North Atlantic Seafood Market Report April 2013 1

Key Highlights

Íslandsbanki

Dear reader,

The North Atlantic Seafood Market

Íslandsbanki employs a group of experts who focus on the seafood industry. The group is part of the corporate banking unit and handles relationships and services for domestic and foreign seafood companies, as well as the publication of analyses and reports.

Íslandsbanki offers comprehensive financial services to individuals, households, companies and professional investors. The bank has assembled a dedicated team of experienced professionals with a deep understanding of the seafood sector, which has been an important part of the Bank’s operations since establishment. Indeed, Íslandsbanki and its predecessors have worked closely with the seafood industry for over a century. Íslandsbanki’s international strategy is centred on the bank’s core strengths in seafood and energy. The geographic focus is the North Atlantic region.

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In addition to providing banking services to the seafood industry, the bank has issued reports on the sector since 2003. Through these reports, we attempt to provide insights into key issues affecting the industry.

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It is once again our great pleasure to present this Íslandsbanki Industry Report, this time focusing on the North Atlantic Ocean. As before, the object of our Seafood Industry Report is to give a comprehensive and analytical overview of a region or a country. The following pages are an introduction to the seafood industry in the North Atlantic with a special focus on Iceland, Norway, Faroe Islands, Greenland, Canada and US. We invite you to read on.

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Íslandsbanki’s Seafood Team



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Fishing in the North Atlantic represents about 11% of total global landings Atlantic herring is the most caught species in the North Atlantic, followed by Atlantic cod and Atlantic mackerel Norway is the largest fishing nation in the North Atlantic, representing about 23% of total landings All of the six focus countries (Iceland, Norway, Faroe Islands, Greenland, Canada and US) have quota systems, although the methodologies differ from country to country Salmon and cod are the most valuable export species for the focus countries Aquaculture accounted for 41.3% of fish production in the world in 2011, a 6.2% increase over 2010

Over the years, many of the largest and leading seafood companies in Iceland and abroad have been customers of the bank. At present, about 26% of the bank’s corporate loan portfolio relates to the seafood industry.

North Atlantic Report

Vilhelm Mar Thorsteinsson Managing Director Corporate Banking vilhelm.thorsteinsson@ islandsbanki.is

Runar Jonsson Executive Director Seafood runar.jonsson@ islandsbanki.is

Timothy H. Spanos Executive Director International Lending timothy.spanos@ islandsbanki.is

Has 14 years of finance experience.

Has over 15 years of finance experience.

Has over 25 years of banking and finance experience.

Fig. 01. Íslandsbanki’s Loan Portfolio, by Industry

9%

Individuals

8%

Seafood Real estate

12%

44%

Commerce and services Industrials Other

13% 14%

2

Seafood Industry Team

Foreword

Ragnar Gudjonsson Business Manager Seafood ragnar.gudjonsson@ islandsbanki.is

Olafur Hrafn Olafsson Credit Manager Seafood olafur.hrafn.olafsson@ islandsbanki.is

Linda G. Lyngmo Analyst Seafood linda.lyngmo@ islandsbanki.is

Rafn Árnason Associate Corporate Finance rafn@ islandsbanki.is

Has over 40 years of finance experience.

Has 14 years of finance experience.

Has 4 years of finance experience.

Has 9 years of finance experience.

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Table of Contents North Atlantic 5 North Atlantic Ocean 6 North Atlantic Landings 7 Landings by Species 8 Landings by Country 9 Quota Systems 10 Seafood Export Comparison 12 Export Value by Destination 13 Export Value by Species in 2011 14 North Atlantic Economy 15 The Icelandic Economy 16 The Norwegian Economy 18 The Faroe Islands Economy 20 The Greenland Economy 22 The Canadian Economy 24 The US Economy 26 National Comparison 28

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Main Fish Stocks in the North Atlantic 29 Atlantic Herring 30 Atlantic Mackerel 31 Atlantic Cod 32 Blue Whiting 33 Capelin 34 Northern Prawn (Shrimp) 35

North Atlantic

Aquaculture 36 Aquaculture by Countries 37 Aquaculture Production 38 Atlantic Salmon 39 Conclusion 40 Disclaimer 42

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The Atlantic Ocean is the second largest of the world’s five oceans. It lies between Africa, Europe, the Arctic Ocean, the Americas and the Southern Ocean. It is rich in natural resources, including crude oil, natural gas and seafood, which have contributed significantly to the development of surrounding countries. This is especially true in the North Atlantic where fishing is rooted in the culture of many countries. This region hosts some of the world’s richest fishing resources, especially in the waters covering the continental shelves. The major fish stocks are cod, haddock, hake, herring, and mackerel.

