Seafood industry: the next investment catch?

The seafood industry plays an essential part in the balance between biodiversity & ecosystems, and social & economic dynamics. It offers growth potential and plays an important role in feeding a growing worldwide population. 

Despite its importance, the seafood industry is disproportionaly small in terms of market cap relative to its Blue Economy sector peers. It only makes 1% by market cap of our stock universe. Identifying listed seafood companies can be a challenging task because large trading corporations own some of them such as Mitsubishi Corporation with Cermaq.

According to the FAO (Food & Agriculture Organization), world fisheries and aquaculture production is at an all-time high and is set to play a growing role in supplying food and nutrition. Total production (excluding algae) is expected to grow by 15% to 202 million tonnes in 2030, mainly driven by aquaculture. The consumption is expected to increase from 20.2kg in 2020 to 21.4kg per capita in 2030 thanks to rising incomes and urbanisation, better harvest practises and growing health consciousness. Indeed, aquatic food is a great source of protein and essential omega-3 fatty acids and a good alternative to other protein animals, which are more carbon-intensive.

With a growing world population projected to reach 8.6 billion in 2030, the demand for aquatic food is only going to rise. This coupled with higher cost pressure from feed and energy will put pressure on prices that may rise 33% by 2030. 

Aquaculture offers exciting growth potential and can satisfy the global rising demand for aquatic food. It is a solution that supports a sustainable ocean if given the right environment and fish feed. Its production has grown six-fold in the past 30 years and is now 35% higher than wild catch fisheries production. It is expected to grow another 35% by 2030. 

The production is 80% dominated by Asian markets, with China producing more than half. There have been several environmental issues linked to this activity such as the high concentration of

pecies, nutrition and macrobiotic problems that lead to pollution, and fish escape that are invasive to the natural habitat and lead to biodiversity loss. There are also some fundamental barriers such as the need for innovation, finance, governance and regulation. The FAO Blue Transformation roadmap has set a priority to implement sustainable aquaculture practises that support biodiversity, facilitate ecosystem restorations and the delivery of ecosystem services.

The wild catch market is more fragmented. Nine countries make up over half of the world’s wild catch fisheries with China accounting for 14.7%, followed by Indonesia 7.7% and India 6.1%. Global fisheries production peaked at 96.5 million tonnes in 2018 and was down 6.4% to 90.3 million tonnes in 2020 as a result of COVID-19. Wild catch fishing has caused the world’s fish stocks to fall dramatically in the past fifty years. 

According to the FAO, the world percentage of fish stocks within biologically sustainable levels has fallen from 90% in 1974 to 64.4% in 2019. Climate change, pollution, and invasive species have also contributed to marine biodiversity loss. Unfortunately, there is an inclination for countries that are large fish producers in terms of wild catch fisheries to have poor ratings under the Illegal, Unreported and Unregulated (IUU) Fishing Score such as China. 

However, the High Seas Treaty agreement reached in March 2023 is a massive step for the future of our oceans and the potential recovery of fish stocks. It stipulates that 30% of the seas ought to be protected by 2030.