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UnderCurrent News: Majestic cannery in PNG halts operations amid high tuna prices, cash flow issues


Port of Rabaul, Papua New Guinea
Port of Rabaul, Papua New Guinea

Majestic Seafood plans to temporarily shut down its tuna cannery and loin plant in Papua New Guinea (PNG) at the end of June, having incurred significant financial challenges this year, sources with its parent company told Undercurrent News.


Filipino firm Frabelle Fishing Corporation, one of the largest seafood companies in the Philippines and Asia Pacific, is one of the major partners behind the Majestic venture.


The company's troubles primarily stem from two major issues: a shortage of fish supply, particularly skipjack, and the soaring price of fish, which does not align with the prices the company can get for its canned tuna from buyers. As a result, the more it processes at these inflated raw material prices, the greater its losses, according to Francisco Tiu Laurel Jr., Frabelle's president.


"Majestic has been losing money for the last three to four years due to this problem of inconsistent fish supply. Frabelle tried its best to support Majestic, but even Frabelle -- due to a change of policy reduced its fleet in PNG from 20 to 14 purse seiners, plus we have our own plant to support," Tiu told Undercurrent. He added that Frabelle's plant was doing "ok," but the lack of fish to process, particularly during this period of poor catch, impacted operations at the Majestic plant.


Skipjack tuna prices have remained at a five-year-record high of $2,000 per metric ton or higher in recent months, while catches in the Western Pacific Ocean have somewhat declined since last November.


Furthermore, Majestic is grappling with another issue in PNG relating to a goods and services tax (GST) refund. As an exporter, the company is entitled to receive a refund on the GST paid. However, the PNG government has failed to provide the necessary reimbursement, leading to a substantial outstanding debt. The PNG government owes Majestic approximately $5 million in refunds, which continue accumulating while the company operates, Tiu told Undercurrent.


In light of these mounting challenges, Majestic has made the "difficult decision" to temporarily shut down its operations in PNG by the end of June, Tiu said.


The temporary shutdown of Majestic is expected to impact the local economy, including job losses -- as it employs 1,300 people, according to Frabelle -- and potential ramifications for the broader seafood industry. It remains to be seen whether alternative solutions or government intervention can offer any relief to the company in these challenging times.


The Frabelle executive expressed concerns over the situation, emphasizing the urgent

need for resolution regarding the fish supply and the outstanding GST refund. He believes immediate action is required from relevant authorities to address these issues and provide the necessary support to ensure the company's viability.


"Changes now are really needed to save the industry and hopefully reopen the factories," he said.


Tiu also said that it would be cleared towards the end of the year if Majestic's plant in PNG could reopen. He also noted that there were discussions on the way with other possible partners who might want to join Majestic next year if the current system of vessel day scheme (VDS) rates was maintained.


Meanwhile, PNG's national fisheries authority (NFA) has addressed concerns over tuna supply issues facing processors in Lae, the country's second-largest city, reported The National.


The NFA stated that the problem is not due to a lack of fish stocks but rather from supply chain issues between the fishing vessels and the processing plants. It had previously stated the same when it emerged that Filipino tuna giant RD Corporation's fleet had stopped operations and that RD's tuna cannery in PNG lacked US dollars to buy tuna.


Responding to recent media reports about the scaling back of operations at large-scale tuna processing plants like Majestic Seafood, the NFA emphasized that the tuna stock status in PNG's exclusive economic zone fishing grounds is healthy.


Moreover, NFA's managing director Justin Ilakini stated the authority is implementing various reformative actions and policy changes to support tuna processing partners and protect employment and socioeconomic benefits.


These include the requirement for supply contract visibility as a licensing condition, VDS and the rebate scheme.


The VDS daily rate for PNG-based fishing vessels has been reduced to $6,500 and $7,500 for international vessels based in PNG, aiming to maintain competition and incentivize fishing vessels to return to PNG waters.


The rebate scheme, designed to ensure the onshore processing of tuna caught in PNG waters, has reduced the rebate rate from $400/t to $308/t for tuna processed onshore. Since 2018, the NFA has paid PGK1.94 billion ($542.4m) in rebates to associated fishing companies.


The country currently contributes 17% of the entire tuna catch within the Western and Central Pacific Fisheries Commission waters, equivalent to approximately 453,057t of tuna.


Source: Undercurrent News

Author: Matilde Mereghetti


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