Commentary

See all articles

Opinion: There's no land-based bubble, just growing pains

The industry will face some bumps -- but ultimately has huge potential.

In Lola Navarro's recent article "Will the land-based bubble burst?" some important perspectives on the emerging recirculating aquaculture system (RAS) segment are discussed. The learning curve RAS is following is very similar to other industries, including the net pen industry many years back.

DnB analysts: Atlantic Sapphire's project has 40% chance of success

Read more

Finfish production is capital-intensive with a moderate to long time to market. This creates entry and execution barriers for new entrants in the net pen, offshore, and RAS industries.

The strongest players in net pens and RAS clearly have an advantage over most startups, as both involve value chains requiring extensive know-how and capital.

Access to technology is only a part of the puzzle. Standards are emerging across the seafood industry and in RAS -- these efforts need to be inclusive to move the industry as a whole forward.

Almost all emerging industries have casualties as they develop. RAS is no exception. Most RAS startup cases in the United States have not had a strong financial foundation, have lacked scale and do not have an established industry to recruit from. That increases risk and makes profitability difficult.

--

Want to follow along with IntraFish's land-based salmon farming coverage? Visit our dedicated page here.

--

Some regions, such as the Nordics, have competitive advantages that contribute to reducing risk for startups. The RAS players to watch are those who have made it through the early phase; number of these companies are now expanding.

Is RAS a bubble?

RAS is already in wide use and a vital part of the entire industry. Valuation of most pure-play RAS companies today is moderate, and most are privately held. We are not seeing the same widespread bubble as with Internet companies 20 years ago. The Internet is more present in our lives than ever. The market will eventually adjust potentially overpriced companies as it always has. Some bumps on the road should be expected.

Will the land-based aquaculture bubble burst?

Read more

While it is unlikely that capital cost will fall significantly for RAS farms, they are being vastly improved by leading players. Proper scale, proper location and experienced management are needed for most seafood production to be competitive. The same rules apply to RAS. No seafood production is risk-free for investors as we have seen across the industry, but the opportunity in the space is enormous. The most advanced RAS projects are well-positioned to deliver competitive production costs.

As in many other industries, the front runners pave the path for others to follow. The time to market for these projects is three to four years. The learning curve takes time.

Given such timelines, RAS companies need to plan long-term for scaling in their projects. As in many industries, incumbent players often sit on the fence given their vested interests and significant investments into their current business models. Growth in all segments is in the end needed to meet our future seafood supply challenges.

Erik Heim is the President of land-based salmon producer Nordic Aquafarms Inc. The Nordic Aquafarms group has operations in Norway under its Fredrikstad Seafood subsidiary, and is in the process of developing a land-based salmon site in Maine.

--

OUT NOW! Industry Report: The land-based salmon farming revolution

--

Latest news
Most read