Managing director of Cermaq Chile, Steven Rafferty, is not optimistic about the influence the current pandemic will have on the future. He believes the Chilean salmon market has long tough months ahead.
According to Steven Rafferty, the industry must look far beyond the European summer before the market will quiet down.
“40-50 thousand tonns of salmon have been delayed to date in Chile,” says Rafferty to SalmonBusiness and continues:
“I can say that it is definitely not business as usual. We will probably see disruption for months.”[factbox]
The price on salmon has, according to Steven Rafferty, gone down 30 percentage since February in the US. Most Chilean salmon goes to the US market. Since the US closed their borders and New York became the epicentre for the corona virus, Chilean companies have suffered.
“There are a few CEOs in Chile being positive and saying as soon as the US market opens up, then everything will be back to normal. I don’t see that due to supply chain issues and fish delayed.”
And since a lot of salmon is delayed in the Chile, he believes, that when the markets do open again the price will decline even more.
“What will happen even if markets resume and start opening, for example in the US, there will be a lot of fish coming,” he states and elaborates:
“Though I believe consumer demand is still very high and will maybe be even stronger later this year, recovery all depends on when restaurants and hospitality reaches previous capacities. Industries like cruise ships were large consumers, that will not recover this year.”
Mitsubishi got Cermaq’s back
Cermaq Chile has, according to Steven Rafferty, been lucky, as they are owned by Mitsubishi and therefore have financial backing and no loans.
Smaller harvesting volumes have also made it possible for the company not to suffer to much financially during this pandemic.
“There has certainly been a loss. But we were a bit fortunate that we did not have large harvesting planned for April and May,” he says and underlines the situation in the company:
“In the case of Cermaq Chile the harvest has gone as originally planned, so we have not reduced our sales. That is partly due to the fact that we have more than one processing plant, that we were able to activate, when the crisis came. We have more processing capacity than our competitors. The issue really is the closed markets, due to border closing.”
The manager states that the company is able to go on with low margin for several months because of the Mitsubishi ownership.
Steven Rafferty explains how the situation hit the Chilean salmon:
“When the processing capacity dropped the Chilean industry suffered. I think for the first few weeks the industry was running at 50-60 percent of capacity.”
In the beginning the company was challenged on the US east coast as many flights with salmon go to Miami and then on to Dallas and New York. Flights were cancelled to New York and truck drivers did not want to drive to the epicentre of the pandemic.
“We have had quite a lot of difficulties on the East coast. New York and Boston areas have been more challenging, than the rest of the country,” he states.
Airfreight costs reduce margin
On average Cermaq Chile has been paying 20 per cent more on every airfreight the last month. Prices have been settling down the last couple of weeks, as airlines have converted their passenger flights into cargo flight to transport food abroad. But the price reduction still has a big impact on the company’s bottom line.
“We still have reduced margin because of the extra freight prices,” says Steven Rafferty, and explains that the company has had extra costs since the corona virus broke out, like the rest of the industry.
Rafferty explains that the company has switched a lot of their wholesale into portions that they now sell to US customers, so they can make “ready to cook” food from home.
The Chile boss strategy is to keep harvesting and processing the same amounts, and in this way not postpone harvesting for “better times” as he does not believe they will come.
Cermaq Chile closed down two processing factories in the beginning of April month and let go of 180 workers. This decision was in the air before the corona virus.
“We are trying to attend and keep things going, until new problems evolve,” he informs.