Spot price slump predicted

The Nordea markets analyst predicts that they will dip to NOK 36-38 per kg due to a high volumes of salmon being harvested, combined with a weaker demand from Russia, Ukraine and Belarus.

In a statement released today he reflects: “Yesterday, we were out with a sector update where we took down our salmon price estimate for this year and 2016 to NOK 43 per kg. Furthermore, with the temporary 6% higher MTB to end in march we see a risk for late Q1 harvesting pressure.”

The two main reasons he cites are a weaker than expected development in salmon prices in January, despite the weak NOK, and demand from Russia being dried up in the wake of the collapse of the rouble in December. Moreover, he states, the increase in Norwegian production caused by another mild winter will further exacerbate the problem.

He continues: “After the Russian sanctions in August 2014, the Norwegian government granted a temporary increased MTB of 6%, due 31st March 2015. The theoretical increase in biomass is 45,000 tonnes. During the fall, there were substantial challenges related to sea lice and amoebas, hence only limited biomass build-up. Colder water has reduced these challenges and left room for using this extra biomass window, instead of placing the fish in the market. Looking forward; we estimate 35-40,000 tonnes extra fish in the sea when we come to early March (difference in biomass per 31.12 was 30,000 tonnes). In order to comply with the lowered (= normal) biomass limit there is a risk of excessive harvesting towards Easter.

He also warns that “Q1 might end up as a huge disappointment in terms of prices”.

“The weak Rouble is strangling mid- and low end demand in Russia, this extra harvesting needs to be placed in other markets. The mild winter with firm feed sales and on-growing could make the accumulation of biomass particularly challenging,” he explains.

“Forward prices for 2015 are now down NOK 2.4 in 5 weeks,” he adds.