Marine Harvest ASA and Cermaq ASA, two of Norway’s biggest salmon producers, surged in Oslo trading amid signs that falling production during the next two years will lead to increased prices.
Cermaq jumped as much as 10 percent, the most in almost a year, while Marine Harvest gained as much as 7.2 percent to the highest level since July 13. Cermaq, the third-largest fish farmer, was the biggest winner on the OBX benchmark index, ahead of Marine Harvest, the world’s largest producer.
“We have seen a positive shift in demand as the low prices have led to increased market penetration,” ABG Sundal Collier Holding ASA analyst Dag Sletmo said in an e-mailed note yesterday. “We upgrade the sector to buy from hold as the cycle should start to head north in 2013.”
Wholesale prices for fresh salmon have fallen 21 percent during the last year amid rising output from Chile and Norway, according to Bloomberg calculations based on figures from Fish Pool ASA, a clearing house for financial contracts on salmon. Shares in fish farmers have declined as producers seek to reduce costs and reorganize debt as weaker demand curbs margins.
“Supply growth will drop from 19 percent in 2012 to 4 percent in 2013, which should be supportive for prices,” Sletmo wrote. “The year-on-year growth in supply peaked at 33 percent in the first quarter of 2012 and will decline steadily in the quarters and years ahead.”
Cermaq traded 5.6 percent higher at 73.95 kroner as of 11:40 a.m. in Oslo, while Marine Harvest was up 4.8 percent at 3.782 kroner. ABG’s Sletmo upgraded both companies to buy from hold in his report.
“If history repeats itself, there is 100 percent upside in Marine Harvest and the sector on a one-to-two year horizon,” wrote Sletmo, who also upgraded Bakkafrost P/F, Salmar ASA, Leroey Seafood Group ASA and Grieg Seafood ASA to buy and kept that recommendation on Morpol ASA.