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Icelandic Seafood Market Report September 2013

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Page 1: Icelandic Seafood Market Report - Íslandsbanki · Many Icelandic vessel operators have merged over the course . ... Icelandic Seafood Market Report 5 Icelandic fisheries sector

Icelandic Seafood Market Report

September 2013

Page 2: Icelandic Seafood Market Report - Íslandsbanki · Many Icelandic vessel operators have merged over the course . ... Icelandic Seafood Market Report 5 Icelandic fisheries sector

2 Icelandic Seafood Market Report

Foreword

Íslandsbanki has issued regular annual reports on the Icelandic seafood market for over a decade. The report’s content has been under continuous development, and its scope has grown every year. The report is intended to provide a comprehensive review of the position of the Icelandic seafood market and its recent devel-opment. The Bank hopes that the report is of use to stakeholders within the sector, as well as to others who wish to familiarise them-selves with the Icelandic fisheries sector.

The operation of fisheries companies in Iceland is, on the whole, quite good, and external conditions are favourable, although results vary between companies. Despite some decline in the prices of important marine species, the sector has been quite successful in adapting itself to the current conditions. It is grati-fying to note that companies are able to get through such diffi-cult times without help – namely, government assistance. A solid foundation is essential in order to be able to promote the progress of the sector, as is ensuring that the Ocean Cluster as a whole becomes stronger and that Iceland continues to remain among the leading nations in the international seafood market.

The fisheries management system in Iceland will continue to change, and Icelanders should constantly seek ways to develop the system toward increased efficiency, simplicity and fairness. Care should be taken, however, to avoid taking excessively large steps, particularly when the conditions are advantageous. During this time, companies should be exerting their efforts on develop-ing and strengthening their competitive positions.

Rúnar JónssonExecutive Director, Íslandsbanki’s Seafood Industry Team

Íslandsbanki

Íslandsbanki offers comprehensive financial services to private individuals, households, companies, and professional investors. Building on a tradition of service to the nation’s base industries, Íslandsbanki has developed expertise in three key economic sectors – fisheries, renewable energy and tourism.

According to the Bank’s 2013 6M interim statements, loans to the seafood industry were the second largest in its portfolio, comprising approximately 24% of the total. The importance of the fisheries industry to the bank is therefore quite clear.

The Bank’s Corporate Finance Division operates a dedicated sea-food industry team. The team consists of a multidisciplinary group of people from various departments within the Bank. The group handles relations and services for domestic and foreign fisheries companies, as well as the publication of analysis and reports.

Many of the largest and leading fisheries companies from Iceland and abroad have been among Íslandsbanki’s customers in the past few decades.

Source: Íslandsbanki

Fig. 1. Íslandsbanki’s loan portfolio by sector – Q2 2013

Commerce and service Seafood Real estate Industry Construction Other

25%6%8%

24%22%

15%

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3Icelandic Seafood Market Report

Table of contents

Highlights 4

Key aspects 4

Icelandic fisheries sector 5

The fisheries sector’s contribution to GDP 6

Jobs in the seafood industry 6

The Icelandic fishing fleet 7

The operation of fisheries companies 8

Debt position 8

Investments 9

Fishing fees 9

Income tax 10

Vessel operators and catch quotas 10

Catch and catch value 12

Prices and exchange rate developments 13

Exports of marine products 14

Exports by species and specie groups 15

Exports by product categories 17

Seafood product exports according to market areas and countries 18

Aquaculture 19

Export value 19

Geographic locations 19

International comparison 20

The international fisheries sector 21

Supply of seafood products 21

Seafood consumption 22

Population growth 22

Development of seafood product prices 23

Sources 24

Figures 25

Tables 26

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4 Icelandic Seafood Market Report

Highlights

The fisheries sector is extremely important to the Icelandic econ-omy, particularly now that the importance of exports and of earning foreign currency has increased. In 2012, seafood prod-ucts accounted for over 42% of Iceland’s total export value and approximately 27% of the total export value of goods and services. The export value amounted to ISK 269bn – an increase of 7% from the year before. The export value of seafood products has increased by 57% since 2008, and has never been greater than in 2012.

Europe was the most important market for Icelandic seafood goods in 2012, accounting for approximately 79% of all exported seafood during the year. This amounts to an increase of around 3% between years. Exports to the UK accounted for the greatest proportion (18%), followed by Norway (8%) and Spain (7%).

As before, cod was Iceland’s most valuable export species in 2012. Almost 101 thousand tonnes of cod products, with a value of ISK 83bn, were exported during the year. Mackerel and herring followed, accounting for ISK 30bn and ISK 26bn respectively. Products from demersal species in 2012 accounted for just under 57% of the total value of seafood goods – an increase of 4% between years.

The fisheries sector’s direct contribution to GDP was approxi-mately 11.5% in 2012. Approximately 9,000 people are directly employed by the fisheries sector, a similar figure to 2011. Men make up the majority of the sector (78%). The majority of those employed by the seafood industry are located outside the greater Reykjavík area (82%).

Many Icelandic vessel operators have merged over the course of the past two decades in order to gain greater operational efficiency. This is proven by the fact that the 50 largest vessel operators own most of the allocated quota, or approximately 86%, as compared to 74% in 2002. This can also be seen in the statis-tics of the development of the Icelandic fishing fleet, which has decreased from 1,935 vessels to 1,690 vessels from 2002 to 2012, or by approximately 13%. The greatest number of fishing vessels, 399, had a registered home port in the Westfjords in 2012; this corresponds to 24% of the fishing vessel fleet. The second most numerous, a total of 324 or just over 19%, listed their registered home port in West Iceland. Fewest vessels had a registered home port in South Iceland, a total of 75, which corresponds to over 4% of the total.

The operation of Icelandic fisheries companies has been suc-cessful in recent years, and the low exchange rate of the króna and favourable product prices have had a positive impact on the operational results of the sector. The EBITDA margin of the fish-eries sector as a whole in 2011 was approximately ISK 80bn, which is an increase of around 26% between years. Íslandsbanki is of the opinion that the results in the sector in 2012 were some-what better than in 2011, and there is every likelihood that 2013 will also be better. The rate of the Icelandic króna has remained weak, and catches and the processing of pelagic species has been successful during the years in question, with catch quotas of main species increasing.

Investments have decreased in recent years despite the sector’s good results. In 2011, investments in the fisheries industry as a proportion of the rate of return were just under 9%. If we take account of the average over the past ten years, the percentage

Key aspects

• Seafood products are an important part of Icelanders’ diet, and seafood consumption is among the highest internationally, or approximately 88 kg per capita per year (ungutted fish).

• The Icelandic fisheries sector’s direct contribution to GDP was 11.5% in 2012 and has been rising for the past five years.

• Approximately 12% of all jobs outside the greater Reykjavík area are in the the fisheries sector, compared to 1.5% in the greater Reykjavík area. The number of jobs in the fisheries industry has risen by 25% over the past five years.

• The EBITDA margin of Icelandic fisheries companies has never been higher than in 2011, rising by approximately 26% from the previous year.

• Recent years have seen the decrease of the indebtedness of companies in the fisheries sector, the key figure in 2011 being aproximately 4.2 x EBITDA or approximately ISK 442bn.

• Fisheries companies pay approximately ISK 7bn in special fishing fees for the quota year 2012/2013 once deductible items have been taken into account.

• Paid income tax from fisheries companies in 2013 (2012 operating year) was approximately ISK 9.0bn, as compared to ISK 5.5bn in 2012 (2011 operating year).

• The value of exported seafood goods amounted to just under ISK 269bn in 2012, increasing by almost 7% from 2011.

• Aquaculture in Iceland increased somewhat between 2011 and 2012. Approximately 7.800 tonnes were harvested in 2012 as compared to approximately 5,000 tonnes in 2011. It is estimated that 8,500 tonnes will be harvested in 2013.

is around 26%, peaking at 47% in 2005. There were significant investments in 2012, although their scope has yet to be seen. However, it may be assumed, given the criteria at hand, that the total investment in 2012 has been greater than in 2011.