North Atlantic Landings This report will focus on six North Atlantic nations, referred to as “focus countries” throughout the report: Iceland, Norway, the Faroe Islands, Greenland, Canada and the US. These nations are all large seafood producers and share strong cultural and historical ties. The countries all have large coastlines and the ocean has played an important role in the development of their economies.

Million MT

North Atlantic Ocean

In 2011, total global landings were about 83.5 million metric tonnes (MT), a 6.7% increase from 2010. Total landings in the North Atlantic were 10.3 MT or about 12% of total global landings. Pelagic fish accounted for the largest proportion of landings, as can be seen in figure 02. Fishing in the northern Atlantic has fallen by over 25% since 2001. This decline was due in part to the decline in the blue whiting catch, along with the collapse of the capelin stock.

Fig. 02. Historical Landings in the North Atlantic, by Species and Groups

16 14 12 10 8 6 4 2 0

00 001 002 003 004 005 006 007 008 009 010 011 2 2 2 2 2 2 2 2 2 2 2

20

Pelagic Total

Groundfish total

Shelfish

Other

Million MT

Fig. 02. Total Landings Global, 1990-2010 90 80 70 60 50 40 30 20 10 0

60% 50% 40% 30% 20% 10% 0%

90

19

19

91

19

92

19

93

94

19

Total, marine

6

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Sources: CIA World Factbook and Arctic Portal

Sources: Statistics Iceland and FAO

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

Total Atlantic percentage of total marine (r. axis)

03

20

20

04

20

05

20

06

20

07

20

08

09

20

20

10

11

20

North Atlantic percentage of total marine (r. axis) North Atlantic Report

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Landings by Species

Landings by Country

In 2011, total landings in the North Atlantic decreased by 800,000 MT or about 7.2% compared to 2010.

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

Fig. 04. Historical Landings in the North Atlantic, Top 6 Species from 2000 to 2011

catch equal to the US of about 1,100,000 MT in 2011. The reason for Iceland’s decline can primarily be traced back to fluctuations in some of the largest Icelandic fishing stocks, such as capelin, blue whiting and cod along with other groundfish species.

As seen in figure 06, the total catch for Norway and Iceland has declined substantially from their peak in 2002. Norway has however been showing signs of recovery since 2008, while Iceland’s volume has continued to decline, ending with a total

Fig. 07. Total Catch in the North Atlantic in 2011

Fig. 06. Total Catch in the North Atlantic, by Focus Countries and Volume

Fig. 05. Total Landings for the 6 Major Fish Species in the North Atlantic from 2000 to 2011 3,000 Top 6 species Other

40% 60%

2,500

00

Herring

01

20

02

20

03

20

Blue Whiting

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04

20

Cod

05

20

06

20

Capelin

07

20

08

20

Mackerel

09

20

10

20

11

20

European Sprat

Norway

23%

2,000

Iceland US

1,500

Canada

43%

1,000

Faroe Islands

11%

500

Greenland Other

0

20

8

For the past decade, Norway has been the clear leader in the North Atlantic region, representing about 23% of the total catch. Iceland and the US are the second and third largest, catching about 10% of all fish in the North Atlantic.

Thousand MT

Thousand MT

The six major species accounted for just over 50% of the total catch in the North Atlantic in 2011. The Atlantic herring accounted for about 20% of the total catch, followed by the Atlantic cod and the Atlantic mackerel, with 8.7% and 8.1% of total landings respectively.

It should be kept in mind that the figures below does not reflect the value of each species. The largest species by volume are not necessarily the most valuable.

