Salmon sector downgraded in wake of price drops
Analysts at Nordic financial group Nordea have downgraded the seafood sector following a fall in prices that they did not fully predict.
In its morning report today, Nordea pointed out that Norwegian salmon prices have fallen from a level around NOK 60 (£5.37) per kilo in the third quarter to just over NOK 40 per kilo.
“The fall in prices has been stronger and longer-lasting than we expected, although the volumes in recent weeks have also been relatively high,” said the group.
7% below expectation
Nordea’s analysts now expect the average price of salmon this year to be around NOK 57 per kilo.
“This is 7% lower than we expected at the beginning of the year and this despite a more favourable currency situation than we then assumed,” they write.
According to calculations by Fish Farming Expert’s sister site, Kyst.no, the salmon price in the last few weeks in isolation averaged NOK 54. So far, the average spot price of salmon (at week 37) is NOK 56.90 / kg. To average NOK 57, the price will therefore have to go up from the price level seen after the summer.
Same price next year
Based on expectations of a 6% growth in global supply over the next couple of years, Nordea is also lowering its salmon price estimates for 2020-21 to NOK 57 per kilo.
“Based on this, we reduce the EBIT estimates of the companies we cover and downgrade all companies except Bakkafrost, where we keep our Hold recommendation and at the same time point to the company as a sector favourite.”
The reason for Nordea’s assumption is that Faroese farmer Bakkafrost has most of its sales in the third quarter either on a fixed-price contract or as big fish in the spot market, where a price premium of around NOK 15 per kilo was achieved during the quarter.