The fisheries industry has, on average, paid approximately ISK 2.6bn in income tax per year. According to recent data from Deloitte, the income tax from Icelandic fisheries companies, paya-ble in 2013 (2012 operating year), amounted to approximately ISK 9.0bn, as compared to ISK 5.5bn in 2012 (2011 operating year). Aquaculture in Iceland increased between 2011 and 2012. Approximately 7,800 tonnes was harvested in 2012, compared to around 5,000 tonnes in 2011. The increase can, for the most part, be attributed to salmon farming, with 3,100 tonnes of salmon harvested in 2012 compared to 1,100 tonnes in 2011. The export value of farmed fish amounted to ISK 4.9bn in 2012 compared with approximately ISK 3.6bn in 2011.

It is vital that a consensus is maintained with regard to the Icelandic fishing industry and that its environment is kept competitive in the international market. Government attitudes toward the sector are important, as is ensuring the stability of future arrangements for the industry. There has been considerable debate about the sector relating to increased taxation and the manner in which access to the resource is arranged. This has led to significant decreases in new investments in recent years.

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5Icelandic Seafood Market Report

Icelandic fisheries sector

The Icelandic fisheries sector plays an important role in Icelandic society, both culturally and financially. It has been a significant source of food for the nation and a large and important part of the country’s export income. Historically, the fisheries sector has been a mainstay in job creation in Iceland and the foundation for diversified industry.

The fisheries sector has had a strong impact on the development of settlement in Iceland and has had a significant effect on the location of built-up areas around the country. Population centres developed, for the most part, in locations with suitable harbour conditions and closeness to fishing grounds.

Fig. 2. Global consumption of seafood products in 2009 (kg/person)

Icelan

d

Portug

al

Sout

h Kore

aSp

ain

Finlan

d

Swed

en USAJa

pan

Norway

Lithu

ania

Franc

e

Canad

aChin

a

Denmark

Russia

Europea

n ave

rage

German

y

The N

etherl

ands

UK

Nigeria

88

61 57 5651

43 41 37 34 32 31

24 23 22 22 22 21 20 15 14

World average18.5

Source: FAO

Seafood products are an important part of Icelanders’ diet and seafood consumption is among the highest internationally, amounting to approximately 88 kg per capita per year (ungutted fish) according to information from FAO. The consumption of seafood in Iceland is more than four times the average consumption in Europe, and over five times higher than the average global level. Consumption of seafood in Iceland, however, has decreased by 3.5% during the past decade or so. Average consumption in Europe has increased by just under 15% during the same period.

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6 Icelandic Seafood Market Report

The fisheries sector’s contribution to GDP The Icelandic fisheries sector’s direct contribution to GDP was approximately 11.5% in 2012, a similar proportion as in the previous year. Fishing accounted for just over 7% of the GDP, and processing for just over 4%. If the average over the past ten years is examined, the fisheries industry has directly contributed 9%, a figure that has been rising in the past five years. Exchange rate fluctuations and an

unstable economic environment account for the instabilities that have been noticed in the proportional contribution of the fisheries sector to GDP during the past decade. The fisheries sector’s contribution to GDP has been rising steadily since 2008. In 2009, GDP decreased – while, at the same time, the fisheries sector’s contribution to GDP rose considerably in real terms and has continued to rise steadily in recent years.

Fig. 3. Share of industries in GDP in 2012

Source: Statistics Iceland

Industry and utilities Commerce and services Real estate Seafood Financial services Transport and shipping Construction Other

29%

17%

16%

11%12%5%

6%

4%

Fig. 4. Fisheries as proportion of GDP

Fishing Fish processing Average seafood production

Source: Statistics Iceland

20%

15%

10%

5%

0%

1973

1977

1981

1985

1989

1993

1997

2000

2004

2008

2012

Fig. 5. Jobs in fishing and fish processing in Iceland

Outside Reykjavík area Reykjavík area

6,100

1,100

7,200

6,500

1,300

7,900

7,100

1,500

8,600

7,200

1,800

9,000

7,400

1,600

9,000

2008 2009 2010 2011 2012

Source: Statistics Iceland

Fig. 6. Individuals employed in the fisheries industry

181614121086420

Thou

sand

per

sons

14%

12%

10%

8%

6%

4%

2%

0%

Number of jobs Proportion of total labour market (r.axis)

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Source: Statistics Iceland

Jobs in the seafood industry

Approximately 9,000 individuals were directly employed in the fisheries sector in Iceland, the same as in the preceding year. Of this, over 4,900 were employed in fishing and just under 4,100 in processing. Gender division between jobs in the fisheries sector is such that women hold approximately 2,100 jobs, with 85% of these consisting of jobs in processing fish on land. The number of men in the industry is 6,900. As of 2008, however, the number of jobs has increased, following a continuous decrease from 1995 onwards. This increase can be attributed to increased coastal fishing together with larger catches. Increased levels of capelin and mackerel fishing have led to the creation of more jobs in land-based processing. In total, approximately 5.3% of the entire labour force in Iceland is employed in the fisheries industry, a similar percentage as that seen in recent years.

The fisheries industry plays a huge role in the areas outside of Reykjavík, with approximately 82% of those employed by the sector residing there. The sector accounts for 12% of all jobs outside the greater Reykjavík area, compared to 1.5% within the greater Reykjavík area. In 2012, the number of jobs outside the greater Reykjavík area increased by 200, while decreasing by the same number within the area. Numerous jobs in other sectors are linked to the fisheries industry in various sectors. It is estimated that between 25 and 35 thousand jobs are directly or indirectly linked to the sector.

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7Icelandic Seafood Market Report

According to figures from Statistics Iceland, based on information from the Icelandic Maritime Administration, the Icelandic fishing fleet has been getting smaller during the past decade, regarding both the number of vessels and gross tonnage. The number of vessels has decreased by around 15% since year 2000, or from 1,993 to 1,690 in 2012. The fishing vessel fleet, as measured in gross tonnage, has decreased by approximately 8%, or from 180,150 to 166,086 during the same period. Figures provided by the Icelandic Maritime Administration for the first eight months of 2013 show that the number of vessels in Iceland is 1,699 and that the gross tonnage of the fleet is 163,325 tonnes. There has therefore been an increase in the number of vessels, although the gross tonnage has decreased slightly in 2013. The figures also show that the number of trawlers is 53 as opposed to 91 in year 2000. In 2012, there were 856 open fishing boats. This number has increased by four during the first eight months of 2013, and currently stands at 860.

The greatest number of fishing vessels (399) have a registered home port in the Westfjords at the end of 2012, corresponding to 24% of the fishing vessel fleet. The second most numerous, a total of 324 or just over 19%, have a registered home port in West Iceland. Fewest vessels had a registered home port in South Iceland, a total of 75, which corresponds to over 4% of the total number of fishing vessels.

The figures from Statistics Iceland do not take vessels’ fishing rights into account. The figures, therefore, include vessels that do not have any fishing rights within the Icelandic fishing zone

as well as those with fishing rights that are not being used by the vessel in question but have been transferred to another. LÍÚ (Federation of Icelandic Fishing Vessel Operators) and the Directorate of Fisheries have issued, since 2002, figures that contain only vessels with fishing rights. These figures demonstrate a decrease over the past decade, with the exception of the years when the coastal fishing boats joined. In 2002, the number of registered vessels with fishing rights was 1,722, while in 2012 they numbered 889. The number of vessels with fishing rights, there-fore, has decreased by 833 vessels, or by approximately 48%.

Source: The Directorate of Fisheries and LÍÚ

Fig. 9. Number of hook catch quota boats, catch quota ships and coastal fishing boats

2.000

1.500

1.000

500

0

Num

ber

Hook catch quota boats Catch quota ships Coastal fishing boats

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: Statistics Iceland

Fig. 8. The fishing vessel fleet by region in 2012

250

200

150

100

50

0Reykjavík

areaSudurnes West coast Westfjords North-West North-East East coast South coast

Open fishing boats Motorised Trawlers

Num

ber

Fig. 7. The Icelandic fishing vessel fleet

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*

Source: Statistics Iceland

2,500

2,000

1,500

1,000

500

0

250

200

150

100

50

0

Gross tonnage No. of vessels (r.axis)

Thou

sand

ton

nes

*Figures for first 8 months of 2013

Num

ber

The Icelandic fishing fleet

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8 Icelandic Seafood Market Report

The operation of Icelandic seafood industry companies has been satisfactory in recent years. Figures from 2011 show that the EBITDA margin – i.e. profits before taxes, depreciation and financial items – has never been higher, having increased by approximately 26% from the previous year. The EBITDA margin amounted to just under ISK 80bn in 2011, compared to just under ISK 64bn in 2010. Íslandsbanki estimates that the results of the sector in 2012 may have been somewhat better than in 2011 and that it is likely that 2013 will provide similar results. The rate of the Icelandic króna has remained weak, catches and the processing of pelagic species have been successful during the years in question, and catch quotas of the main species have been increased.