01

20

02

20

Norway

03

20

04

20

Iceland

Sources: Statistics Iceland and FAO

05

20 US

06

20

Canada

07

20

08

20

09

20

Faroe Islands

10

20

11

20

2% 7% 4%

10%

Greenland

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Quota Systems The focus countries have developed six distinct types of fisheries management systems. The systems operate under conditions that differ significantly from nation to nation, especially in terms of the countries’ economic dependence on fishery resources, their socio-cultural approaches to fisheries, and their marine ecosystems.

Iceland: The Minister of Industry and Innovation determines the TAC for each species, based on the scientific advice from the Icelandic Marine Research Institute. The TAC is normally 20% of the total biomass, without ever exceeding the Maximum Sustainable Yield.* The maximum total quota for each company is 12% for all species combined and there is also a different limit for each species. Iceland has a uniform and fairly complete ITQ system applying to all vessels. Norway: The Norwegian management system is in the form of a “regulatory chain”, which is an annual, interactive process based on incremental changes. The regulatory chain incorporates stages such as gathering research data which, for example, explores the marine environment and resources, quota negotiations with other states, as well as allocating quotas to the various vessel groups. Faroe Islands: A fisheries management system based on individual transferable quotas, with various restrictions on transferability, was introduced in 1996. The quotas are not given in metric tonnes of individual species but as fishing days for various groups of fishing vessels in the Faroese fisheries zone. Greenland: Fishing is administrated through quotas and licenses regulating the total allowable catch (TAC) for Greenlandic waters as decided by the Government of Greenland based on the biological advice of Greenlandic and international fisheries organizations. A distinction is made between coastal fishing and

10 North Atlantic Report

Sources: Nordic Council, OECD, Ministry of Fisheries and Natural Resources Faroe Islands, Statistics Greenland and Ministry of Fisheries and Aquaculture Iceland

ocean fishing. Permanent licenses are used for shrimp. These licenses can be traded between ship owners, with limits of 10% (coastal fishing) and 33% (off shore fishing) of the total quota for each company. The distribution of quotas for most other species is determined by the Greenlandic government through temporary one-year licences that cannot be traded between ship owners. Canada: The Department of Fisheries and Oceans (DFO) determines the TAC for each species, based on the scientific advice from the Canadian Science Advisory Secretariat and input from the Regional Advisory Process. The assessment criteria include acoustic surveys, bottom trawl surveys, gillnetter telephone surveys, and historic catch volumes. As a general rule, the TAC is normally 20% of the total biomass, without ever exceeding the Maximum Sustainable Yield.*

*Maximum Sustainable Yield or MSY is, theoretically, the largest yield (or catch) that can be taken from a species’ stock over an indefinite period. MSY is extensively used for fisheries management. MSY has been refined in most modern fisheries models and occurs at around 30% of the unexploited population size. This fraction differs among populations depending on the life history of the species and the age-specific selectivity of the fishing method.

US: The US has eight Regional Fishery Management Councils which serve as the front line of fisheries management, where region specific management measures (such as fishing seasons, quotas, and closed areas) are initiated, developed, and ultimately adopted in a fully transparent and public process. The US has Ecosystem based fisheries and it implements a fishery management plan for all fish species caught in US waters. Some plans are for single species fisheries while others cover species and even multispecies complexes, sometimes providing separate management strategies by species, gear type, area etc.

Sources: Nordic Council, OECD, Fisheries and Oceans Canada, Department and Ministry of Fisheries and Coastal Affairs Norway

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Export Comparison

Export Value by Destination

As shown in table 01 the seafood industry plays different roles in each of the focus countries’ economies. Marine products represent a large proportion of total export value in Greenland and The Faroe Islands, while in the US the share is much lower. Norway is the largest export country of these six focus countries. However, the share of fish and seafood in Norway‘s total export value is only 5.9%. The fishing sector in Norway is the second largest export sector after oil and gas.

In all of the focus countries, the number of jobs in the seafood sector has decreased during the last 10 years. The main causes for that fall are mechanisation and optimisation of the nation’s vessels fleets.

