The majority of financial analysts covering the salmon industry still expect strong salmon prices in the years ahead, even though the level in the first quarter of 2015 was lower than projected. The robust market is expected to last, primarily driven by only a slim rise in salmon supply.
Pareto Securities wrote in an analysis in April the proposed growth regime in Norway indicates capacity will increase by a maximum of 3 percent per annum the next three years.
“This will result in a low level of growth in supply, high prices, a less cyclical industry, lower operational and financial risk and lower operational costs," the analysts wrote.
In January, Nordea Markets estimated an average price of NOK 43 (€4.60/$5.20) per kg for both 2015 and 2016. They adjusted the estimate down later several times due to developments in the market proving weaker than previously anticipated.
On June 16, the brokerage’s estimate was for NOK 38 (€4.10/$4.60) in 2015 and NOK 40 (€4.30/$4.80) in 2016.
Handelsbanken Capital Markets adjusted its estimate down in April. At that time the brokerage projected an average price of NOK 40.10 (€4.30/$4.80) per kg in 2015 and NOK 43.50 (€4.60/$5.20) per kg in 2016.
In January 2015, SpareBank 1 Markets wrote in an update that the groundwork had been laid for continuing robust salmon prices for many years to come.
“Low, single-figured growth in the next few years supporting higher prices,” the brokerage wrote, and referred to regulatory restrictions in Norway and biological and financial challenges in Chile as playing a role.
Currently, contract prices traded on the salmon stock exchange Fish Pool are averaging at NOK 43 (€4.60/$5.20) to NOK 38 (€4.10/$4.60) per kg for 2016 and NOK 39 (€4.20/$4.70) to NOK 38 (€4.10/$4.60) for 2017.
Even though brokers and futures contracts diverge slightly from each other, they lie more or less around NOK 40 (€4.30/$4.80) per kg, which, from a historic perspective, is a high salmon price.
With production costs projected at around NOK 30 (€3.20/$3.60) per kg in Norway, this would indicate the solid earning power of this sector will be maintained -- at least in the short term.