Earnings before taxes (EBT), taking into account depreciation and financial items, according to the tilted annuity depreciation method, amounted to just under 23% of earnings in 2011 compared to 19.8% the year before. Profits have increased steadily in recent years, rising from ISK 34bn in 2010 to ISK 45bn in 2011, an increase of 32% between years. Although the operation of the sector as a whole is improving and the results are good, operational results vary considerably between individual fisheries categories and company sizes. Increased public charges

Fig. 10. Debt position of the Icelandic fishing industry

Source: Statistics Iceland

3.64.1

5.4

7.5

9.3

7.0

10 9.8

7.1

5.7

4.2

Net debts / EBITDA

Average over past 10 yrs 6.5

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Fig. 11. Assets of Icelandic fisheries companies in ISK bn

Liabilities Equity

Source: Statistics Iceland

2005

334360

446

443 541502

547

2006 2007 2008 2009 2010 2011

have been troublesome for the operation of companies involved in roundfish fishing, particularly smaller companies. Companies involved in pelagic fishing have enjoyed the benefits of increases in catch allowances and successful fishing. However, it is not long since there was a catch failure in certain pelagic species, showing that the sector is subject to significant fluctuations.

Debt position

The leveraging of Icelandic fisheries companies increased significantly in the wake of the extensive weakening of the króna in 2007 and 2008, as a large proportion of the sector’s financing was in foreign currencies. Indebtedness peaked in 2007 and 2008 at around 10x EBITDA, or ISK 564bn in 2008. In the past few years the indebtedness of the companies has decreased and by 2011 the figure was 4.2x EBITDA, or ISK 442bn, with a considerable increase in the EBITDA margin during this period, as has been previously discussed. The companies’ equity position has strengthened during the same period and by 2011 the equity ratio had climbed to just over 19%. Íslandsbanki believes that once the figures for 2012 and 2013 are available they will show a continued strengthening of equity.

Fishing (ISK bn) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total income 76 83 70 71 75 82 85 103 118 137 159

EBITDA 19 19 15 12 15 20 18 26 31 36 42

Depreciation -9 -12 -12 -12 -9 -8 -7 -8 -7 -8 -8

Net price level adjustm.+interest -11 5 0 2 3 -22 1 -127 -13 -9 -11Net profits (EBT) -2 13 2 3 9 -10 13 -109 11 19 23

Fish processing (ISK bn) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total income 93 98 86 93 80 90 94 128 156 169 199

EBITDA 18 8 8 7 6 12 6 22 33 27 38

Depreciation -3 -3 -2 -3 -2 -2 -3 -4 -5 -4 -5

Net price level adjustm.+interest -7 6 1 2 0 -12 2 -66 -9 -9 -12

Net profits (EBT) 8 10 6 5 4 -2 6 -48 18 15 22

Table 1. Operating overview of fishing and fish processing companies

Source: Statistics Iceland

9584

110

-80-1

29 104

238 276 336 532 542 474 443

The operation of fisheries companies

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9Icelandic Seafood Market Report

Investments in the fisheries sector have been minimal in recent years, despite the sector’s good results. The main reason for this trend can be attributed to uncertainties with regard to the Icelandic fisheries management system, i.e. reductions in catch allowances and increased fishing fees. Such advantageous conditions should have created scope for investment, as has been the case in the fisheries sector in recent years, but this has not been the case. The companies have increasingly focused on reducing their debts rather than investing. According to data from Deloitte, the fisheries companies have paid approximately ISK 82bn in instalments in excess of borrowings over the past four years, if account is taken of the net position from the cash flow of each year of the amortisation of long-term borrowings and new borrowings.

As shown in Figure 12, investment in the fisheries sector, as proportion of the rate of return, has significantly decreased since 2007, and has fallen to just under 9% in 2011. The average proportion over the past decade, however, has been around 26%.

In recent years the fisheries companies have embarked on only necessary investments to maintain equipment used in fishing and processing. Significant investments were made in 2012 and, although their scope is not yet known, Íslandsbanki estimates that the total investments in 2012 were greater than in 2011.

Fishing fees

According to the Act on Fishing Fees that was passed in mid-2012, fishing fees are imposed on vessel operators in two ways. One is a general fishing fee and the other a special fishing fee. The general fee is intended to cover the state’s cost of research, management, monitoring and supervision of fishing and processing activities. The special fishing fee is intended to ensure that the nation has a share in the excess dividends that the utilisation of a limited resource can create.

The general fishing fee was first imposed during the quota year 2004/2005. As of 2012 the fee has amounted to ISK 9.5 per cod equivalent kilogram. During the quota year 2012/2013, the special fishing fee was ISK 23.2 per cod equivalent kg of demersal species and ISK 27.50 per cod equivalent kg of pelagic species.

Source: The Directorate of Fisheries

Fig. 13. Paid fishing fees by accounting years

10

8

6

4

2

0

Fishing fee Special fishing fee

ISK

bn

2004 2005 2006 2007 2008 2009 2010 2011 2012

Charged general fishing fees during the 2012/2013 quota year amounted to ISK 3.7bn and the special fishing fee amounted to ISK 9.7bn, while the decrease in the special fishing fee due to the interest costs of parties under payment obligation is ISK 2.7bn. The aggregate amount of the general and special fishing fees for the quota year to the present date is ISK 10.7bn. Yet to be imposed and collected, however, are the general and special fishing fees on catches of non-quota bound species and catches outside quotas (e.g. coastal boat catches and long-line concessions). This will be done this autumn, when the final catch volume is known – included therein will be collections relating to the expected mackerel catch during the quota year, which will probably be the largest amount. The total amount that Icelandic fisheries companies will have to pay in fishing fees for the quota year could amount to as much as ISK 13bn.

Interim provisions have been established in the Act so that dur-ing the 2013/2014 quota year the special fishing fee will be ISK 7.38 per cod equivalent kg for demersal species and ISK 38.25 per cod equivalent kg for pelagic species. Special cod equivalent co-efficients, moreover, are used to calculate the fishing fees for the 2013/2014 quota year. The present government has announced a total review of the Act on Fishing Fees during its term in office and it is therefore difficult to predict the manner in which these issues could develop over the next few years.

Source: Deloitte

Fig. 12. Net investments in operating assets

Net investments Proportion of EBITDA (r.axis)

50%

40%

30%

20%

10%

0%

5.8

9.2

6.1

10.8

8.4

13.9

4.1

5.26.4

ISK

bn

Average over past 10 years = 26%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

13.7

16

14

12

10

8

6

4

2

0

10.5

Investments

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10 Icelandic Seafood Market Report

Income tax

In addition to fishing fees, Icelandic fisheries companies pay income tax and, until 2005, they also paid property taxes. According to data from Deloitte, the income tax from Icelandic fisheries companies, payable in 2013 (2012 operating year), amounted to approximately ISK 9.0bn, compared to ISK 5.5bn in 2012 (2011 operating year).

The state’s tax income from the fisheries sector has increased in conjunction with increased profitability in the sector. The fisheries industry has on average paid approximately ISK 2.6bn in income tax per year. Since 2008, the fisheries companies have been clear-ing up the accrued losses that occurred following the collapse of the Icelandic economy, as such losses may be set off against prof-its when income tax is calculated. Some fisheries companies have cleared up these accrued losses and have, therefore, paid much higher income tax for the past two years than in the preceding years. It may be assumed that the accrued losses on the books of the largest companies will decrease, which again will lead to increased tax payments.