The three main markets for the six focus coutries can be seen in the table below. Greenland exports 87% of its total fish and seafood products to Denmark. Greenland is able to export a large proportion of its fish and seafood products because of its small population and large amount of total landings. In Iceland, cod is the most valuable species, with the UK and Spain as the main markets. The UK is also a strong market for Faroese groundfish along with the US and Nigeria is a valuable market for dried fish. Canada is highly dependent on the US, which is a net importer of seafood products. Norway enjoys diverse markets for its products with no reliance on any single market.

Table 01. The North Atlantic Fisheries in Short Term Employed in the Fishing Industry

Fisheries Share of National GDP

Fish and Seafood of Total Export Value

Iceland

9,100

7.7%

34.0%

672,247

1,559

Norway

12,791

1.5%

5.9%

2,277,740

6,684

Faroe Islands

3,642

35.0%

85.0%

325,092

618

Greenland

1,381

NA

90.0%

109,788

316

Canada

81,000

2.5%*

34.0%

609,335

2,977

1,233,204

0.0%

0.3%

1,479,683

3,900

US** Numbers from 2011

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*Atlantic region’s GDP

Total Fish and Seafood Export (MT)

Total Fish and Seafood Export (Million EUR)

**US total edible seafood

Table 02. Main Export Countries in 2011 Iceland

Norway

Faroe Islands

Greenland*

Canada

US

1.

UK (18%)

Russia (10%)

UK (14%)

Denmark (87%)

US (62%)

Canada (19%)

2.

Spain (9%)

France (10%)

Nigeria (10%)

Canada (4%)

China (9%)

EU (17%)

3.

Norway (7%)

Denmark (7%)

US (9%)

Iceland (1%)

Japan (6%)

Mexico (14%)

*Numbers from 2009

Sources: Statistics Iceland, Fisheries and Oceans Canada, Statistics Norway, Directorate of Fisheries Norway, Fishery Statistics Division US, Statistics Greenland and Statistics Faroe Islands

Sources: Statistics Iceland, Fisheries and Oceans Canada, Statistics Norway, Directorate of Fisheries Norway, Fishery Statistics Division US, Statistics Greenland and Statistics Faroe Islands

Export Value by Species in 2011 Fig. 08. Norway

Iceland

Salmon Cod

13%

31%

30%

8%

12%

Lobster

23%

4% 7%

35% 56%

8% 9%

Faroe Islands

6%

Redfish

11%

10%

Prawn Herring

9%

12%

Mackerel

16%

Haddock Blue Whiting Crab

Canada

Greenland

US

Saithe Capelin

10% 5%

28%

Scallops

9% 55% 21%

14 North Atlantic Report

9%

50% 4% 10%

18% 15%

Pollock

19%

25%

Greenland halibut Other

11% 4%

7%

Sources: Statistics Iceland, Fisheries and Oceans Canada, Statistics Norway, Directorate of Fisheries Norway, Fishery Statistics Division US, Statistics Greenland and Statistics Faroe Islands

North Atlantic Economy

Historical Landings

The Icelandic Economy (Amounts in million EUR) Area (km2)

103,000

Population

313,183

GDP (PPP)

10,071

GDP (growth) (PPP)

2.7%

GDP per capita (PPP)

30,639

The following figures show the development of the Icelandic fishery from 2000 to 2011.

Total seafood catch in 2011 was valued at EUR 953 million, a 16% increase from 2010.

Over the last decade three of the major species have decreased in volume by an average 25%. The total catch has fallen by 42% from about 1,900,000 MT in 2001 to just over 1,100,000 MT in 2011. The primary cause for the decline is a fall in the capelin stock.

Cod was the most important species in 2011 in terms of value followed by redfish, herring and haddock.

GDP composition by sector 24.4%

Services

70.3%

Inflation rate

5.3%

Unemployment rate

5.6%

Trade balance Export

3,966

Import

3,655

2,000 1,500 1,000

Numbers are 2012 est.

500

The Icelandic economy depends heavily on the fishing industry and is the second largest fishing nation in the North Atlantic behind Norway.

