Scenarios & Drivers for high and low prices in 2019/2020 Hotel Bloom Brussels, SEG – May 6 th 2019 by / Ragnar Nystøyl – Kontali Analyse
Q1 – 2019 vs. Q1 – 2018 What has been different ?
Market Supply – Apparent Consumption - Atlantic Salmon Q1-2018: + 10 % EU: + 5 % USA: + 7 % RUSSIA: + 42 % JAPAN: - 8 % CHINA/HK: + 34 % BRASIL: + 22 % OTHERS: + 14 % Q1-2019: + 4 % EU: + 5 % USA: + 5 % RUSSIA: - 15 % JAPAN: + 6 % CHINA/HK: + 18 % BRASIL: + 2 % OTHERS: + 4 % Systemizing the world of aquaculture and fisheries
Harvest Volumes – By region Atlantic Salmon Q1-2018: + 10 % EUROPE: + 3 % AMERICAS: + 23 % Q1-2019: + 5 % EUROPE: + 6 % AMERICAS: + 3 % Systemizing the world of aquaculture and fisheries
Salmon Growth – (Feed sales development …) Atlantic Salmon Q1-2018: - 1 % EUROPE: - 7 % AMERICAS: + 5 % Q1-2019: + 12 % EUROPE: + 11 % AMERICAS: + 12 % Systemizing the world of aquaculture and fisheries
Q1 2019 – Salmonid feed sales growth – By region Relative & Absolute change Systemizing the world of aquaculture and fisheries
RESULTS: Global Biomass Status + 8 % Y-o-Y + Availability of harvest-ready biomass sees even greater increase + Approx. 15 % Y-o-Y
Est. Development in Harvest-ready* biomass – Globally** Atlantic Salmon *Harvest Ready; Calculated share above 4 kilo WFE Systemizing the world of aquaculture and fisheries **Global; NO, CL, UK, Nam, FO, IE/IC
Change Year-over-Year; Harvest Ready Biomass Currently – Both a European & American phenomena Systemizing the world of aquaculture and fisheries
Q1 – 2019; Shift in market position continues Estimated global share of large sized salmon harvested Systemizing the world of aquaculture and fisheries
How does this status convert into; Harvest Estimates & Harvest Profile
Outlook 2019 – Atlantic Salmon Estimated Harvest Need & Market Split ( In tonnes WFE) Harvest Volume 2019E 2017 2018 Chg. Std. Scen Chg. Range Norway 1208 1253 4 % 1321 5 % 1300 - 1340 Chile 564 677 20 % 711 5 % 700 - 750 Scotland 177 154 -13 % 179 17 % 170 - 185 North America 161 165 3 % 164 -1 % 160 - 170 Faroe Islands 80 72 -11 % 80 12 % 75 - 85 Others 104 98 -5 % 124 26 % 115 - 130 Totalt 2294 2420 5 % 2579 7 % 2500 - 2650 Market Supply 2019E 2017 2018 Chg. Std. Scen Chg. Range EU 1023 1063 4 % 1125 6 % 1100 - 1170 USA 442 475 8 % 514 8 % 510 - 550 Russland 78 97 24 % 105 9 % 100 - 110 Japan 64 60 -6 % 64 6 % 60 - 70 Brasil 89 100 12 % 105 5 % 100 - 110 Kina/HK 100 113 14 % 125 10 % 120 - 135 Andre 471 503 7 % 551 10 % 540 - 570 Totalt 2266 2410 6 % 2589 7 % 2500 - 2670 Systemizing the world of aquaculture and fisheries
Harvest Estimates – EUROPE; Atlantic Salmon Systemizing the world of aquaculture and fisheries
Harvest Estimates – AMERICAS; Atlantic Salmon Systemizing the world of aquaculture and fisheries
Price development - YTD
Increasing price trend during Q1 – Both EU and US But not into the same degree as last year…… Systemizing the world of aquaculture and fisheries
Fresh Atlantic Salmon Export price development -> Q1-19 For Q1-19; Increase – All regions except Faroe Islands *Jan-Feb19 for: Faroe Islands, Scotland Systemizing the world of aquaculture and fisheries
Scenarios for High or Low Spot prices – EUROPE, Atlantic Salmon Q2-2019
Average Spot-price Q2-2019 Scenario A: HIGH PRICE (NOK 66 – 70 / «As Q2-2018» kilo) Scenario B: LOW PRICE « Back to pre-2016 level» (NOK 56 – 60 / kilo) Scenario C: MID LEVEL «Below 16/17 – but close» (NOK 61 – 65 / kilo) Systemizing the world of aquaculture and fisheries
Drivers for price-scenarios in Q-2 Scenario A - HIGH PRICE: - Strong and Quick increase in Asian demand for European Large Salmon - NOK/EUR rate at 9,80 - Following strong April-harvest, farmers hold back harvests in May/June Scenario B - LOW PRICE Sea-lice levels Norway – > Strong anticipation of harvest of 18G - May/June Lots of harvest of small fish in Europe – with only EU as off-take - market …. Trade conflict level US / China – Affecting Asian demand rapidly - Scenario C - MID LEVEL - Surplus - Harvest-ready biomass being «portioned out between Q2/Q3» Systemizing the world of aquaculture and fisheries Better availability of larger salmon – reduced price premium -> - spurring demand in overseas/Asian markets
Scenarios for High or Low Spot prices* – EUROPE, Atlantic Salmon Second Half 2019 *Nasdaq Exporters Sales Price FCA Oslo – Weighted avg.
