War in Ukraine: Fishers on large beam trawlers and twin trawlers are suffering particular losses due to the high fuel prices
Fuel prices have been rising since 2021, but this trend has been accelerated by the war in Ukraine and the associated sanctions against Russia and Belarus. The fishing industry is highly dependent on fuel for its vessels, but the effects vary according to type. More than 80% of large beam and twin trawlers need significantly more revenue to compensate for these high fuel costs. For shrimp trawlers, fly shooters and euro trawlers, the additional necessary revenue is lower.
The Ministry of Agriculture, Nature and Food Safety has commissioned Wageningen University & Research to prepare a report on the consequences of increased fuel costs for the fishing industry in March 2022. The researchers used three scenarios to look into this. A basic variant in which the price of fuel as of March 2022 (0.90 EUR per litre) is taken as the starting point for the rest of the year. There is also the optimistic variant, which assumes lower fuel costs compared with March 2022 (0.70 EUR per litre), and the pessimistic scenario. This assumes an increase in fuel costs (1.10 EUR per litre).
Ships are already suffering losses
In general, the rise in fuel prices leads to significant production cost increases across the fishing industry. These increases come on top of 47% of fishers already making losses in 2021. According to WUR calculations, this share will be even higher in 2022. In an optimistic scenario, this would be 65% of all fishers. If the average fuel price in 2022 reaches the same level as March (the base level scenario), 72% of ships will suffer losses this year. In the pessimistic scenario, 74% of fisheries will be in the red.
Revenues may offset production costs
Irrespective of loss, if revenues increase, they may at least (partially) compensate for the effects of the increased fuel prices.
In the optimistic scenario, a 20% yield increase would be sufficient for two-thirds of the vessels. This group mainly consists of shrimp cutters, not large beam trawlers.
In the base scenario, a 20% yield increase would be sufficient to neutralise the effect of increased fuel prices for almost half of the vessels. Over 60% of shrimp cutters are in this group, but only 3% of large beam trawlers.
In the pessimistic scenario, about 20% (64 vessels) of the vessels would need a 50% price increase to compensate for the increased fuel costs. Of the large beam trawlers, 75% need more than 50% additional income to compensate for the increased fuel prices.
Vessels immobilised and higher prices
In March, a group of 20 to 25 ships, mainly large cutters, were immobilised due to high fuel prices. There were more vessels immobilised, but based on an understanding of the sector, an attempt was made to discover the reason for the immobilisation. Vessels would sometimes be immobilised for a week and then would go out to sea again. Other vessels were immobilised for the entire month. Interviews with sector representatives revealed that crew retention was the most important reason for heading seawards.
Ships were usually immobilised for a combination of reasons. High fuel prices certainly play a role, but reduced fishing opportunities also play a part in the decision not to head to sea. Immobility incurs substantial costs that cannot be recouped.
Prices of most major fish species were higher in March 2022 than in 2021; prices of brill, squid, Norway lobster, mullet, plaice, turbot and sole were all higher, ranging from +10% for squid to over +80% for sole and turbot. However, the landing volume for most species was lower. In order to determine the effects of all the developments on the sector’s economic results, further analysis of these data will have to be done on ship-level. It will also become clearer how costs and revenues will develop in the coming months. As such, it is currently impossible to estimate the impact on the sector’s net result or parts of it.