Wake up to find out Europe is in a gas crisis, Barnaby Joyce is worried about burping cows, and now you find your portfolio is underweight #seaweed ? Me too.
Let's take a look at 'Australian Seaweed As A Megatrend' 👇
1. Investment Thesis: Early stage investing in seaweed as a nascent industry with significant growth potential due to multiple mega trends (climate change, organic fertilizers, food security, and biopharma); moving from research into commercialisation.
2. What is seaweed?
Seaweed biomass can be used for an array of possible uses including food, animal feed, high-value pharmaceutical/ industrial compounds, biofuels, and fertilisers. It's grown in water, and has environmental benefits.
3. Market of seaweed.
Seaweed is big business. The global market is around AUD$16.8bn or 30m tonnes per year. And it's growing fast, 10-15% CAGR depending on the sub-sector. That's well and truly faster than my 'Heinz Baked Beans Hurdle' of 4.8% CAGR.
4. Global seaweed producers.
Most of today's seaweed is grown in China (48%) and Indonesia (39%), with Korea, Japan, Philippines and Thailand notable as well. Europe, US, Canada and Chile are developing industries.
5. Megatrend: Climate Change.
Seaweed forests sequester 200m tonnes of Co2 every year (equivalent to New York state's total emissions). And seaweed aquaculture has potential to increase that by a lot more - potentially 10% of the world's GHG emissions.
nationalgeographic.com/environment/ar…
6. Megatrend: Food Security.
It's not just eating seaweed in sushi form, though the shift to plant based diets is there. It's the role of seaweed as an organic fertilizer, as well as feed for livestock production.
sbs.com.au/food/article/2…
7. Today's news: European gas crisis.
Fertilizers such as ammonium nitrate, super phosphate and potassium sulfate are made from petrochemicals - oil and gas. The spike in gas prices has shut down these operations in Europe.
icis.com/explore/resour…
8. Today's news: Sri Lanka's organic fertilizer dependency.
Sri Lanka in the midst of a currency / economic / food crisis has banned many imports, including all fertilizers. They have shifted to organic fertilizers out of need, but the trend is there.
foreignpolicy.com/2021/09/27/sri…
9. Today's news: Australia at Glasgow
A major barrier for Australia's commitments to net zero emissions at Glasgow is livestock - they generate around 10% of emissions and there's no clear substitute. The Nats are going berko.
Of course, coal exports are important too...
10. What does this have to do with seaweed?
Well, seaweed is a pretty versatile "crop" that can be used to reduce GHG from livestock, develop biofuels, organic fertiliziers, sequester carbon, and a whole lot more. And Australia's oceans are pretty good at growing the stuff.
11. Australian seaweed market.
It's tiny, at around $5m produced and $40m imported. Production is mainly wild catch near King Island, used to produce Seasol (fertilizer) from Bull Kelp. Imports are predominantly sushi / food consumption.
vitec.com.au/shop-online/st…
12. Australia's seaweed blueprint.
@AgriFuturesAU and @FRDCAustralia developed the Australian Seaweed Industry Blueprint. There's more research to be done, but commercialisation is starting with two main applications.
agrifutures.com.au/wp-content/upl…
13. Kelp Farming.
Farming is to move from land-based systems or wild catch, and to shift into ocean-based coastal and offshore aquaculture. The potential is around $20m by 2025, and $100m by 2040.
14. Kelp Farming and Fish Aquaculture.
The main purpose for this type of kelp farming is to sequester nutrient run off from fish aquaculture, so it would be grown with salmon. Both Tassal $TGR and Huon $HUO have research projects here.
15. Kelp IMTA and Tassal.
The Tassal annual report featured seaweed on the front cover, their third growth area they reckon. Don't be fooled, probably green washing, and I ascribe $0 valuation though it could have value eventually.
Mentions: Salmon 95, Prawn 48, Seaweed 1.
16. Asparagospis.
The smart bunnies at @CSIRO @jcu and @meatlivestock are developing Asparagospis (native seaweed to Australia). With 1-2% in livestock feed, it can improve feed conversion by 20% and reduce their methane emissions up to 60%.
17. Commercialising Asparagospis.
FutureFeed holds the IP, and investors already include Woolworths $WOW Graincorp $GNC . Licensees are CH4 and @blueoceanbarns .
Sea Forest in Tassie are partnering with Fonterra $FCG.NZ and are the closest to scale.
abc.net.au/news/2021-03-0…
18. Lack of investment opportunities.
Unfortunately, there's no real investment opportunity in Australia's seaweed industry. But I'll be on the lookout for Sea Forest's IPO.. they're going to need capital, and are currently only taking private funds.
seaforest.com.au/investor-centre
19. Global seaweed companies.
There's a few players around, but either they tend to be large companies with small seaweed exposure, or not listed. Corbion $CRBN.AS is perhaps the one exception.
20. Corbion.
Corbion have around 40% of the world's market for natural preservatives (lactic acids, etc). 900mEur in revenue, 13-15% EBITDA margins, growing 4-7% p/a. They intend to leverage their fermenting capacities.
21. Corbion seaweed.
Corbion's incubator strategy is to grow sustainable algae-based omega 3 as salmon feed, and algae-based proteins for human consumption (partnering with Nestle). SAM of EUR1.4bn, only 1.5% of revs growing at 120% in 1H21.
22. Seaweed on the horizon.
Right now we have more seaweed scientists (40) than seaweed farmers (30). This'll change. Asparagospsis is tipped to be $1bn industry by 2040, and there's plenty more applications out there. So watch this space.
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A deep dive per week is my commitment to FinTwit.
Questions and feedback always welcome. DYOR.
Disclaimer, I'm long TGR.
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