Marine sector

The marine sector is still one of the main economic sectors and one of the pillars of export activities in Iceland, but its relative importance has diminished with the ascendancy of aluminium and services. In 2007, fishing and fish processing contributed 42% of total merchandise exports, compared with around 90% in the early 1960s. Likewise, the sector’s contribution to GDP has fallen from around 15% to under 7% over the same period. The marine sector is highly diversified in terms of species, modes of processing, and markets.

Fishing and processing of groundfish – primarily cod, but also haddock, saithe and redfish – are the principal focus of the Icelandic marine sector. The catch of these and other demersals accounted for 81% of the landed value of fish in 2007. Cod is the most valuable species in Icelandic waters in terms of total catch value, accounting for 37%. A decline in the cod catch has been partly offset hitherto by increased harvesting of other species such as capelin, haddock, saithe, redfish, flatfish, blue whiting and herring, inside and outside Iceland’s exclusive 200-mile fishing zone.

Enhanced value added in processing has helped to offset lower total catch volumes in recent years, backed by gains in efficiency through individual transferable quotas (the ITQ system), automation, and modern management techniques. Value has also been boosted by a shift towards fresh groundfish products – which generate higher prices in markets in Europe and the US – instead of the more traditional frozen or salted products. The most important step in the valueadded strategy, besides increasing emphasis on fresh products, over the past 3-4 years has been in the processing of filleted and frozen pelagic products, mainly from herring and capelin, which were previously converted into relatively low-value fish oil and meal. In 2000, only 20% of the export value of herring and capelin was accounted for by food products, but in 2007 this ratio had risen to 60%. Other aspects of the value-added processing strategy are the steadily increasing yield of raw material in the processing process and the significant increase in utilisation of by-products and waste in processing of seafood products. The exported amount of processed by-products has risen by half from 2003 to 2007.

A comprehensive fisheries management system (FMS) based on the ITQ system has been developed to manage fish stocks and promote conservation, sustainability, and efficient utilisation of the marine resources. The FMS adopted in Iceland is science-based and market driven. A key role has been assigned to marine research, as the use of available knowledge is fundamental. Another pillar of the FMS is the commitment to take into account the effects of certain measures or policies on the ecosystem.

In May 2007, the Marine Research Institute (MRI) highlighted the urgent need for immediate action to increase the spawning stock biomass of cod to increase recruitment and, ultimately, the harvestable stock. The biomass of cod is now estimated at close to a historical low and only half of the size assumed necessary to produce maximum sustainable yield. The MRI recommended therefore a drastic one-third cut in the total allowable catch (TAC) for the fishing year commencing on September 1, 2007. The Ministry of Fisheries (MoF) acknowledged this recommendation and lowered the TAC for cod to 130,000 tonnes from 193,000 tonnes in the fishing year 2007/2008. Furthermore, the MoF ruled in July 2008 that the TAC for cod would be unchanged in the 2008/2009 fishing year.

Other direct measures support the aims of the FMS and reinforce the conservation measures, including rules on permitted fishing gear, closure of areas for bottom trawls, obligatory small fish grids to prevent juvenile fish catches, and temporary closures of fishing grounds to protect spawning fish and limit by-catch of undersized fish.

In recent years, fisheries companies have actively been seeking to enhance efficiency and benefit from economies of scale through mergers and acquisitions. Consequently, the largest companies have expanded, and the concentration of quota holdings has risen. The 10 and 15 largest fisheries companies in terms of quota holdings owned 51% and 66% of the total respectively in June 2008.

Economy of Iceland,Central Bank of Iceland