The 4th NASF Salmon Summit opened with a comparison of the forecasts made by Lars Liabø, Kontali Analyse, last year at NASF with the actual figures of the industry. “Mr Kontali” is a permanent speaker at the NASF salmon seminar and has a reputation for accurate forecasts. The closing remark of the past year was that “salmon farmers should not complain about the future outlook with the forecast of the slaughtered volume of 2,025,000 (in tonnes WFE) in 2013”.
2013 was one of the best years for Norwegian salmon industry
The year after, the actual figures for 2013 were 2,041,000 tonnes, 1% higher than predicted. Together, Norway and Chile are responsible for 80% of the global market share of Atlantic salmon, where Norway had 56% and Chile 23% in 2013. The year 2013 was one of the best ever for the Norwegian salmon industry with prices of up to 37.5 NOK from 25 NOK in 2012. In terms of markets, Brazil is at present the fastest growing market, followed by China. Norway has a lot of excellent sites in contrast with Chile, the UK, Canada and the Faroe Islands. As for the forecast for 2014, the drop in oil and fish meal prices in 2013 suggests that there should be no increase in feed cost at the moment. Norway released 10 million more smolts in the sea in 2013, therefore, the estimated harvest quantity for 2014 range from 2,050,000 to 2,200,000 tonnes slaughtered volume with the average 2,144,000 tonnes (+5% compared to 2013). In addition, warmer temperature in the sea enables faster salmon growths impacting the harvest this year. “The future is bright, especially in Norway, but surprises can always happen”, was the concluding remark from Kontali Analyse.
Lack of global supply growth
Representing Lerøy Seafood Group, the world’s second largest producer of salmon and trout, Mr Henning Beltestad spoke about market outlook for Atlantic salmon. According to the company’s estimates, the total supply of Atlantic salmon in 2014 is expected to reach 2,143,000 tonnes, 5.1% higher than 2013. Norway is forecast to increase its production by 6.6% to 1,219,000 tonnes, and positive developments are expected in the UK, the Faroe Islands, Ireland and Iceland giving a total estimates for European production of 1,473,000 tonnes. In the Americas, salmon production is forecast to reach 669,000 tonnes, up by 2.7% compared to 2013. Of this volume, Chile is anticipated to contribute 481,300 tonnes (+2.8%), Canada 117,200 (+1.8%), Australia 39,500 (5.3%), USA 19,500 (-3.9%) and other countries 12,100 (+9%). In 2015, global salmon production is expected to be 2,165,500 tonnes, of which Norwegian production will be 1,227,000 tonnes. In terms of market development, in 2013 salmon consumption was flat with downward trends in Europe (-1%), Japan (-6%) and Russia (-8%), and upward trends in the USA (+7%) and other markets (+10%). In the category of “other markets”, the highest growth was observed in China, Hong Kong and Vietnam (+20%), Brazil (+20%), Australia (+8%), Chile (+25%), Argentina (+28%) and other countries. Mr Beltestad encouraged the audience to estimate the potential scope of salmon consumption if the countries with the world’s largest population were involved. “Salmon is a global product with consumption developing in all countries in the world. Every day we serve 3 million meals all year around. What happens if India with its 1.2 billion people by 2030 starts to buy salmon?” he asked.
Investment in sustainability is another important mile-stone of the Group’s development. The company’s Aurora division will be completely ASC (Aquaculture Stewardship Council) certified by the end of 2014, a move that already has created interest among customers.
Slow recovery of Chilean production
The situation in Chilean salmon production was analysed by Mr Jose Ramon Gutierrez, Executive Director of Multiexport Foods, which is among the 3 largest salmon producers in Chile and the 10 largest in the world. Since the late 80s and 90s when the base for the salmon industry was established in Chile the country has been one of the most globally competitive producers. At the end of 2007 the industry suffered an unexpected sanitary crisis due to sea lice (ISA virus), which went out of control and spread throughout the industry. The ISA virus killed 70% of the Atlantic salmon biomass in 18 months, companies suffered heavy losses and the crisis cut 40% of the industry jobs. The industry and government started to design a new regulations for the sector, applying a new Chilean Production Model (“Salmon Chileno 2.0”) based on a neighborhood system including hundreds of new rules. In 2010-2011 the industry witnessed the best couple of years in its history thanks to the best production performance (average 4,5 kg/smolt) combined with high market prices. The good economic results boosted the industry and capital markets invested heavily in listed and not listed companies, and the industry began to grow rapidly again. Yet the new production level experienced its old structural problems, and during 2012-2013 the margins became negative again as production rose by 70%, while the market price fell by 45%. To overcome the reasons and consequences of the new crisis, the Chilean industry has been working hard with government to: remove overregulation, modify current neighborhood system, and define neighborhood capacity. As a consequence of the improvements, the Chilean industry is presently showing signs of recovery even though it is too early to predict to which degree. “Chile is expected to recover its level of competitiveness by 2015-2016, if the industry continues with its current production performance”, said Mr. Gutierrez.
