Nordic Credit Rating (NCR) said today that it expects salmon prices to remain strong for the next three years, driven by a combination of low supply growth and increased demand as economies rebound from COVID-19. While the Russian invasion of Ukraine has had only a moderate impact on demand, the agency nonetheless expects it to increase costs. It also believes that any increase in production costs will mostly be passed on to end-customers.
NCR said it forecasts an average salmon price of NOK 68 per kg for 2022 – NOK 10 per kg higher than in 2021 – on the basis of projected changes in global supply. It also forecasts higher prices in 2023 and 2024.
"We believe that increased demand and higher production costs will support global salmon prices and more than compensate producers for any negative effect from lower demand in Russia, Ukraine and Belarus," said NCR credit analyst Geir Kristiansen.
NCR takes a through-the-cycle perspective and normalises margins when it assesses salmon farmers' creditworthiness. Stronger salmon prices should, all else being equal, lead to stronger cash flows, theoretically allowing a reduction in net interest-bearing debt and improved credit metrics. However, higher prices could trigger more investment in new farming methods such as offshore and land-based farming, potentially offsetting the benefits of higher profitability. For this reason, the net effect on net interest-bearing debt is currently uncertain.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com