Vessel operators and catch quotas

There has been a strong trend towards consolidation in the Icelandic seafood industry in past two decades after fishing quotas became transferable. The driving force behind this was increased economisation.

This consolidation entailed increased indebtedness within the seafood industry, while at the same time contributing greatly to increased economisation and improved profitability in the companies. In addition, larger companies, which have harvesting rights to a greater number of species, are better able to tackle operating fluctuations.

At present, the 50 largest seafood industry companies hold approximately 86% of issued quotas. The 10 largest companies control just under 52% of issued harvesting rights, and the 20 largest companies control approximately 71%, as can be seen in Table 2.

Fig. 14. Income tax paid by Icelandic fisheries companies in ISK bn

Operating year

0.91.9 1.4

1.9 1.6 1.32.2

1.2 1.5

2.8

5.5

9.0

Source: Ministry of Finance and Economic Affairs and Deloitte

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: The Directorate of Fisheries

Fig. 15. The share of the 10 largest quota holders in authorised total catch

1992 1999 2004 2013

52%

32%

47%

24%

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11Icelandic Seafood Market Report

Source: The Directorate of Fisheries

Fig. 16. Proportional division of catch quota by region during the 2013/2014 quota year

Source: The Directorate of Fisheries

12%

15.4%

17.5%

6.1%

13.5% 13.3%

8.4%

13.9%

West c

oast

Sout

h coa

st

Westfj

ords

North-

West

Reykja

vík ar

ea

Sudurn

es

North-

East

East co

ast

Fig. 16 shows the proportional division of catch quotas by region for the fishing year 2012/2013. North-east Iceland has the highest share, or approximately 17%, and North-west Iceland has the lowest share, or approximately 6%.

Vessel operator Cod equivalents (thousand tonnes)

Percentage

HB Grandi hf. 50,031 11.87%Samherji Ísland ehf. 29,798 7.07%Þorbjörn hf. 21,186 5.03%FISK-Seafood ehf. 19,482 4.62%Vinnslustöðin hf. 17,982 4.27%Brim hf. 16,993 4.03%Skinney-Þinganes hf. 16,511 3.92%Síldarvinnslan hf. 16,115 3.82%Vísir hf. 15,602 3.70%Rammi hf. 15,440 3.66%Ísfélag Vestmannaeyja hf. 13,880 3.29%Hraðfrystihúsið - Gunnvör hf. 11,540 2.74%Nesfiskur ehf. 9,454 2.24%Eskja hf. 8,614 2.04%Gjögur hf. 8,403 1.99%Ögurvík hf. 7,559 1.79%Útgerðarfélag Akureyringa ehf. 6,717 1.59%Bergur-Huginn ehf. 6,385 1.51%Jakob Valgeir ehf. 5,264 1.25%Stálskip ehf. 5,179 1.23%Top 10 219,141 52%Top 20 302,136 72%Top 30 336,516 80%Top 50 367,074 87%

Table 2. Permitted total catch of the largest firms in 2013

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12 Icelandic Seafood Market Report

Catch and catch value

The total catch of Icelandic fishing vessels from all fishing grounds, has increased significantly during the past decade. According to preliminary figures from Statistics Iceland for 2012, the catch volume was approximately 1,450 thousand tonnes, almost of 300 thousand tonnes more than in 2011, or an increase of 26% between years.

According to Statistics Iceland the catch value from Icelandic vessels amounted to around ISK 159bn in 2012, an increase of 4% from the previous year. Cod was the most valuable species in 2012, or 31% of the total value. Herring was the second most valuable species, with 9% of the total value. The capelin catch value rose considerably between years with the 2012 value amounting to ISK 13.5bn, an increase of 52% from 2011. It should be noted that the catch value of mackerel is not specifically stated in the figures from Statistics Iceland. It may be assumed that most of the category “Other” consists of mackerel.

By far the largest proportion of the catches of Icelandic fishing vessels unloaded in Iceland in 2012 originates from Icelandic waters, a total of 87%. Comparisons between 2009 and 2012 show a significant drop in catches caught in foreign waters, while at the same time the catch in Icelandic waters has increased considerably. This is shown in Fig. 19.

Fig. 19. Catch by fishing grounds in thousands of tonnes

Icelandic fishing grounds Other

2009 2010 2011 2012

Source: Statistics Iceland

Fig. 17. Catch of Icelandic vessels from all fishing areas

Cod Haddock Pollock Redfish Herring Capelin Other

Source: Statistics Iceland

2.5

2.0

1.5

1.0

0.5

019881984 19921960 19961964 20001968 20041972 20081976 20121980

Mill

ion

tonn

es

Source: Statistics Iceland

Fig. 20. Proportional division of catch by species in 2012 in tonnes

Capelin Cod Herring Redfish Pollock Haddock Other

39%

23%

13%14%

4%4%3%

Source: Statistics Iceland

Fig. 18. Proportional division of catch by species in 2012

Cod Herring Redfish Capelin Haddock Pollock Halibut Other

31%

8%9%

9%9%

6%

5%

23%

734 761 976 1.257

396 303173

192

1,449

1,1491,063

1,130

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13Icelandic Seafood Market Report

Prices and exchange rate developments

Price indices of seafood products have decreased to date in 2013. The price index in July measured 249.9 points in Icelandic króna, a decrease of just under 8% since January. The index, therefore, has fallen by just over 6% since July 2012 measured in ISK and by approximately 3% measured in SDR. The SDR measurement is commonly used due to the instability of the Icelandic króna. SDR is the basket index of the International Monetary Fund and is based on the euro, yen, pound sterling and the US dollar.

The Freshfish Price Directorate monitors weighted average prices for various fish categories, including cod, haddock, and saithe. Price and quantity are based on landed catch, and only data on direct purchases by domestic fish processors and sales on domestic markets are used. The weighted average price of these two is then reached.

According to the Directorate, the price of cod has fallen by just under 12% in 2013 and the price of saithe by just under 8% during the same period. The average price of haddock, however, has risen by just under 31% to date in 2013, standing at 147.48 in June 2013.

Source: Statistics Iceland

Fig. 21. Price indices of seafood products (2005=100)

300

250

200

150

100

502008 2010 20122009 2011 2013

ISK SDR

Source: Statistics Iceland

Fig. 22. Price indices of seafood products, sub-indices (2005=100)

600

500

400

300

200

100

02008 2010 20122009 2011 2013

Demersal Pelagic Meal Fish liver oil

Source: The Freshfish Price Directorate

Fig. 23. Weighted average price (sold directly to processors and sold in the domestic markets)

400

350

300

250

200

150

100

50

0

Cod haddock Pollock

Jan ‘

08

Jul ‘0

8

Jul ‘0

9

Jan ‘

10

Jul ‘1

0

Jan ‘

11

Jul ‘1

1

Jan ‘

12

Jul ‘1

2

Jan ‘

13

Jan ‘

09

ISK

/kg

The average price of cod, sold directly to processors and for sale in the domestic market, was 227.89 in June 2013. Increased availability of cod due to fishing activities in the Bering Sea has had the effect of lowering cod prices internationally which also has a considerable impact on the Icelandic market, since cod is one of the main species exported by Iceland.

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14 Icelandic Seafood Market Report

Exports of marine products

In 2012, 749 thousand tonnes were exported, an increase of over 11% from the previous year’s total of 672 thousand tonnes. The value of exported seafood products amounted to just under ISK 277bn in 2012, increasing by approximately 8% from 2011. This figure is the aggregate total of exports and changes in the inventory of marine products. If account is taken only of the value created in exporting seafood products in 2012, the increase between years is approximately 6.8% and amounted to ISK 269bn in 2012.

Frozen products account for over half of the total export value, or 53%, while whole frozen mackerel was of the greatest importance with a value of approximately ISK 19bn.

