Salmon market surprisingly robust says DNB

DESPITE the volatility of salmon prices, the robustness of the market has surprised analysts, DNB’s Alexander Aukner told an audience of producers and traders at the DNB/Fish Pool seminar on the eve of the Seafood Expo.
Aukner, an equity analyst at the Norwegian bank, said the ‘super cycle’ is set to continue, prices are at a record high for the time of year, and the market has to re-evaluate what a high salmon price is.
‘Muted’ supply growth of between five and seven per cent was predicted for the year ahead, with the industry expecting volumes of 2.4 million tonnes in 2018.
‘We’re struggling to see where the supplies will come from,’ he said – Norway and Chile, mainly, while ‘fantastic’ new players, such as Iceland, would take time to develop.
Looking at factors that could change global supply, he listed the regulatory/political risks in Norway and Chile if there were changes to the current framework.
Another risk, if not to the supply or price, but to the share price, would be increased taxation on salmon farmers.
And new technologies could also affect supply , if they work. Land based farming is the biggest and most credible ‘threat’ when it comes to supply from new technologies (or regions), he suggested, mentioning Atlantic Sapphire, which is investing millions in closed containment salmon farming in Miami.
But it will be some time before there is any evidence that this worked. Several projects are ongoing, but most are still on the drawing board and it would be well into 2022–2025 before meaningful output hits the market.
Turning to where demand might come from, he forecast one million tonnes of new demand over the next 10 years, principally from China (with a possible 420 million middle class consumers) and the US, if these markets matched current EU per capita consumption levels.
There is much potential in new markets, with new regions accounting for 29 per cent of consumption in 2017, compared to 17 per cent in 2002.
He observed that retail initiatives drive new growth in seafood, and in the UK, for instance, the trend was for more ready made meals.
Juan Ignacio Montfort, of the Spanish seafood company Copesca & Sefrisa, said in Spain where fish consumption is high and there are 20 to 30 species in fishmongers, salmon is popular with people who don’t want to ‘do the work’ preparing fish.
It is a great product for millennials but, he said ‘take care with the price because they may not want to work but they are not stupid!’
Salmon ‘disappears’ when prices go up and once the market is destroyed by high prices it takes three to four months to build it up again in Spain.
People will substitute smoked salmon with something different, like cheese, but with fresh salmon the substitute is other species of fish.
Montfort said to win market share for his brand he didn’t rely on marketing but on quality – by consistently delivering a very good product year after year.
Asked what country’s salmon was the best, he said salmon is like wine, and you can find good and bad wines in all areas.
‘It’s the same with salmon, but it is either good or very good – there is no bad salmon in Norway,’ he told his mostly Norwegian audience.
Dag Sletmo (pictured) of DNB said salmon’s success story is not only about production but about markets, and new export countries were a driver for growth.
Mature markets can be revitalised by new products and channels, but it was China’s new channel – Alibaba – that had the ‘wow factor’.
This online superstore, bigger than Amazon and eBay combined, is still in its early days but concepts like this will drive market growth, make people rethink their market strategies and help level the playing field by lowering barriers to entry.
Outlets such as Alibaba and Amazon provide simpler and cheaper ways for smaller producers to distribute fish, said Sletmo. ‘innovative retailers will be the winners.’