November 9, 2011
Investment in Salmon Farming Business in Chile
Mitsubishi Corporation (MC) will accelerate expansion of its salmon (including trout) farming business through the acquisition of Salmones Humboldt S.A. (SH) through its subsidiary company, Southern Cross Seafoods S.A. (SCS). The transaction value of this acquisition is approximately USD 125 million (JPY 10 billion).
SH has salmon farming assets which fully integrate fresh water farming (*1), sea water farming (*2) and processing plants. Through these facilities, SH has farming and processing capacity of 20,000mt/year. By adding these facilities to the current trading operations and 10,000mt/year farming capacity currently held by SCS, MC aims to establish stable supplies of farmed salmon for the Japan, US and European markets, as well as for rapidly expanding markets in emerging nations.
Worldwide supply of salmon is approximately 3.1 million mt and farmed salmon represents about 60% of this volume. It’s been 20 years since commercial salmon farming first started and currently, Norway and Chile are the two major suppliers. At present, Norway, which has supplies of 1.0 million mt per year, supplies to Europe, while Chile, which has supplies of 0.4 million mt per year, supplies to North America and Asia. Due to its sensitivities to factors such as climate, sea water temperature and geography, there are limits to the number of areas that are suitable for salmon farming. As a result, supply of farmed salmon is expected to reach its limit in the near future. Supplies of wild salmon are also approaching their peak due to increasing fishing costs and stricter controls of natural resources globally.
On the other hand, demand has been strong, especially in emerging countries such as Russia, Brazil and Asian countries with compound annual growth rates of more than 10% in the past 5 years. There is also stable demand in Europe (0.75 million mt/year) and Japan (0.3 million mt/year), and as a result supply and demand of farmed salmon will be tight in the coming future.
Chile is geographically very well suited to salmon farming. It has a long stretch of fiords along its coastline where there is only a gentle current, and it has access to clean, cool water from rivers and lakes which is essential in such farming. The country is also one of the major producers of fish meal and oils which are the main ingredients in farmed salmon feed. Chile has also signed Free Trade Agreements with Japan, the US, China and other countries, giving it certain economical advantages over other farming nations as well.
MC has a long history of creating marketing channels for marine products and providing stable supplies of products to its customers. We have been involved in farmed salmon trading since the early 1990s when the supply of farmed salmon exceeded wild salmon for the first time in history. In January 2011, we established SCS and in doing so entered the salmon farming business in Chile. MC established SCS because, with supply and demand becoming increasingly tight, we believe that in order to meet the growing demand from our global customers, who require farmed salmon all year round, it is essential for us to procure additional farmed salmon to that which comes from our existing trading business alone. Acquisition of SH is also in line with this decision. This acquisition is part of our Living Essentials Group’s core strategy of “Expansion of the food supply sources”.
*1) Fresh water farming: Facilities on land in which hatched alevin grows for
*2) Sea water farming: Marine facilities in which smolt grows into mature fish.
Company Name: Salmones Humboldt S.A.
Business: Salmon farming, processing and marketing
Location: Puerto Montt, Chile
Major Shareholders: Sociedad Pesquera Coloso, Sociedad de Inversiones Coloso
Year Founded: May 2006
Company Name: Southern Cross Seafoods S.A.
Business: Salmon farming and marketing
Location: Puerto Montt, Chile
Major Shareholders: MC, Primar
Year Founded: January 2011
Fresh Water Farming Facility
Sea Water Farming Facility
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