Source: Statistics Iceland

Fig. 24. Proportion of goods and service exports of total export value in 2012

2009 2010 2011 2012

Source: Statistics Iceland

Fisheries Aluminium Transport and shipping

Tourism Other

24% 22% 22% 21%

9% 8% 9% 10%

17% 17% 16% 18%

24% 28% 27% 24%

26% 25% 26% 27%

Fig. 25. Export value of seafood products in ISK bn

201120102009 2012

Fixed price 2012 (seafood product price index) Price level each year

260 265 270 269

209229

252269

Source: Statistics Iceland

The export value of seafood products in 2012 corresponds to just over 42% of the total value of goods exported from Iceland. If account is taken of the fisheries industry’s share in exports of both goods and services, seafood products have an approximately 27% share in the total value of goods exported. The aluminium industry had the second largest share of export value, or ISK 245bn, which corresponds to 24% of the total value.

The export value of seafood products on the basis fixed price levels in 2012 has remained quite stable in recent years. It may be assumed, therefore, that the increase in export values that has occurred in the past four years is mainly due to exchange rate changes or price changes in seafood products.

Fig. 26. Export value at each year’s price levels in ISK bn

20112010200920082007 2012

Seafood products Aluminium Transport and shipping Tourism

220209

171

128

252269

245

190182

80

257247

144131

8164

158180

68685287 106

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15Icelandic Seafood Market Report

Exports by species and specie groups

Just under 226 thousand tonnes of demersal species were exported in 2012. This corresponds to approximately 30% of the total export of seafood products. The export value of demersal species is just under 57% of the total value of exported seafood products, or approximately ISK 153bn. Their value increased by ISK 7.3bn between years, or just under 4% since 2011.

Just under 101 thousand tonnes of cod were exported in 2012. Cod was the most valuable export species and its value amounted to approximately ISK 83bn, an increase of almost 8% between years. The export value of haddock products amounted to over ISK 16.4bn in 2012, increasing by 1.7% between years. The value of demersal species other than cod and haddock increased by 2.3% between years.

The share of pelagic species was just under 58% of the total exports of seafood products and amounted to 431 thousand tonnes, an increase of 23% from 2011. The greatest volume caught in 2012 was capelin, followed by herring and then mackerel. The share of pelagic species in the export value of marine products was approximately 29%, or just under ISK 78bn, increasing by almost 16% from 2011.

Source: Statistics Iceland

Fig. 28. Proportional value of seafood products by species in 2012

Cod Capelin Herring Mackerel Redfish Haddock Pollock Shrimp Halibut Other

31%

11%

9%7%7%

6%

4%

16%

5%

4%

Fig. 29. Export value of demersal species, at fixed price in 2012 in ISK millions

Cod Redfish Haddock Pollock Other demersal

2011201020092008 2012

16,07019,206 21,223

20,596 21,570

11,54513,733

14,00212,820 12,476

25,84523,044

21,291 16,468 16,404

15,29718,156

18,396 19,788 19,252

77,504 85,855 80,579 78,779 82,961

146,263159,994

155,491 148,451 152,663

Source: Statistics Iceland

Fig. 27. Proportional value of exported demersal species in 2012

Cod Redfish Haddock Pollock Shrimp Other demersal

43%

9% 10%

7%

6%

25%

Source: Statistics Iceland

Of individual species, the export value of capelin was the highest, amounting to under ISK 30bn or an increase of 62% from the previous year. The export value of herring products was approximately ISK 26bn, an increase of 6% between years. The export value of mackerel, however, decreased between years and amounted to around ISK 20bn in 2012, a decrease of just under 19%.

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16 Icelandic Seafood Market Report

Source: Statistics Iceland

Fig. 30. Proportional value of exported pelagic species in 2012

Capelin Herring Mackerel Blue whiting

38%

33%

25%

4%

Source: Statistics Iceland

Fig. 31. Export value of pelagic species, at fixed price in 2012 in ISK millions

Capelin Herring Mackerel Blue whiting Other pelagic

2011201020092008 2012

7,488

5,165

5,197

5362,844

1,347

3,835

12,076

28,963 19,568

41,692

40,271

29,53229,915

25,551

22,885

4,597

17,697 22,020

29,719

74,151

54,677

64,632

80,63177,810

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17Icelandic Seafood Market Report

Exports by product categories

Of individual product categories, frozen products accounted for over 53% of the total export value, or ISK 142bn, decreasing by of ISK 1.7bn from 2011. This is followed by fresh (iced) fish products for approximately ISK 44bn, an increase of almost 6% from the previous year. The value of salted products amounted to almost ISK 27bn. This is the eighth year in a row that the value of fresh products exceeded salted products. The export value of meal and fish liver oil accounted for just under 14% of the export value of seafood products and was ISK 36.9bn, an increase of 26% from 2011.

Source: Statistics Iceland

Fig. 32. Export value of seafood products by species groups, at fixed price in 2012 in ISK bn

20112009 20102008 2012 Demersal Pelagic Other

146,263 159,994 155,491 148,451 152,663

269,320 259,696 264,920 269,578 268,631

48,906 45,026 44,797 40,497 38,158

74,151 54,677 64,632 80,631 77,810

Source: Statistics Iceland

Fig. 33. Proportional export value of seafood products by product categories in 2012

Frozen Fresh Meal/fish liver oil Salted Dried Other

53%14%

16%

10%

5%2%

Frozen Meal/fish liver oil Fresh Salted Dried Other

Source: Statistics Iceland

Fig. 34. Proportion of exported seafood products by product categories in tonnes in 2012

56%

8%

24%

4% 3%5%

Source: Statistics Iceland

Table 3. Export value of marine products by processing method in 2012 in ISK bn

Frozen 141,739

Frozen-at-sea, whole 22,710Frozen-at-sea, block-frozen fillets 3,522Frozen-at-sea n.e.c. 17,953Other frozen-at-sea marine products 244Whole frozen fish n.e.c. 29,725Frozen on land, block-frozen fillets 4,670Land frozen fillets, n.e.c. 13,565Minced fish, frozen 1,090Frozen roe 5,742Other frozen marine products 42,518

Fresh 44,289New, chilled or ice-protected whole fish 9,896New, chilled or ice-protected fish fillets 14,147Other fresh, chilled marine products 20,246

Salted 27,044Dried salt fish 2,100Wet-cured salt fish 16,462Salt fish fillets, pieces, etc. 6,771Salted roes 1,711

Meal/fish liver oil

36,927

Fish meal 22,291Fish liver oil 14,636

Dried 12,924

Stockfish 803Dried fish heads 8,622Other dried, salted fish 3,499

Other 5,705Other fish processing products, n.e.c. 5,705

Total 268,628

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18 Icelandic Seafood Market Report

Source: Statistics Iceland

Fig. 36. Proportional value of exported seafood products by country in 2012

UK Norway Spain Russia France Nigeria Netherlands Germany USA Other

18%

5%

33%

6%

8%

7%

6%

6%6%

5%

Source: Statistics Iceland

Fig. 35. Proportional value of seafood products by continents in 2012

Europe Asia Africa N-America Other

79%

6%

9%

5% 1%

1. Cod ISK m % of total 2. Capelin ISK m % of totalUK 20,744 25.0% Norway 12,208 41.1%Spain 12,707 15.3% Denmark 4,443 14.9%France 11,529 13.9% Russia 2,073 7.0%Nigeria 7,442 9.0% UK 1,713 5.8%

3. Herring ISK m % of total 4. Mackerel ISK m % of totalPoland 5,874 23.0% Norway 7,259 37.1%Russia 5,127 20.1% Denmark 4,840 24.7%Lithuania 5,103 20.0% Russia 3,099 15.8%Norway 4,709 18.4% UK 1,661 8.5%

5. Redfish ISK m % of total 6. Haddock ISK m % of totalGermany 4,540 23.6% UK 7,743 47.2%Japan 3,259 16.9% USA 5,598 34.1%China 2,198 11.4% Nigeria 949 5.8%Netherlands 1,650 8.6% Belgium 675 4.1%

7. Pollock ISK m % of total 8. Shrimp ISK m % of totalGermany 3,258 26.1% UK 8,919 80.4%Netherlands 1,595 12.8% Denmark 949 8.6%Nigeria 1,101 8.8% Spain 263 2.4%Spain 1,061 8.5% Estonia 218 2.0%

Table 4. Export value according to species and countries for the eight most valuable species in 2012

Source: Statistics Iceland

Seafood product exports according to market areas and countries

In 2012, seafood products with a value of ISK 211bn were exported to Europe, corresponding to approximately 79% of total exports. This makes the European Union (the EU) the most important market area for Icelandic seafood products. The value of exported seafood products to Europe increased by ISK 5.4bn between years, or just under 3%. Exports to Asia increased by 7% between years with the value amounting to around ISK 24bn, corresponding to 9% of the total export of seafood products. Exports to Africa amounted to just under ISK 17bn in 2012, or approximately 6% of the export value of seafood products.