0

00

20

In 2011, the seafood sector provided over 38% of export earnings, contributed about 8% of GDP, and employed over 5% of the work force. 16 North Atlantic Report

Fig. 10. Total Landings, by Species and Value

Fig. 09. Total Landings, by Species and Volume

Million EUR

Iceland is located in Northern Europe, an island between the Greenland Sea and the North Atlantic Ocean, northwest of the United Kingdom. The country is rich in natural resources such as geothermal and hydropower, and seafood.

5.3%

Industry

Thousand MT

The Icelandic Economy

Agriculture

01

20

02

20

Capelin

Sources: CIA World Factbook and Statistics Iceland

The main species in terms of volume are capelin, herring, cod, redfish and haddock.

03

20

04

20

Herring

05

20

Cod

Sources: FAO and Statistics Iceland

06

20

07

20

Haddock

08

20

09

20

Redfish

10

20

11

20

Other

1,000 900 800 700 600 500 400 300 200 100 0

00

20

01

20

02

20

Cod

03

20

Redfish

04

20

05

20

Herring

06

20

07

20

Haddock

08

20

09

20

Saithe

11

10

20

20

Other

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17

Historical Landings

The Norwegian Economy (Amounts in million EUR) Area (km2)

385,252

Population

4,722,701

GDP (PPP)

216,265

GDP (growth) (PPP)

3.1%

GDP per capita (PPP)

43,004

The following figures show the development of the Norwegian fishery from 2000 through 2011. The most significant change in terms of volume has been in herring and capelin. After reaching its peak in 2009, herring has decreased by 41%, reaching a total volume of 633,103 MT. As in previous years, cod remains the most valuable species in Norway accounting for 25% of total value in 2011.

GDP composition by sector

Norway is rich in natural resources, such as petroleum, hydropower, fish, forests, and minerals. The country is highly dependent on the petroleum sector, which accounts for a significant portion of total export revenue. Norway is the world’s second-largest natural gas exporter and seventh largest oil exporter.

18 North Atlantic Report

41.5%

Services

55.7%

Inflation rate

0.6%

Unemployment rate

3.1%

Trade balance Export

126,524

Import

67,484

Numbers are 2012 est.

Fig. 12. Total Landings, by Species and Value

Fig. 11. Total Landings, by Species and Volume 3,000

2,500

2,500

2,000

Million EUR

Norway comprises the western portion of the Scandinavian Peninsula in Northern Europe. The country has long been considered unique for its spectacular fjords, spanning more than 21,000 km. About 80% of the country’s population resides around the coast and up to 10 km inland.

2.7%

Industry

Thousand MT

The Norwegian Economy

Agriculture

2,000 1,500

1,000

1,000

500

500 The fishing sector is the second largest export sector in Norway, with total exports valued at about EUR 5 billion in 2011 and employing around 19,000 people, both directly and indirectly.

0

0

00

20

01

20

02

20

Herring

Sources: CIA World Factbook, the Directorate of Fisheries Norway and Statistics Norway

1,500

03

20

Capelin

04

20

05

20 Cod

06

20

07

20

Mackerel

08

20

Saithe

09

20

10

20

11

20

Other

Sources: CIA World Factbook, the Directorate of Fisheries Norway and Statistics Norway

00

20

01

20

Cod

02

20

03

20

Herring

04

20

05

20

Mackerel

06

20

07

20

Saithe

08

20

09

20

Haddock

10

20

Other

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11

20

19

Historical Landings

The Faroe Islands Economy (Amounts in million EUR) Area (km2)

1,393

Population

47,7090

GDP (PPP)

1,107

GDP (growth) (PPP)

2.9%

GDP per capita (PPP)

20,732

The following figures show the development of the Faroe Islands’ fishery from 2001 to 2011. The collapse of the blue whiting stock has had a major impact on the fishery. At its peak in 2003 the total catch of blue whiting was 320,000 MT, which represented 53% of the Faroese’ total catch. In 2011, the total catch was 16,000 MT, a 95% decrease compared to 2003.

GDP composition by sector

For decades fishing has been the main source of income for the Faroese, with fish and fish related products representing over 91% of Faroese exports in 2012. Initial discoveries of oil in the Faroese area give hope for eventual oil production, which may provide a foundation for a more diversified economy and less dependence on Danish economic assistance.

