SeaDragon sees EU barrier, makes China push, tackles quality control

Friday 1st September 2017

SeaDragon says it has an unresolved quality control issue which has hurt prices and is waiting to hear back from offshore customers who are assessing samples of its refined Omega-3 fish oil.

In a market update, the company said it was working to "satisfy exacting regulatory and customer specifications."

"With one exception, we believe we have addressed these deficiencies and process improvements," it said in a statement. "We are focussed on resolving the one remaining issue affecting one quality parameter, but in the interim, the price we can achieve is weakened. We expect this to be a temporary situation."

The company cited a customer who had placed a second order for 32,000 kg of Omega-3 tuna oil but it also signalled market disruption in the European Union. "Recent changes to EU quality standards may limit our ability to secure orders from some customers selling into the European market in the short-term," it said. "We see this as creating a temporary barrier to entry to a key market where demand for high DHA tuna oil for infant formula is strong. We are currently implementing several process changes to our plant that we believe will assist us to meet these new EU requirements in the short-term."

Chair Colin Groves said the company was pursuing alternatives markets, especially in China, "where we have had strong interest for refined Omega-3 oils, but have not previously been able to supply the required regulatory standards".

He said in the DHA market more of the alternative algal DHA is coming onto the North American market, while the market was also being eroded by surplus DHA from anchovy oil, "especially in EU markets".

"We believe that Seadragon remains competitive however, as the price point for algal DHA is significantly higher than our oil," he said.

Its shares were last at 0.6 cents and have fallen 44 percent in the past 12 months.

(BusinessDesk)

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