Icelandic seafood products are exported mainly to Britain (18%), followed by Norway (8%) and Spain (7%). The top ten nations on the list of buyers of Icelandic seafood products collectively account for 77% of total export value, with the top five countries accounting for 48%. The category “Other” in Fig. 36 consists of 34 nations that each have a share of less than 4%.

The greatest proportion exported is frozen or chilled cod and haddock, together with frozen shrimp to the UK. The UK receives 80% of exported shrimp. The main export products to Norway are fishmeal and fish oil from herring, capelin and blue whiting. Norwegians use the fishmeal and fish oil as feed in aquaculture. Large amounts of salted fish and frozen cod are exported to Spain. Exports to Russia mostly consist of whole, frozen mackerel, capelin and herring. Exports to France are composed of mainly fresh cod, while capelin roes, sea-frozen red perch and Greenland halibut are the main products exported to Japan.

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19Icelandic Seafood Market Report

Aquaculture

Aquaculture in Iceland increased somewhat between 2011 and 2012. Approximately 7,800 tonnes were harvested in 2012 as opposed to around 5,000 tonnes in 2011. The increase can for the most part be attributed to salmon farming as 3,100 tonnes of salmon were harvested in 2012 compared to 1,100 tonnes in 2011. The National Union of Fish Farms and Ocean Ranching estimates that approximately 4,000 tonnes of salmon will be harvested this year. Continued growth is anticipated in the next few years and permits to produce up to 26,155 tonnes of salmon and rainbow trout at sea have been granted.

Moreover, the farming of trout and arctic char increased in 2012, when 3,700 tonnes were harvested. The corresponding number for 2011 was 3,100 tonnes. Cod farming increased between years with approximately 1,000 tonnes harvested in 2012 compared to 800 tonnes in 2011. This volume will decrease significantly, as large entities in the sector have ceased production.

Export value

The export value of farmed fish amounted to approximately ISK 4,9bn in 2012, compared to approximately 3.6bn in 2011. The increase is mainly attributable to the increased value of exported salmon, the value of which rose from ISK 1.2bn in 2011 to around ISK 2.4bn in 2012.

Some increase in the value of exported salmon per kg may be expected over the course of the present year as salmon prices have increased significantly since the beginning of 2013. The price in August 2013 stood at around NOK 42 per kg or ISK 840 per kg. The futures price for salmon, however, is lower than the current price which means that the market expects prices to fall.

Fig. 38. Harvested farmed fish in thousands of tonnes, whole, ungutted fish

2006 2007 2008 2009 2010 2011

Salmon Trout/Arctic char Cod Other species

3.8

8.9

1.2 0.3 0.8 1.0 1.13.1 4.0

0.6

9.9

4.9 4.9 5.0 5.0

7.88.5

4.8

1.4

1.5 1.5 1.0 1.20.8

1.01.4

2.2 3.0 3.1 2.4 3.1

3.7

2012 2013*

Fig. 39. Export value of farmed fish, at fixed price in ISK millions in 2012 (seafood product price index)

2007 2008 2009 2010

Salmon Trout Cod Other species

2011 2012

617 6781,232 1,221 1,227

2,428

468416

221 344201

243

201

65 15396

72

286

1,218 1,525

1,798 1,688 2,060

2,176

2,5882,821

3,315 3,406 3,584

4,918

Source: Statistics Iceland

Source: The Icelandic Aquaculture Association

*Estimated figures

Fig. 37. Price and futures price of salmon

50454035302520151050

2009 2010 2011 2012 2013Futures price

2014

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Janu

ary

May

Sept

embe

r

Source: The Icelandic Aquaculture Association

NO

K/k

g

Geographic locations

There appears to be quite some optimism around Icelandic fish farming these days. Production is increasing and it appears as if we are becoming more successful at farming than before. The greatest increase in production is presently in the Westfjords. Fig. 40 shows the areas where salmonids may be farmed in the sea. As the figure shows, fish farming is mostly limited to the West- and Eastfjords, so it is only natural that the increase is seen only in these two areas.

Estimated figures

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20 Icelandic Seafood Market Report

International comparison

In 2012, world-wide fish farming produced approximately 66.2 million tonnes, according to FAO. This is an increase of two million tonnes or 5.6% from the previous year. FAO predicts a similar increase over the next few years and is of the opinion that by 2015, fish farming harvests for human consumption will for the first time exceed wild caught fish. A year ago, FAO predicted that this would happen in 2018, but due to greater increases in fish farming than expected, this prediction has changed.

China is by far the largest aquaculture producer in the world with around 61.5% of the total global production in 2011 and approximately 47.3% of the total value. India is the second largest with around 7.3% and Vietnam and Indonesia thereafter with 4.5% each.

Of the fish farming nations in the North Atlantic, Norway is by far the largest nation, producing around 1.1 MT in 2011 and is, on a global level, in sixth place with 1.8% of the total production. Next in line is Canada with around 70,000 tonnes and the Faeroe Islands are third with 60,000 tonnes. It is therefore clear that Iceland lags far behind its neighbours with approximately 5,000 tonnes produced in the same year.

Source: FAO and OECD

Fig. 41. Fishing for human consumption and aquaculture in the world120

100

80

60

40

20

0

Mill

ion

tonn

es

Total catch Farmed fish Fishing for human consumption

2000 2005 2010 2015 2020

Fig. 42. Fish farming in the North Atlantic Ocean

1,4001,2001,000

800600400200

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: FAO

Norway Canada - East coast Faroe islands US - East coast Iceland

Thou

sand

ton

nes

Fig. 40. Operating permits for fish farming and areas protected from salmonid farming at sea

Fontur

Glettinganes

Tjörn

está

Hraunhafn

artangi

Bjarn

arfjall

SiglunesGeiró

lfsnúpur

Látrabjarg

Hellissandur

Malarrif

Garðskagi

Permit for between 50-250 tonnes per yearPermit for 250-1000 tonnes per yearPermit for between 1000+ tonnes per year

Protected areas at sea where the farming ofsalmonids of reared origin in sea cages is prohibited

Source: Institute of Fresh Water Fisheries and Directorate of Fisheries

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21Icelandic Seafood Market Report

The international fisheries sector

Supply of seafood products

The total production of seafood has increased by just under 25% during the past decade and in 2011 the total production globally amounted to around 156.2 million tonnes. According to the predictions from FAO regarding the development of the total production of seafood, this number will be over 181 million tonnes by 2022, which corresponds to an increase of 16% from 2011 or an average 1.4% increase each year, attributable for the most part to greater emphasis on fish farming.

Catches of wild stock have remained rather stable over the past few years and have been around 90 million tonnes. Availability has remained stable, although there have been some changes to catch trends according to country, areas and species. Wild catches are not expected to increase much over the next few years, as fish stocks cannot sustain much more harvesting.

Catches of most marine species has changed little in recent years with the exception of anchovies. Anchovies (Peruvian anchovy) are the most heavily harvested species in the world with 8.3 million tonnes caught in 2011. Fishing for anchovies has been decreasing significantly since 2004, mainly as a result of government actions to protect the stock.

According to data from FAO, Asian countries fish the greatest volume, or around 50% of the total catch in 2011. America is second in line with around 27% and then Europe with just under 16%. China is the world’s leading fishing nation, as in previous years, with just under 14.5 million tonnes total catch in 2011. Iceland is in 17th place with around 1.1 million tonnes, or approximately 1.4% of the total global catch. Iceland has moved down by six places since 2001 when it ranked as the eleventh leading fishing nation. Twenty leading fishing nations caught 80% of the total catch in 2011.