20 North Atlantic Report

16.0%

Industry

29.0%

Services

55.0%

Inflation rate

2.3%

Unemployment rate

6.8%

Trade balance Export

621

Import

584

Numbers are 2012 est.

Fig. 14. Total Landings, by Species and Value

Fig. 13. Total Landings, by Species and Volume 700

250

600

Million EUR

The Faroe Islands are an island group and archipelago under the sovereignty of Denmark, situated between the Norwegian Sea and the North Atlantic Ocean, about halfway between Norway and Iceland.

Agriculture

Thousand MT

The Faroe Islands Economy

In recent years, increased mackerel landings have partially offset the decline in the whiting catch. The mackerel catch increased from 15,000 MT in 2009 to 125,000 MT in 2011.

500 400

100

200

50 0

0

Sources: CIA World Factbook and Statistics Faroe Islands

150

300 100

In 2012, Faroe Island’s commercial fishing industries generated more than EUR 429 million and created more than 2,846 jobs. Fish farming is also an important industry in the Faroe Islands, creating more than 796 jobs, valued at EUR 245 million.

200

1

0 20

2

0 20

3

0 20

Blue Whiting

4

0 20

Herring

5

0 20

6

0 20

Saithe

Sources: FAO and Statistics Faroe Islands

7

8

0 20

0 20

cod

Mackerel

9

0 20

0

1 20

Other

1

1 20

01

20

02

20

Saithe

03

20

Cod

04

20

05

20

Monk fish

06

20

07

20 Ling

08

20

09

20

10

20

Greenland halibut

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11

20

Other

21

Historical Landings

The Greenland Economy (Amounts in million EUR) 2,166,086

Population

56,7490

GDP (PPP)

1,529

GDP (growth) (PPP)

3.0%

GDP per capita (PPP)

25,423

As can be seen in the following figures, shrimp (northern prawn) is by far the most caught species in Greenlandic waters, accounting for over 46% of the total catch in 2011, followed by the Greenland halibut and cod. Recently, capelin has increased in volume, reaching 48,000 MT in 2011, a sharp increase compared to the previous five years. Snow crab was a substantial part of Greenland’s total catch up until 2007 but has decreased by more than 50% since then (crab is listed among other species in the figures).

GDP composition by sector

Greenland, which is located between the Arctic Ocean and the North Atlantic Ocean, is the largest island in the world. Ice covers about 81% of the island and the majority of the population lives in towns along the West Coast. Greenland is rich in many natural resources, the main ones being the fisheries, with more than 250 fish species living in its waters. Furthermore, Greenland has abundant mineral resources such as coal, iron ore, uranium, lead, zinc, molybdenum, diamonds and gold, and has recently gained international attention because of the country’s strategic location for the future development of the Arctic, including Arctic shipping lanes. 22 North Atlantic Report

4.0%

Industry

29.0%

Services

67.0%

Inflation rate

2.8%

Unemployment rate

4.9%

Trade balance Export

289

Import

613

Numbers are 2009 and 2012 est.

The fishing industry is a vital part of the national economy, accounting for 90% of the country’s exports and providing around 1,500 jobs in 2011.

Fig. 15. Total Landings, by Species and Volume

Fig. 16. Total Landings, by Species and Value

300 Thousand MT

The Greenland Economy

Agriculture

Northern prawn is also the most valuable species accounting for more than 55% of total landings by value in 2011. Greenlandic halibut is the second most valuable species with around 21% of the total value in 2011.

250

Million EUR

Area (km2)

200 150 100 50 0

00

20

01

20

Shrimp

02

20

03

20

Capelin

04

20

05

20

06

20

Greenland Halibut

07

20

Cod

08

20

09

20

Lumpfish

10

20

11

20

Other

400 350 300 250 200 150 100 50 0

00

20

01

20

Shrimp

02

20

03

20

04

20

Greenland Halibut

05

20

06

20 Cod

07

20

08

20

Redfish

09

20

10

11

20

Capelin

20

Other

Note: The landings values for 2003-2007 are est. figures since the official data was not available

Sources: CIA World Factbook and Statistics Greenland

Sources: FAO and Statistics Greenland

North Atlantic Report

23

Historical Landings

The Canadian Economy (Amounts in million EUR) 9,984,670

Population

34,568,211

GDP (PPP)

1,143,146

GDP (growth) (PPP)

1.9%

GDP per capita (PPP)

32,272

The following figures show the development of the Canadian fishery in the Atlantic Region from 2000 to 2011. Total seafood landings in 2011 were valued at EUR 1.3 billion, a 19% increase from 2010. Lobster was the most important species in 2011 in terms of value followed by queen crab, shrimp, and scallop.