Challenging year for importing and processing companies
Ms Monika Siecinska-Jaworowska from Suempol Group, one of the largest producers of smoked salmon in the world and second largest exporter of salmon products from Poland, reminded the audience about the other side of the skyrocketing prices of Atlantic salmon which had sharply effected the Polish processing industry. Last year witnessed a market breakdown due to the sharply increased value of Norwegian salmon. The retail sector has not followed the price of raw material, and the processing companies stand in the middle of the chain”, said Mrs. Siecinska-Jaworowska. “If the situation continues, it will be difficult for the EU processing companies to survive, so we have to collaborate and think long-term”, she added.
The latest developments on the salmon market in Russia was discussed by Mr Børge Prytz Larsen, Director of Severnaya Company. “The combination of increasing prices of salmon and at the same time the ruble depreciation by more than 10% against the euro and dollar has made Russian importers very cautious”, he said. “Those factors have pushed prices of NOK 50/kg for Norwegian salmon to the equivalent of NOK 60/kg for the Russian buyers”. The political situation with the Ukrainian crisis has made the situation worse, and several salmon importers stopped buying salmon from Norway due to liquidity problems. “Those players who have enough resources to accept the present losses are able to increase their market share, as imports are being concentrated among just a few buyers”, he explained. During 2013, Russian imports of Norwegian salmon significantly decreased, but that volume was partly substituted by salmon imports from other countries, and in particular from Chile. The explanation for the dramatic increase of imports from Chile was that Russia stopped to freeze salmon and trout itself, but started to import it from Chile due to the lower prices, and consequently those produces were seen to occupy a lower segment. However, regardless of the prices, the volume of salmon imported to Russia in 2013 was pretty much the same as in 2012. In 2014, the market is experiencing a fresh drop in imports from Norway – salmon and trout imports fell by 20% and 32% respectively compared to 2013. The situation is also characterised by the fact that there is quite a big stock of frozen fish on the market and importers are selling frozen fish with losses.
How will the Russian market develop?
Mr Larsen suggested two scenarios for the Russian market, “bullish” and “bearish”. The best-case scenario will see salmon prices decline to NOK 32-35, the ruble appreciate 5-10%, continued retail growth and support from credit insurers, so the volume will be approximately the same as last year. In the negative-case scenario, prices could remain in the high NOK 40s while the ruble continue weakening, the market could experience imports down by 30-40% on 2013. Summarising, Mr. Larsen opined that imports would decrease short-term due to the ruble depreciation, but from summer the volumes to Russia will start to rise again. Salmon prices would come down to around mid NOK 30/kg, which the Russian market would follow rapidly, while the import segment would be more concentrated.
In the upcoming year, strong demand for salmon and at the same time production capacity constraints will lead to limited global supply growth. In terms of distribution, growth is anticipated in new markets, driven by distribution and middle class development. It is expected that 2/3 of the volume increase will come from outside the EU and the US. The main growth is anticipated in the category of new products, and especially fresh pre-packed salmon products sold at unmanned counter. While supply growth is predicted as stable, demand will stay high, and higher margins are expected.
|Polish industry delegation visits NASF 2014|
A special part of the NASF 2014 programme included an official visit by a large Polish delegation, organized by Mr. Tomasz Kulikowski, editor of Fish Industry Magazine, and Innovation Norway, Warsaw. The companies include Morpol, Graal Capital Group, Suempol, Lisner, King Oscar, Contimax, TLB, Morex, Limito, Aja Fresh Fish&Seafood, and Stawiany.
The participation of the Polish delegation was to show the potential and importance of Polish fish processing, which is currently the largest importer of salmon from Norway in the EU. In 2013, Poland imported 125,000 tonnes of salmon, while the overall export of various fish products from the country in the same year was 400,000 tonnes. The total value of the Polish fish and seafood export reached EUR 1.5 billion, and the 13 companies at NASF 2014 were responsible for a combined EUR 1.2 billion turnover. The Polish delegation was marketed directly to NASF delegates as “the leading processing industry in Europe” as well as “cost efficient”, “flexible” and “state-of-the-art processing”.
Before the start of the conference, a special program for the Polish delegation was organized by Innovation Norway. It included a visit to a salmon farm with a boat trip and interviews with salmon farmer, as well as Polish-Norwegian Seafood Summit at the Seafood Center in Bergen. The main topic of the meeting was "How can committed cooperation create added value and increased income for both Norwegian exporters and the Polish fish industry?" The most important areas for co-operation are joint work on raw material quality as well as support for long-term seafood consumption promotion in Poland, especially for pelagic species.
There were two speakers from Poland on the NASF programme, Mr Piotr Janiec (Lisner) who presented an outlook for European markets at the 7th Pelagic Industry Summit and Ms Monika Siecińska-Jaworowska (Suempol) who presented the market outlook for current salmon demand in continental Europe. Companies generally consider the trip as successful, with a large number of meetings- not only with companies from Europe, but also among Polish companies which normally competing with each other.