1. Chile Report: Salmon Farming
At the beginning of 2019, we took the opportunity to visit salmon farming operations in the Chilean summer.
Once a remote island where residents primarily lived off fishing, Frøya has transformed over the past few decades into a global hotspot for salmon farming. Thanks to modern infrastructure and forward-thinking innovations, the island is now considered a pioneer in aquaculture. This success story has not only brought prosperity to its residents but also garnered international attention.
An island built for economic prosperity
At 147 square kilometers, Frøya isn't the largest island, ranking only 31st among Norway's largest. However, its treasure lies in its coastal waters. The constant flow of fresh, cool Atlantic seawater makes Frøya one of the top regions for salmon farming worldwide. It’s no surprise that some of the industry’s most profitable players hail from this picturesque island of 5,000 inhabitants.
Recently, the island gained further fame through the Netflix series "Billionaire Island," a family drama set against the backdrop of salmon farming. Once a struggling community reliant on fishing, Frøya has become an aquaculture hub within just a few decades. With new opportunities at home, families no longer need to move to distant cities in search of a better life.
The island now boasts impressive infrastructure, including bridges and an underwater tunnel, facilitating the transport of more than 100 trucks daily for the fish farming industry. In less than three hours, you can reach Trondheim, Norway’s third-largest city. Salmon farming has brought wealth not only to those working in the industry but to the entire island. Houses and factories are being built, children attend school, and the local economy thrives. Who would have thought that 50 years ago, Frøya would even brew its beer?
Pioneers at Work
You might assume such a remote place wouldn’t be an innovation hub. You’d be wrong. A significant milestone was reached in 2014 with the opening of InnovaMar. This state-of-the-art processing plant remains one of the largest in the world, with a capacity of 150,000 tons annually. In 2017, the region set another benchmark with the launch of the first offshore unit, stationed in exposed waters. This €100 million project produces up to 1.5 million salmon per cycle, equivalent to 7,500 tons or roughly 40 million meals.
The natural current in these waters completely refreshes the water every eight seconds, and the 160-meter depth disperses fish waste over such a large area that it prevents the seabed from becoming over-enriched, a common issue in fjords. The facility is operated by four highly skilled employees working around the clock. The scale of efficiency and sustainability is staggering. Although two additional units were planned for 2024, political obstacles under Norway’s current government have delayed these investments until at least 2025.
Costs and Biology
Though Frøya hosts several salmon farmers, one name stands out: SalMar. The company’s success story began in 1991 with a single farming license. By 2000, they were producing a modest 11,000 tons of salmon, but by 2024, that figure has skyrocketed to 244,000 tons, with a capacity of up to 300,000 tons in the coming years. SalMar excels in cost control while maintaining the best biological conditions for their fish. Their portfolio includes the most attractive sites, resulting in a low mortality rate of 9.6%, compared to Norway’s average of 16.1%. For the minds behind this success, salmon farming remains a raw commodity subject to price cycles. Yet, the industry has been in a "supercycle" for some time, where demand outstrips supply.
While some companies might become complacent or adopt more expensive production methods to spur growth, SalMar takes a different approach. The founder strives to maintain a culture of humility, hard work, and risk management across generations. Unlike competitors who use "post-smolt" systems to raise salmon to 700 grams on land (compared to the usual 150 grams), SalMar remains cautious, preferring to provide the best conditions for their fish in large offshore cages. The "post-smolt" strategy has its appeal, but in the long run - according to SalMar’s decade-spanning perspective - it sacrifices cost advantages. While "post-smolt" factories are unlikely to become stranded assets, SalMar’s restraint demonstrates their confidence in their existing and cost-efficient value chain.
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