Nordic Credit Rating (NCR) expects strong salmon prices in 2021 and 2022, driven by a combination of low supply growth and increased demand as economies rebound after the COVID-19 pandemic. Our regression model, based on expected global supply and global GDP, forecasts an average salmon price of NOK 68 per kg for 2021.
"We note that this would be a record price and we are reluctant to take this prediction at face value, An upturn in demand may also be delayed by new lockdowns in regions with slower vaccination distribution," says credit analyst Geir Kristiansen in NCR. "However, we believe that the model, which predicts a price increase of 23% in 2021 and 11% in 2022, reflects the correct underlying trend."
While higher prices will have a positive impact on credit metrics, NCR takes a through-the-cycle perspective and normalises margins when it assesses salmon farmers' creditworthiness. A stronger salmon price will lead to stronger cash flow for salmon farmers, theoretically allowing a reduction in net interest-bearing debt and improved credit metrics. However, we also believe that higher salmon prices will trigger more investment in new farming methods such as offshore and land-based farming. The net effect on credit metrics is therefore uncertain.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com