Norway Salmon Farmers Plunge on Russian Sanction Retaliation

Norwegian salmon farmers including Marine Harvest ASA, the world’s largest, slumped in Oslo as Russia retaliated against economic sanctions with import bans on food products including fish.

Marine Harvest, controlled by billionaire John Fredriksen, fell as much as 12 percent in intraday trading, the most in more than six months, while Leroey Seafood ASA dropped as much as 9.6 percent, Salmar ASA 9.9 percent and Cermaq ASA 8.2 percent. Oslo’s 13-member Seafood Index slumped as much as 9.3 percent, the most on record.

Russian Prime Minister Dmitry Medvedev said today that the country will ban all cheese, fish, beef, pork, fruit, vegetable and dairy imports from countries that have imposed sanctions on Moscow over its support for separatists in eastern Ukraine. Norway, while not a member of the European Union, has said it will probably follow the latest set of EU sanctions that target Russia’s finance, energy and defense industries, and is among the countries targeted by the bans.

“There’s a lot of uncertainty,” Nordea Markets analyst Kolbjoern Giskeoedegaard said by phone. “If there’s a full ban, we’ll get a period with a significant price fall.”

Russia is the third-biggest importer of Norwegian salmon, contributing more than 9 percent of export revenue in July, or 332 million kroner ($53.1 million), according to figures published yesterday by the Norwegian Seafood Council.


A “worst-case scenario,” with a full ban on Russian salmon imports for a year, could cut global demand in 2015 by as much as 7 percent and prices by as much as 14 percent to 35.7 kroner a kilogram (2.2 pounds) on average, Pareto Securities ASA analysts Henning Lund and Fredrik Steinslien wrote in a note before the details of the ban were announced.

“This is a challenging situation,” Managing Director Terje Martinussen of the Norwegian Seafood Council, an industry group, said in a statement. He said he’s recommending exporters refrain from packing deliveries for Russia today and in the coming days.

“Russia’s import ban is totally unreasonable,” Norwegian Foreign Minister Boerge Brende said in a statement. Russia’s measures “show how important it is that we stand together with allies and partners in our reaction to Russia’s destabilization of Ukraine.”

Marine Harvest, which earned about 3 percent of its revenue from Russia in the first quarter, is monitoring the situation closely, spokesman Ola Helge Hjetland said by phone. “The Russian market is important for the Norwegian seafood industry in general,” he said, declining to comment further.

Red Fish

Still, Norwegian fish exporters have experience with Russian trade barriers, and salmon farmers in particular have in the past been able to re-route volumes elsewhere when markets are closed to them, the Seafood Council’s Martinussen said.

Forward prices for August and September closed at 36 kroner a kilogram today on the Bergen, Norway-based Fish Pool derivatives exchange. That’s down from 36.5 kroner and 37.5 kroner respectively, yesterday, Managing Director Soeren Martens said. “It’s less dramatic than in the stock market,” he said.

“There’s a sense that demand outside Russia can manage to absorb these volumes without creating a big disaster in the market,” Fish Pool Desk Manager Francois Perrone said by phone.

Russia will try to replace Norwegian red fish with supplies from other countries as well as domestic shipments and has already started talks with traders, Russian Agriculture Minister Nikolai Fedorov told reporters in Moscow today.

Benefiting Chile

Salmon farmers in Chile, the biggest producer after Norway, could benefit from the situation, according to Nordea’s Giskeoedegaard, who estimates that the South American country has stocks of about 20,000 metric tons of frozen salmon. At the same time, Norwegian producers could profit from the loss of Chilean volumes in markets such as the U.S., he said.

Russia has been the biggest importer of Norwegian seafood overall since 2011, said Christian Chramer, a spokesman for the Norwegian Seafood Council. The country has imported 8.5 percent of Norway’s seafood this year, down from 10.6 percent last year.

Marine Harvest closed 8.3 percent lower at 79.5 kroner, while Leroey fell 8.3 percent to 210 kroner. Cermaq lost 5.5 percent to 77.5 kroner, Salmar 9.1 percent to 110 kroner and Grieg Seafood ASA fell 6 percent to 25.3 kroner.

Due to Russia’s import ban, Bakkafrost P/F, based in the Faroe Islands, is likely to be the only salmon farmer listed in Oslo now able to sell fresh salmon to Russia, Nordea’s Giskeoedegaard said. Bakkafrost fell 6.8 percent to 116 kroner in the Norwegian capital today.

“There’s a good reason to use the share-price drop as a buying opportunity” for Bakkafrost, said the analyst.

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