Average Spot-price – Second Half 2019 Scenario A: HIGH PRICE «Back to 2016» (NOK 59 / kilo or higher) Scenario B: LOW PRICE (NOK 52 / kilo or lower) «Not seen since 2015» Scenario C: MID LEVEL «Like last year?» (NOK 53 - 59 / kilo) Systemizing the world of aquaculture and fisheries
Drivers for price-scenarios in Second Half 2019 Scenario A - HIGH PRICE: - «Lousy Lice-Scenario» in Norway. Sealice just as problematic as last year, lost feeding days, poor growth on S0 18; No improvement in harvest weights - Algae in Scotland and Faroe -> Mortalities and poor growth over summer - Lots of harvesting of smaller sized fish early summer - (Q2-B Scenario), entering September with European biomass surpluss of less than 4-5 % Scenario B - LOW PRICE - Norway finally achieving regular, good feeding, and increased harvest- weights - Chilean caligus «crisis» - Need to place forced harvest/surplus to US/Asia at «bargain prices» Brexit – Hard and Complex – A total mess……… - Scenario C - MID LEVEL - Harvest profile as in standard scenario. Systemizing the world of aquaculture and fisheries - Despite stronger supply increase than since long, demand keeps strong –
Scenarios 2020 Case Chile vs. Case Norway What If….
Chile; 2015 -> today Following a change in the regulatory regime, which had – among others, the - following effects: Limit the possibility of unsustainably, strong growth - Volume growth has been stronger than «most» anticipated ; Drivers; - Dramatically improved productivity (Losses down, harvest weight up, growth time up, FCR down) - Rapid shift over to High-Energy feeds diets - In forefront with respect to implementing new vaccines / new treatments against the industry’s two major fish-health challenges: SRS & Caligus STILL, Majority’s perception going forward (including ours); HOW LONG WILL IT BE BEFORE THE POSITIVE PRODUCTIVITY TREND SHIFTS, INTO A «NEGATIVE DIRECTION», NOT TO BUT TOWARDS «OLD NORMAL» Systemizing the world of aquaculture and fisheries
Norway; 2012 - today - Following increasing sea-lice challenges, including also need to comply with stricter and stricter regulatory regime on sea-lice, despite initiatives to increase capacity. Volume growth has been only marginal – Capacity utilization down - Drivers; - Notably declining productivity (Avg. loss-weight up, harvest weight down, FCR up, growth time down) Sea-lice treatments, with notable side-effects (Mortalities – Loss of feeding days..) - - Lack of alternative tools in sealice mitigation, some current methods under pressure Pancreas Disease – Following years of causing high costs & low productivity – - Not solved STILL, Majority’s perception going forward (including ours); Systemizing the world of aquaculture and fisheries WITH SUCH FOCUS & SPENDING ON SEA-LICE COMBATTING, HOW SOON WILL NORWAY BE «BACK TO NORMAL» ON HARVEST WEIGHTS &
ILLUSTRATION HARVEST WEIGHTS – NORWAY VS. CHILE Systemizing the world of aquaculture and fisheries
ILLUSTRATION LOSS-RATE – NORWAY VS. CHILE Systemizing the world of aquaculture and fisheries
WHAT IF ??? PERCEPTIONS SHOULD BE FULLY THE OPPOSITE, AND THE REALITY IS: «CHILE HAS REALLY CRACKED THE CODE» «NORWEGIAN PRODUCTIVITY; - STUCK IN THE MUD»
New assumptions – Loss Rate Kontali Standard Scenario WHAT IF ? - Assumptions Systemizing the world of aquaculture and fisheries
New assumptions – Harvest Weights Kontali Standard Scenario WHAT IF ? - Assumptions Systemizing the world of aquaculture and fisheries
OUTPUTS 2020/2021 - FROM A SCENARIO; ……. A SCENARIO THAT IS STILL A BIT HARD TO IMAGINE - On continued productivity improvement, the Chilean industry still finds ways to increase Atlantic smolt release by + 5 % a year - The Norwegian «Traffic light based» capacity increase; due to many red zones, is on average reduced by 1 % per year Chile has by 2021, not fully caught up with Norwegian harvest volumes – but is - nearly there. Other European producing regions are suffering a similar situation as Norway. Price level in Europe continues to be high, but producers margins are declining … - - Asian salmon markets are increasingly more dominated by Chilean exports, while European market players have started importing frozen whole Chilean salmon, to secure raw material base and desired-size bands. Systemizing the world of aquaculture and fisheries
CONCLUSION…… Immediate - Short – Medium Term WHAT ARE THE MOST LIKELY SCENARIOS? A-B-C B-B-C C-B-A B-C-B C-C-C ????
Agenda
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