Bloomberg Businessweek (Europe)

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”

- Whitney McFerron, with Sveinung Sleire Edited by James E. Ellis and David Rocks

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
Sea lice Salmon

Newspapers in English

Newspapers from Bahrain