By Whitney McFerron

(Bloomberg) — The world’s largest Atlantic salmon producer needs to start out farming fish inside a ship quite than the ocean.

Building conventional fish farms on the open water in Norway has change into nearly unattainable due to state guidelines meant to curb outbreaks of sea lice, a parasite that may kill younger fish. So elevating salmon inside an undesirable cargo ship is one of some choices proposed by Marine Harvest ASA, which is making an attempt to spice up manufacturing at a time when costs are close to a document excessive.

Output in Norway, the highest producer, is falling simply as provide declines from the remainder of the world. Employing a Panamax vessel higher suited to carrying coal or metal was one of many responses to a Norwegian authorities program searching for methods to unravel the parasite downside and cease farmed fish from escaping into the open sea. Winning proposals will get coveted farming licenses at decreased costs.

“It’s more or less kick-starting fish farming again in a new way,” Alf-Helge Aarskog, chief govt officer of Marine Harvest, stated in an interview final month after the appliance was submitted.

Global salmon manufacturing will fall about 7 p.c to 2.15 million metric tons this yr, in line with Nordea Bank. Along with the lice outbreak, an algae bloom this yr has curbed output from No. 2 producer Chile, the place stricter farming guidelines might restrict growth, the Oslo-based financial institution stated. Norwegian salmon costs have tripled since 2011 and reached a document 69.44 krone ($8.36) a kilogram on June 19, in line with Statistics Norway.

Norway’s aquaculture trade spent 5 billion krone final yr making an attempt to eradicate sea lice, Aarskog stated. The pest thrives close to the shore within the high 7 to eight meters (23 to 26 ft) of water. The Panamax idea would work by taking in water from under that stage.

Marine Harvest, primarily based in Bergen, Norway, pitched different concepts, too. Two proposals have been to boost salmon in specifically constructed, enclosed buildings formed like eggs or donuts by the shore. Another concerned constructing a caged farm that may be submersed offshore, deep within the ocean.

Feasible Methods

Norway’s incentive program might make the proposals financially viable, stated Aarskog, who wouldn’t disclose the price of constructing prototype farms. Buying an current standard license from one other firm — if one have been accessible — would most likely price about 60 million krone, however the authorities will cost simply 10 million krone for a allow for a possible new undertaking, he stated.

Marine Harvest doesn’t understand how lengthy it should take for the federal government to determine on its initiatives, Aarskog stated. Each of the prototype farms would take about six months to develop, and the fish want one other 12 to fifteen months to develop sufficiently big to reap.

Norway can be giving firms the prospect to raised exploit current capability to spice up manufacturing now. They will pay 1.5 million krone to farm extra throughout the very best rising interval, however much less throughout different occasions of the yr, the Fisheries Ministry stated Thursday.

Cheaper Ships

It’s additionally a superb time to purchase a cargo ship. A development binge fueled by larger freight charges doubled vessel capability prior to now decade, whereas shipments of cargoes akin to coal and iron ore have expanded at a slower tempo. Daily charges to rent Panamaxes have plunged by 94 p.c since 2007. Billionaire oil and delivery tycoon John Fredriksen is Marine Harvest’s largest shareholder.

Buying a 10-year-old ship would price about $7 million and modifying it with six holding tanks for fish might price one other $2.5 million to $5 million, stated Erik Stavseth, an analyst at Oslo-based funding financial institution Arctic Securities. That would put the overall invoice, together with the federal government license, at about $18 million, lower than half as a lot as constructing a traditional farm might price, he stated.

Dozens of firms have submitted purposes, however the one one authorised to this point is from SalMar ASA, Norway’s third-biggest producer, to develop an offshore farm far out within the ocean the place sea lice can’t survive.

There are a “lot of interesting concepts,” stated Kolbjorn Giskeodegard, an Oslo-based analyst at Nordea Bank who covers the seafood trade. “A lot of these concepts probably will fail or need heavy modification. Some of them will prove to be viable, but there’s also a question of cost.”

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