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How Norwegian aquaculture rides the wave of rising salmon prices

Dive in deep into the Norwegian aquaculture journey, which is filled with hurdles yet holds valuable lessons for the industry.


In brief

  • Despite facing biological and regulatory challenges, Norwegian aquaculture charts growth, driven by escalating salmon price on the back of high global demand.
  • Rising costs and economic headwinds test industry resilience.
  • Navigating toward a sustainable future for aquaculture.

Over the years, aquaculture has become an increasingly important, financially strong and contributing industry in Norway. However, a combination of internal and external elements, including biological challenges, inflation, governmental regulations and a fragile global supply chain, have considerably impacted the sector, underlining its vulnerability.

Norwegian aquaculture navigating through rough seas

In 2022, the Norwegian aquaculture industry generated more profits than ever before while being exposed to extraordinary challenges spanning from high inflation to disruptive tax regulation changes.

Much of this boom was driven by historically high salmon prices, which resulted in an impressive surge in EBITDA by 65.7% compared with FY21, reaching a remarkable figure of NOK50.2 billion. As a result of increased raw material cost on feed, general inflation and persistent biological issues, the industry also experienced record-high costs per kg, which went up by 17.4% on a Whole Fish Equivalent (WFE) basis.
 
Despite this, increased cost didn’t quite match the sharp increase observed in prices which ranged from NOK58 to a steep NOK83 per kg. The marked hike in the cost for feed, due to inflated prices of raw materials, significantly contributed to this cost increase.

The year of 2022 also witnessed other concerning industry events. The introduction of the resource rent tax resulted in an abrupt dip in orders for the equipment and solution segment causing a stand-still in revenue and profit figures. Fuel costs also shot up, creating a decrease in EBITDA in the transportation segment — for the first time ever in the period covered by the analysis.

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    Sustainability at the core of aquaculture

    The future of aquaculture depends on a continuous focus on sustainable solutions.

    Emerging as a crucial aspect in salmon farming, feed, which accounts for a substantial amount of both production costs and farmgate emissions, is receiving heightened attention in the industry. The diminishing availability of conventional marine ingredients has prompted the industry to turn its focus toward innovative feed ingredients such as insect meal, single-cell proteins and microalgae.

    While these newcomers make up a small fraction of the total feed composition, their potential is vast. It's noteworthy that the salmonid feed sector is predominantly operated by a handful of major producers that have control over the major shares of salmon feed output.

    Sustainability also remains at the core of the industry's operations. In this year’s analysis, we focus on how the industry can improve circularity within waste handling and the use of plastic, particularly in net pens and other aquaculture equipment. Meanwhile, the industry continues to focus on the utilization of artificial intelligence (AI) for production and digital innovation.

    Aquaculture’s AI wave: tech beneath Norwegian waters

    While significant progress has been made throughout the whole value chain, there are certain areas where the use of AI and tech can be improved. The industry can benefit more from machine learning algorithms for predicting and preventing diseases, while image recognition technology can be further employed to monitor fish health continuously. There is also room for improvements in providing real-time analytics, refining models on fish behavior and enhancing digital platforms for efficient farm operation.

    Norway, as the world's leading salmon producer, has adopted several AI and tech solutions. Companies are using AI-powered monitoring systems for early detection of diseases and parasites such as sea lice. Drones and robots are employed for tasks like sea floor inspections. AI is also used to monitor fish health and behavior, predict diseases, control feed quantity and timing, and improve breeding processes. This enhances yield and quality, minimizes environmental impact and reduces operational costs.

    The future of AI and emerging tech in Norwegian aquaculture is promising and is expected to transform fish farming significantly. A more widespread adoption of these technologies is anticipated as the industry seeks to boost efficiency and sustainability. With more advanced AI models, it will be possible to identify emerging diseases early and adjust feeding and treatment plans swiftly. In the long term, the application of technologies like AI, IoT, robotics and sensors will lead to the creation of smart, eco-friendly aquaculture systems with minimal human intervention.

    Toward a resilient future for aquaculture

    Drawing from its history, the Norwegian aquaculture industry has been nothing short of resilient, even when tides of significant political happenings, a world-reaching pandemic, high inflationary pressures and stiff global supply constraints have flanked the industry. The performance of this industry across different spectra, in turn, has hinted toward a future that will demand careful considerations for both short-term realities and long-term aspects of sustainability.

    It will be the industry's calibrated response to these concerns and disruptions that will significantly shape its business framework and reputation in sustainability, while one thing remains clear — the commitment and capacity of Norwegian aquaculture on continuing to adapt and to innovate effectively will determine how promising and sustainable the industry’s future will be in the long run.



    The Norwegian Aquaculture Analysis 2023



    Summary

    Norwegian aquaculture demonstrated growth and resilience amid recent challenges, including biological issues, regulations, inflation and supply chain disruptions. Despite high costs, the industry benefited from continued high salmon prices and continues to focus on the utilization of AI and technology for production and digital innovation. The focus on sustainable feed, use of plastics and waste management underlines the industry's commitment to sustainability and circularity. The future of aquaculture depends on technological integration and digital solutions enhancing fish health monitoring and disease prediction. These combined elements reflect Norwegian aquaculture's undeniable potential for continuous innovation and sustainable progress.

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