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Despite short-term issues, the longer-term outlook for the Norwegian salmon fishing industry looks bright. Key thematic drivers indicate that demand for quality salmon will continue to send prices higher, improving the forward earnings outlook for “pure play” companies.
Norway accounts for over 40% of global salmon production and is expected to maintain its dominant position for years to come. While the country has a long history in fisheries, the sector is now a primary driver of GDP, with salmon accounting for over 95% of total fish exports. With demand for Atlantic salmon growing but stocks of wild fish falling, the market share of Norwegian farmed salmon is set to increase in key markets. The aquaculture market is expected to grow at a CAGR of over 5% between 2018 and 2020. However, salmon farming remains a small industry within the global salmon market. Salmon populations have declined significantly in recent decades. While human activity is largely responsible, climate change could now exacerbate or even supersede these threats, particularly in the southern part of the fish’s natural range. The net effect is a rapid increase in salmon prices, adaptation, and innovations in aquafarming.
According to the Norwegian Seafood Council (NSC), the country’s salmon sector “broke records”, with sales increasing sharply by volume and value in the first six months of 2018. Overall, the NSC projects 4% volume growth in 2018. The lifting of restrictions in some Chinese markets, allowing them to purchase Norwegian salmon, has helped offset the decline in Europe due to higher prices. The EU market remains the biggest market for Norwegian salmon suppliers, with key national markets including the UK, France and Poland.
The country has exported 556,000 metric tons, worth NOK 32.6 billion ($4 billion), a 7% rise by volume and a 4% increase by value. For full-year 2017, the value of Norwegian salmon exports increased 3.6% to a record NOK 67.7 billion (€7 billion), allowing Norway to post record international seafood sales of NOK 94.5 billion (€9.8 billion) in the year. Measured in product weight, Norway exported 1 million tons of salmon, 2.8% or 27,000 tons more than in 2016. In 2017, Norway exported 169,000 tons of salmon to Asia, worth NOK 11.6 billion. This was an increase of 11% from 2016. Measured in product weight, exports to Asia have increased by 13%. The largest buyers of Norwegian salmon in Asia, measured in volume, were Japan, Vietnam and South Korea. The fastest-growing market in 2017 was the USA, with a full NOK 1 billion in growth (23%), for a total export value of NOK 5.7 billion.
The outlook for the global aquaculture and seafood industry looks bright, with key underlying trends supporting further growth. Four of the most critical megatrends support the growth of the Norwegian salmon industry:
-The growing global population increasingly demands high-protein, nutritious foods
-Climate change will disrupt traditional food production
-Rising household incomes will support higher-quality food
-Health-conscious consumers will drive demand for healthier food options
The growing global population increasingly demands nutritious, high-protein foods. Demographic trends will push the world’s population to a staggering 10 billion in 2050. This exponential growth will challenge natural resource constraints. The world’s oceans and aquaculture provide the logical solution to land and clean water limitations. In addition, impending arable land constraints due to urbanization will damage agriculture. Wild salmon, as well as offshore and zero-waste-water land-based fish farming, provide readily available options.
Climate change will undoubtedly constitute a challenge for global food production. In the world’s oceans, climate change is projected to change temperatures, salinity, pH and oxygen levels, affecting Atlantic salmon and the accompanying ecosystems. While salmon has adapted in the past, the pace of climate change this time might be too quick for evolution to keep up. Salmon’s complex life cycle leaves the fish vulnerable in various places. However, innovation in aquafarming will allow salmon production to adapt to shifting weather patterns that would destroy traditional food sources. Nevertheless, fragile ecosystems mean wild salmon stocks will suffer, likely driving prices higher still.
Urbanization will have a far-reaching impact on global trends in two areas. Firstly, for the first time in history, cities will house a majority of the world’s population. At the current pace of urbanization, the world will be two-thirds urban and one-third rural by 2050. This will lead to major changes in income levels and consumer behavior. Urbanization should result in an increase in the proportion of households where both spouses work, which should in turn lead to higher incomes. Given this urbanization, consumers will not be constrained by local availability, but will have access to international choices. With discretionary income and easy access to information, consumers often shift towards more expensive and healthier food options. A sharp change in behavior has already had a major impact on demand for healthy foods. Often referred to as a superfood, fresh salmon packs high levels of protein, Omega-3 fatty acids, antioxidants, zinc, copper, iron and selenium, as well as calcium, phosphorus, potassium and sodium – all critical ingredients in a healthy, balanced diet.
If the Norwegian salmon fishing industry can stay on this trend, its revenue outlook will increasingly improve.