Mill

ion

tonn

es

Source: FAO and OECD

Fig. 43. Global seafood production

200

180

160

140

120

100

80

60

40

20

0

2220181614121086420

Fishing Fish farming Pop. developm. Consumption (r.axis)

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

Source: FAO and OECD

Fig. 44. Proportional division of the total seafood production by continents in 2011

Asia America Europe Africa Oceana

50%

16%

27%

6% 1%

Source: FAO

Fig. 45. Total production of the 20 largest fisheries nations in the world in 2011

Russia

China

Japan

Peru India

Indon

esia

Chile

Vietna

mUSA

Norway

Philippine

Islan

ds

Myanm

ar

Sout

h Kore

a

Thaila

nd

Mexico

Malaysi

a

Icelan

dSp

ain

Morocc

o

Canad

a

16

14

12

10

8

6

4

2

0

Mill

ion

tonn

es

Average of 20 largest

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22 Icelandic Seafood Market Report

Seafood consumption

In 2011, the yearly consumption of seafood products worldwide averaged at approximately 19 kg per person, and has never been higher.

It is believed that seafood consumption will increase by 8.4% by the year 2022 and will be 20.6 kg per person per year. This increased fish consumption, together with rising populations, estimated to increase by 11% to 2022, could mean that over the next decade or so demand for seafood products could exceed availability.

Upswings in consumption in growing market areas, particularly among Chinese consumers, will be a key aspect in increased demand in the coming decade. Fast urbanisation, the growth of the middle class and increased proportion of proteins in the diet are fundamental elements in the increased demand for seafood products. Demand for more expensive consumer goods containing proteins, such as seafood, increases with greater spending power. Growing prosperity often leads to an increased interest in better health and health protection and individuals, both in the devel-oped and developing countries, are increasingly seeking health improving foodstuffs with low-fat protein sources, such as sea-food products. Fish is a very protein-rich food and contains many nutritional substances such as iodine, selenium and fish fat. Fish fat is very healthy because it contains omega-3 fatty acids and vitamin D, but little saturated fat.

Population growthIn 2011, the world’s population was 7 billion. According to FAO, it is estimated that by 2030, the global population will be 8.3 billion, corresponding to an increase of 19%, and by 2050 the global population will have reached 9.3 billion, an increase of 33% from 2011.

Taking account of the expected increase in population and that seafood consumption will increase by 8.4% to 2020 and by 4.2% after that, the annual demand for fish for human consumption to the year 2030 will be approximately 183 million tons, and 202 million tons by 2050. For further details, see Fig. 46.

Source: FAOkg

/per

son/

year

20.6

Fig. 47. Average global consumption of seafood products

22

20

18

16

14

12

10

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

Estimated figures

Bill

ions

Fig. 49. Population developments to 2050

10

8

6

4

2

0

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

Developed countries Developing countries

Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat

Thou

sand

ton

nes

Fig 46. Demand for seafood products for human consumption to 2050

Fixed demand in 2011 Increase due to population increase

Increase due to increased consumption

Source: OECD and FAO

250

200

150

100

50

02011 2015 2020 2025 2030 2035 2040 2045 2050

Fig. 48. Average global consumption of seafood products (kg/person/year)

2010-2012 2020-2022

Source: OECD and FAO

18.920.5 21.5

9.7

21.0

10.1

25.223.4

9.1

24.0

10.7

25.9

AsiaAfricaEuropeTotal S-America OECD-countries

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23Icelandic Seafood Market Report

Development of seafood product prices

Limited availability of wild fish and increased feed costs for farmed species generally traded in international markets, such as salmon and shrimp, has led to higher seafood product prices.

Long-term diseases that have plagued the shrimp industry in South-east Asia, as well as limited catches of wild shrimp means that prices will continue to rise over the coming years. Increased demand for tuna, salmon and mackerel in international markets will lead to increases in the prices of these species.

Sufficient supply – i.e. increased fishing rights – of cod in conjunction with decreases in prices in Europe has had a negative effect on vessel operators and producers. The price of hake, together with other white fish, has fallen concurrently with the price of cod. The price of haddock has risen in past months, and it is likely to continue to do so, due to limited availability.

Comparing fish prices with other meats shows that internationally, meat prices have generally been rising since 2000. The price of lamb has risen the most proportionally, or 208% during the period between 2000 and 2013, while the price of fish has increased the least, or approximately 38% during the same period. FAO predicts continued increases in the price of these products and believes that the greatest increase will be in the price of seafood, around 28%.

USD

/ton

nes

Fig. 50. World markt price trends for fish

3,000

2,400

1,800

1,200

600

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

Aquaculture Capture

Source: OECD and FAOU

SD/t

onne

s

Fig. 51. World prices for meat and seafood products

5,000

4,000

3,000

2,000

1,000

0

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

Beef and veal Lamb Pork Poultry Fish

Source: FAO

Fig. 52. Estimated increases in the price of individual seafood product categories 2013-2022

Source: FAO

-7% -7%

28% 32% 33%

Fish oils Fish meals Fish trading Aquaculture Fishing, wild stocks

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Sources

Deloitte. Results of the fisheries sector and the effects of fishing fees 2012. Accessed on 26 August 2013 from: http://www.deloitte.com/assets/Dcom-Iceland/Local%20Assets/Documents/2012%20afkoma%20sjavarutvegs.pdf

FAO. The state of world fisheries and aquaculture 2012. Accessed on 12 June 2013 from: http://www.fao.org/docrep/016/i2727e/i2727e.pdf

FAO. Fisheries and Aquaculture Department. Global Aquaculture Production. Accessed on 30 September 2013 from: http://www.fao.org/fishery/statistics/global-aquaculture-production/query/en

Fish Pool ASA. Price Information. Accessed on 29 September 2013 from: http://fishpool.eu/fpi.aspx?pageId=56

The Directorate of Fisheries. Quota share of the largest fishing companies during the fishing year 2013/2014. Accessed on 9 September 2013 from: http://www.fiskistofa.is/umfiskistofu/frettir/nr/956

The Directorate of Fisheries. Protected areas at sea where the farming of salmonids of reared origin in sea cages is prohibited. Accessed on 26 August 2013 from: http://www.fiskistofa.is/media/laxa_silungssvid/460-2004.pdf

Statistics Iceland. Catch and catch value. Accessed on 2 September 2013 from: http://hagstofa.is/Hagtolur/Sjavarutvegur-og-landbunadur

Statistics Iceland. Fishing vessel fleet. Accessed on 20 August 2013 from: http://hagstofa.is/Hagtolur/Sjavarutvegur-og-landbunadur

Statistics Iceland. Fisheries and agriculture. Accessed in September 2013 from: http://hagstofa.is/Hagtolur/Sjavarutvegur-og-landbunadur

Statistics Iceland. Export and export value of marine products 2012. Accessed on 12 August 2013 from: https://hagstofa.is/lisalib/getfile.aspx?ItemID=15211

Statistics Iceland. Volume and value of exported goods according to product categories 1999-2012. Accessed on 26 August 2013 from: http://hagstofa.is/Hagtolur/Utanrikisverslun/Utflutningur

The Icelandic Aquaculture Association. Statistics – Aquaculture. Accessed on 26 August 2013 from: http://lfh.is/hagtolur-eldid.htm

LÍÚ (Federation of Icelandic Fishing Vessel Owners). The fisheries sector in figures. Accessed on 2 September 2013 from: http://www.liu.is/hagtolur-sjavarutvegsins/

OECD-FAO. Agricultural Outlook 2013–2022. Accessed on 29 May 2013 from: http://www.keepeek.com/Digital-Asset-Management/oecd/agriculture-and-food/oecd-fao-agricultural-outlook-2013_agr_outlook-2013-en#page1

OECD-FAO. Agricultural Outlook 2013–2022. Fish and Seafood. Accessed on 27 August 2013 from: http://www.keepeek.com/Digital-Asset-Management/oecd/agriculture-and-food/oecd-fao-agricultural-outlook-2013/fish-and-sea-food_agr_outlook-2013-11-en#page1

Íslandsbanki would like to thank the following parties for their help in preparing this report: Deloitte, the Directorate of fisheries, the National Union of Fish Farms and Ocean Ranching and LÍÚ

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Figures

Figure 1: Íslandsbanki’s loan portfolio by sector – Q2 2013. Source: Íslandsbanki. Page 2

