whole lobster, with only a small amount of live lobsters delivered to the USA for the time around Mother’s Day. We have been caught in the middle since Canada’s biggest market, the USA, require live or cooked, frozen lobster. This is a key reason for Royal Greenland looking into options of selling live lobsters. In 2018 trial air freight orders for live lobsters are planned to customers in the USA, China, and Europe in order to evaluate the planned live lobster setup. A production for cooking lobster is further planned for 2018, and evaluations will be carried out on an ongoing basis in order to decide if further production should be planned for 2019.”

The new lobster range is targeted at the professional segment, which previously has not been reachable due to a limited product range consisting of frozen, raw lobster.

Thomas Vorre tells: “Although CETA could be considered as a leverage to boost Canadian lobster sales in Europe, Royal Greenland’s target market for the product range of cooked and live lobsters is the USA, and secondly China.”