The main factors determining the performance of Icelandic fisheries have been identified as:
• Price of seafood products
• Growth of major fish stocks
• Oil prices
• Development of wages and other costs
• Political involvement and possible changes in the fisheries management system
Main findings
External conditions are favourable for Icelandic seafood companies. Rising product prices in foreign markets have helped the companies and the exchange rate of the Icelandic krona (ISK) has been weak. The outlook for 2007 and 2008 is favourable.
Economic growth in Iceland in 2006 is estimated to have been 4%. Inflation was 6.9%, and unemployment 1.3%.
2007 will see a slower growth than last year but growth is likely to pick up again in 2008.
Consolidation in the fishing industry has increased in recent years. In 2006, the 10 largest fisheries companies owned 50% of the total fishing quotas in Icelandic waters.
The number of fisheries companies on OX Nordic Exchange in Iceland continues to dwindle. Only two traditional fisheries companies are now left, HB Grandi and Vinnslustöðin. A wide difference between break-up value and market value on OX and slow trading in fisheries companies’ stocks means that owners do not see the purpose of listing.
Fishing quotas in Iceland’s territorial waters have not increased in total in recent years. Despite expectations for an increase in total fishing quotas they have remained almost unchanged.
Product prices
The price of marine products are at a historical high. The price of most types of products has climbed in recent quarters, with fishmeal rising the most.
The price of demersal fish products is also very high which is convenient for the earnings of freezer trawlers and land fish processing.
Glitnir Research expects demand and prices for marine products to remain high.
TACs
Iceland’s most important fish stock, cod, has not grown as much as hoped for. The spawning stock and fish stock have not grown in recent years and therefore cod catches around Iceland are not expected to increase in coming years.
The most positive change in TACs for the year 2006/2007 is the haddock and saithe increase.
Looking into the future, herring quotas are expected to grow at a moderate pace.
Profitability
Profitability in Icelandic fisheries has improved when looking back at the last 26 years.
EBITDA margin in fish processing and harvesting has improved although there are fluctuations between years, these fluctuations are mainly caused by ISK exchange rate movements.
Opportunities and challenges
Opportunities for the industry include:
• Further consolidation and acquisitions, both domestically and abroad
• Increased quotas of haddock, herring and saithe will contribute to higher revenues and earnings
• The seafood industry must further emphasise the purity of the Icelandic fishing grounds and thereby differentiate Icelandic seafood products
• Increased competition will be met by newer and more efficient technologies
• High product prices and a stable exchange rate will improve earnings in the next two years
Industry challenges include:
• Oil prices are likely to remain high
• Product prices are high but are expected to rise more slowly in coming years
• Rapid growth in global aquaculture
• Condition of the cod stock is uncertain
• Growing supply of frozen products from Asia, e.g. China
