Since 2000, TripleNine has experienced enormous fluctuations in the sale prices of both fishmeal and fish oil, as well as fluctuations in the dollar rate and the volume of landed fish. Both dollar rate and landed volumes independently show a rapidly declining trend.
All this has had, has and will have an effect on the shareholders, the factory and to some extent the customers.
The raw materials aspect
Since 2000, the landings to TripleNine have declined from 1,000,000 tons to approx. 300,000 tons. During the same period, the number of active shareholders and their load capacity has likewise declined by 70 per cent.
TripleNine has received slightly more fish in 2009 than in 2008 and the preliminary quota proposals suggest that a similar volume – approx. 300,000 tons of fish – may be caught in 2010.
The consequences of the declining supplies are familiar. Among other things, it has led to discontinuation of fishmeal and fish oil production in Esbjerg and reduction of the workforce to match the reduced production and supply of fishmeal and fish oil.
The future will show whether stability has been achieved in relation to raw material supplies.
Declining dollar rate
During 2000, the dollar rate peaked at 8.75 in relation to the Danish krone. Today, the rate has dropped below DKK 5, a decline of approx. 45 per cent.
Fishmeal and fish oil are traded globally and prices are set by, among others, Peru. As Peru quotes in dollars, the declining dollar rate significantly influences the profit basis of Danish industrial fishing.
The American debt situation is so serious that it is difficult to believe that the dollar will return to its former strength in the near future.
So one may well ask how stable the dollar is.
Price fluctuations
In 2000, fishmeal cost approx. DKK 4 per kg. The price gradually rose to DKK 6 per kg in mid 2005 and then to almost DKK 10 per kg within a very short time. Sales then came to a standstill.
Fishmeal had simply become too expensive. Normally fishmeal costs 2.5-3 times as much as soy, but at that time it cost almost seven times as much. Sales did not really recover until the price dropped to approx. DKK 6 per kg, which was then twice the price of soy.
In 2006, the price was pushed up by a shortage of fishmeal for salmon feed. The same is happening now, when the price has been pushed above DKK 8 per kg. This is just over three times the price of soy, which is significantly less than at the price increase in 2006. In other words, other feed ingredients have also become more expensive.
There is no doubt that some customers have been lost due to the high prices and it will be more difficult to regain them. The experiences from 2006 show that the price of fishmeal must drop significantly and become cheaper in relation to soy than normal before these customers come back.
That said, it is of course gratifying that the price of fishmeal has increased. That makes it easier to achieve the profitable fishing operation on which the factory ultimately depends.
The price of fish oil has likewise fluctuated dramatically. In 2000, it was DKK 2 per kg. In 2001, this increased to DKK 5 per kg within a very short time, only to drop to under DKK 4 per kg in 2003.
The price then slowly returned to DKK 5 per kg in 2007, but in 2008, the price almost doubled to over DKK 9 per kg. Sales then came to a complete standstill. They recovered during 2009, but at prices much lower than DKK 4 per kg, i.e. a price drop of over 65 per cent, virtually overnight.
The price of fish oil follows the price of rape oil, except that it was higher in 2008 and is lower in 2009. However, to the delight of a manufacturer the prices seem to be recovering, at least in dollar terms.
These fluctuations and lack of stability in the prices of both fishmeal and fish oil affect the market, where the players are wary of acting, in case the market goes against them!
El Nino
A further factor also affects the instability of the market, i.e. a forthcoming El Nino in Peru. The temperature along the coast of Peru is today ½-1½ °C higher than normal. Peru has just started fishing and fish are being caught, but not as easily as usual.
It is too soon to predict the influence of El Nino on future fishing in Peru, but the effect is unlikely to increase the stability of the market.
Finally, I must add that currently the demand for fishmeal and fish oil is good and the supply is limited.
Stable periods
Stable periods can lead to complacency, while instability and turbulent times often result in major changes, so it is difficult to predict what lies ahead.
