Nor­we­gian fish farm­ers set sail to raise par­a­site-free sal­mon

▶ To bat­tle dis­ease, sal­mon grow­ers may try rais­ing fish on cargo ships ▶ “It’s more or less kick-start­ing fish farm­ing again in a new way”

Bloomberg Businessweek (Asia) - - CONTENTS - Whit­ney McFer­ron, with Svei­n­ung Sleire Edited by James E. El­lis and David Rocks Bloomberg.com

Nor­way is the world’s big­gest pro­ducer of At­lantic sal­mon, thanks to farms in the waters off its coasts. Yet build­ing tra­di­tional fish farms on the open wa­ter has be­come al­most im­pos­si­ble be­cause of govern­ment rules in­tended to curb out­breaks of sea lice, which can kill young fish. So the na­tion’s largest sal­mon grower, Marine Har­vest, has come up with a novel pro­posal to avoid the pesky par­a­sites: rais­ing sal­mon in­side un­wanted cargo ships.

The com­pany’s plan was one of the re­sponses to a Nor­we­gian govern­ment pro­gram seek­ing ways to solve the par­a­site prob­lem and stop farmed fish from es­cap­ing into the open sea. Win­ning pro­pos­als will get cov­eted sal­mon-farm­ing li­censes at sharply re­duced prices. “It’s more or less kick­start­ing fish farm­ing again in a new way,” says Alf-Helge Aarskog, Marine Har­vest’s chief ex­ec­u­tive of­fi­cer.

Nor­way’s aqua­cul­ture in­dus­try spent 5 bil­lion kroner ($602 mil­lion) last year try­ing to erad­i­cate sea lice. The pest thrives near the shore in depths up to 8 me­ters (26 feet). Marine Har­vest pitched other ideas, too, in­clud­ing rais­ing sal­mon in en­closed struc­tures shaped like eggs or dough­nuts by the shore and build­ing a caged farm that can be sub­merged deep in the ocean.

The coun­try’s in­cen­tive pro­gram may make the pro­pos­als fi­nan­cially vi­able, says Aarskog, who wouldn’t dis­close the cost of build­ing pro­to­type farms. Buy­ing an ex­ist­ing li­cense from another com­pany—if one were avail­able—would prob­a­bly cost about 60 mil­lion kroner. The govern­ment will charge 10 mil­lion kroner for a per­mit for a fea­si­ble new pro­ject, he says. Each of the pro­to­type farms would take about six months to de­velop, and the fish would need an ad­di­tional 12 to 15 months to grow big enough to har­vest.

Nor­way is also giv­ing com­pa­nies the chance to bet­ter ex­ploit ex­ist­ing ca­pac­ity to boost pro­duc­tion. They can pay 1.5 mil­lion kroner to farm more dur­ing the best grow­ing pe­riod but less dur­ing other times of the year, its Fish­eries Min­istry said in late June.

The in­dus­try could use the help. Global sal­mon pro­duc­tion will fall about 7 per­cent, to 2.15 mil­lion met­ric tons this year, ac­cord­ing to Nordea Bank. Be­sides Nor­way’s lice out­break, an al­gae bloom this year has curbed out­put from No. 2 pro­ducer Chile, where stricter farm­ing rules may limit any ex­pan­sion, the bank said. One re­sult: Nor­we­gian sal­mon prices have tripled since 2011 and hit a record 69.44 kroner a kilo on June 19, ac­cord­ing to Sta­tis­tics Nor­way.

It’s a good time to buy a cargo ship. A con­struc­tion binge fu­eled by higher freight rates dou­bled global ca­pac­ity in the past decade, while ship­ments of car­goes such as coal and iron ore have ex­panded at a slower pace. The Marine Har­vest pro­posal calls for us­ing a so­called Pana­max ves­sel—a freighter able to tra­verse the Panama Canal. Daily rates to hire Pana­maxes have plunged 94 per­cent since 2007. Bil­lion­aire oil and ship­ping ty­coon John Fredrik­sen is Marine Har­vest’s big­gest share­holder.

Buy­ing a 10-year-old ship would cost about $7 mil­lion, and mod­i­fy­ing it with six hold­ing tanks for fish may cost an ad­di­tional $2.5 mil­lion to $5 mil­lion, says Erik Stavseth, an an­a­lyst at Arc­tic Se­cu­ri­ties. That would put the to­tal bill, in­clud­ing the six li­censes needed, at about $18 mil­lion—less than half the cost of a con­ven­tional farm, he says.

Dozens of com­pa­nies have sub­mit­ted ap­pli­ca­tions to the govern­ment, but the only one ap­proved so far is from SalMar, Nor­way’s third-big­gest sal­mon pro­ducer, to de­velop a farm far out in the ocean where sea lice can’t sur­vive. There are a “lot of in­ter­est­ing con­cepts,” says Kol­b­jorn Giskeode­gard, an an­a­lyst at Nordea Bank who cov­ers the seafood in­dus­try. “A lot of th­ese con­cepts prob­a­bly will fail or need heavy mod­i­fi­ca­tion. Some of them will prove to be vi­able, but there’s also a ques­tion of cost.”

The bot­tom line Nor­we­gian sal­mon prices have tripled since 2011, in part be­cause of par­a­sites. Fish farm­ers may use ships to evade the pests.

Sea lice Sal­mon

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