Figure 2: Global consumption of seafood products in 2009. Source: FAO. Page 5

Figure 3: Share of industries in GDP in 2012. Source: Statistics Iceland. Page 6

Figure 4: Fisheries as proportion of GDP. Source: Statistics Iceland. Page 6

Figure 5: Jobs in fishing and fish processing in Iceland. Source: Statistics Iceland. Page 6

Figure 6: Individuals employed in the fisheries industry. Source: Statistics Iceland. Page 6

Figure 7: The Icelandic fishing vessel fleet. Source: Statistics Iceland. Page 7

Figure 8: The fishing vessel fleet by region in 2012. Source: Statistics Iceland. Page 7

Figure 9: Number of hook catch quota boats, catch quota ships and coastal fishing boats. Source: The Directorate of Fisheries and LÍÚ. Page 7

Figure 10: Debt position of the Icelandic fishing industry. Source: Statistics Iceland. Page 8

Figure 11: Assets of Icelandic fisheries companies. Source: Statistics Iceland. Page 8

Figure 12: Net investments in operating assets. Source: Deloitte. Page 9

Figure 13: Paid fishing fees by accounting years. Source: The Directorate of Fisheries. Page 9

Figure 14: Income tax paid by Icelandic fisheries companies. Source: Ministry of Finance and Economic Affairs and Deloitte. Page 10

Figure 15: The share of the 10 largest quota holders in authorised total catch. Source: The Directorate of Fisheries. Page 10

Figure 16: Proportional division of catch quota by region during the 2013/2014 quota year. Source: The Directorate of Fisheries. Page 11

Figure 17: Catch of Icelandic vessels from all fishing areas. Source: Statistics Iceland. Page 12

Figure 18: Proportional division of catch value by species in 2012. Source: Statistics Iceland. Page 12

Figure 19: Catch by fishing grounds in thousands of tonnes. Source: Statistics Iceland. Page 12

Figure 20: Proportional division of catch by species in 2012 in tonnes. Source: Statistics Iceland. Page 12

Figure 21: Price indices of seafood products (2005=100). Source: Statistics Iceland. Page 13

Figure 22: Price indices of seafood products, sub-indices (2005=100). Source: Statistics Iceland. Page 13

Figure 23: Weighted average price (sold directly to processors and sold in the domestic markets). Source: The Freshfish Price Directorate. Page 13

Figure 24: Proportion of goods and service exports of total export value in 2012: Source: Statistics Iceland. Page 14

Figure 25: Export value of seafood products in ISK bn. Source: Statistics Iceland. Page 14

Figure 26: Export value at each year’s price levels in ISK bn. Source: Statistics Iceland. Page 14

Figure 27: Proportional value of exported demersal species in 2012. Source: Statistics Iceland. Page 15

Figure 28: Proportional value of seafood products by species in 2012. Source: Statistics Iceland. Page 15

Figure 29: Export value of demersal species, at fixed price in 2012 in ISK millions. Source: Statistics Iceland. Page 15

Figure 30: Proportional value of exported pelagic species in 2012. Source: Statistics Iceland. Page 16

Figure 31: Export value of pelagic species, at fixed price in 2012 in ISK millions. Source: Statistics Iceland. Page 16

Figure 32: Export value of seafood products by specie groups, at fixed price in 2012 in ISK bn. Source: Statistics Iceland. Page 17

Figure 33: Proportional export value of seafood products by product categories in 2012. Source: Statistics Iceland. Page 17

Figure 34: Proportion of exported seafood products by product categories in tonnes in 2012. Source: Statistics Iceland. Page 17

Figure 35: Proportional value of seafood products by continents in 2012. Source: Statistics Iceland. Page 18

Figure 36: Proportional value of exported seafood products by country in 2012. Source: Statistics Iceland. Page 18

Figure 37: Price and futures price of salmon. Source: The Icelandic Aquaculture Association. Page 19

Figure 38: Harvested farmed fish in thousands of tonnes, whole, ungutted fish. Source: The Icelandic Aquaculture Association. Page 19

Figure 39: Export value of farmed fish, at fixed price in ISK millions in 2012 (seafood product price index). Source: Statistics Iceland. Page 19

Figure 40: Operating permits for fish farming and areas protected from salmonid farming at sea. Source: Directorate of Freshwater Fisheries. Page 20

Figure 41: Fishing for human consumption and aquaculture in the world. Source: FAO and OECD. Page 20

Figure 42: Fish-farming in the North Atlantic Ocean. Source: FAO. Page 20

Figure 43: Global seafood production. Source: FAO and OECD. Page 21

Figure 44: Proportional division of the total seafood production by continents. Source: FAO and OECD. Page 21

Figure 45: Total production of the 20 largest fisheries nations in the world in 2011. Source: FAO. Page 21

Figure 46: Demand for seafood products for human consumption to 2050. Source: FAO and OECD. Page 22

Figure 47: Average global consumption of seafood products. Source: FAO. Page 22

Figure 48: Average global consumption of seafood products (kg/person/year). Source: OECD and FAO. Page 22

Figure 49: Population developments to 2050. Source: Population Division of the Department of Economic and Social Affairs

of the United Nations Secretariat. Page 22

Figure 50: World market price trends for fish. Source: OECD and FAO. Page 23

Figure 51: World prices for meat and seafood products. Source: FAO. Page 23

Figure 52: Estimated increases in the price of individual seafood product categories 2013-2022. Source: FAO. Page 23

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Tables

Table 1: Operating overview of fishing and fish processing companies. Source: Statistics Iceland. Page 8

Table 2: Permitted total catch of the largest firms in 2013. Source: The Directorate of Fisheries. Page 11

Table 3: Export value of marine products by processing method in 2012 in ISK bn. Source: Statistics Iceland. Page 17

Table 4: Export value according to species and countries for the eight most valuable species in 2012. Source: Statistics Iceland. Page 18

Disclaimer

This report is made by Íslandsbanki hf. The information in this summary is based on publicly available data and information from various sources deemed reliable. The information has not been independently verified by Íslandsbanki hf. which therefore does not guarantee that the information is comprehensive or accurate. All views expressed herein are those of the author(s) at the time of writing and may change without notice. Íslandsbanki hf. holds no obligation to update, modify or amend this summary or to otherwise notify readers or recipients of this summary in the event that any matter contained herein changes or subsequently becomes inaccurate.

This summary is informative in nature, and should not be interpreted as a recommendation to take, or not to take, any particular investment action. This summary does not represent an offer or an invitation to buy, sell or subscribe to any particular financial instruments.

Íslandsbanki hf. accepts no liability for any possible losses or other consequences arising from decisions based on information in this summary. Any loss arising from the use of the information in this summary shall be the sole and exclusive responsibility of the investor. Before making an investment decision, it is important to seek expert advice and become familiar with the investment market and different investment alternatives. Various financial risks are at all times present during investment activities, such as the risk of no yield or the risk of losing the capital invested. It should further be noted that international investment includes risks related to political and economic uncertainties, as well as currency risk. Each investor´s investment objectives and financial situation is different. Past performance does not indicate or guarantee the future performance of an investment. Reports and other information received from Íslandsbanki hf. are meant for private use only.

This material may not be copied, quoted or distributed, in part or in whole, without written permission from Íslandsbanki hf.

This document is a brief summary and does not purport to contain all available information on the subject covered. Regulator:

The Financial Supervisory Authority of Iceland (www.fme.is)

United States

Neither this report nor copies may be distributed in the United States or to recipients who are citizens of the United States due to restrictions stipulated in US legislation. Distributing the report in the United States might be seen as a breach of the said legislation.

Canada

The information provided in this publication is not intended to be distributed or circulated in any manner in Canada and therefore should not be construed as any kind of financial recommendation or advice provided within the meaning of Canadian securities law.

Other countries

Laws and regulations of other countries may also restrict the distribution of this report.

This summary does not constitute any solicitation of services by Íslandsbanki hf. in the United States or Canada.

For further information relating to this introduction see: https://www.islandsbanki.is.

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Icelandic Seafood Market ReportÍslandsbanki, Kirkjusandi, 155 Reykjavík, Iceland

Tel.: +354 440 4500

For more information:

www.islandsbanki.is/seafood