GDP composition by sector

Located in North America, Canada borders the North Atlantic Ocean on the east, North Pacific Ocean on the west, and the Arctic Ocean on the north. The country is rich in natural resources such as natural gas, oil, arable crops, wildlife, and seafood. Since World War II the growth of manufacturing, mining, and service sectors has transformed the country into an industrial economy.

1.8%

Industry

28.6%

Services

69.6%

Inflation rate

1.8%

Unemployment rate

7.3%

Trade balance Export

374,594

Import

373,972

Numbers are 2012 est.

1,500

800 600

1,200 900

400

600

200

300 0

0 00

2

1 00

2

Shrimp

Sources: CIA World Factbook and Fisheries and Oceans Canada

Fig. 18. Total Landings, by Species and Value

1,000

0

Canada has one of the world’s most valuable commercial fishing industries, directly contributing about EUR 1.3 billion a year and is estimated to account for more than 81,000 jobs. Seafood is the most significant food commodity exported by Canada.

24 North Atlantic Report

Fig. 17. Total Landings, by Species and Volume Thousand MT

The Canadian Economy

Agriculture

All of the major species increased in total value between 2010 and 2011, by an average of 34%. This increase is primarily due to increased landings and the weakening of the Canadian dollar.

Million EUR

Area (km2)

2

2 00

03

20

Herring

2

4 00

5 00

2

6 00

2

Crab, Queen

Sources: FAO and Fisheries and Oceans Canada

7 00

2

2

8 00

Lobster

9 00

2

Scallop

2

0 01

1 01

00

2

20

Other

Lobster

01

20

02

20

03

20

Crab, Queen

04

20

Shrimp

05

20

06

20

Scallop

07

20

08

20

09

20

10

20

11

20

Greenland turbot

Other

North Atlantic Report

25

Historical Landings

The US Economy (Amounts in million EUR) 9,826,675

Population

316,668,567

GDP (PPP)

12,178,004

GDP (growth) (PPP)

2.2%

GDP per capita (PPP)

38,727

The following figures depict the development of the US fishery in New England and Mid-Atlantic Region from 2002 to 2011. Note that other large fisheries within the US (e.g. Alaska) are not covered in this report which focuses on the North Atlantic region. For additional information on these fisheries, please see our report on the US dated September 2010.

GDP composition by sector

The United States is located in North America, bordering both the North Atlantic Ocean and the North Pacific Ocean, between Canada and Mexico.

1.2%

Industry

19.1%

Services

79.9%

Inflation rate

2.0%

700

Unemployment rate

8.2%

600

Trade balance Export

1,244,241

Import

1,835,255

Numbers are 2012 est.

The US is the third-largest country by total land area and population. It abounds with natural resources, as well as having well-developed infrastructure, and high productivity.

26 North Atlantic Report

Fig. 20. Total Landings, by Species and Value

500 400

1,000 800

300

600

200

400

100

200

0

0

02

Menhaden

Sources: CIA World Factbook, NOAA and Fisheries Economics of the United States

Sea scallop and blue crab were the most valuable species in total landings in the Mid-Atlantic Region.

1,200

20

Fisheries, whether for commerce or recreation, play significant role in the US economy. Commercial fishermen in the US directly contributed about EUR 3.8 billion in 2011 into the US economy supporting 1.2 million full and part-time jobs.

In 2011, commercial fishermen in the Mid-Atlantic Region landed 354,000 MT of finfish and shellfish, valued at EUR 378 million, a 6.9% increase from 2010.

Fig. 19. Total Landings, by Species and Volume Thousand MT

The US Economy

Agriculture

In 2011, commercial fishermen in the New England Region landed 282,000 MT of finfish and shellfish, valued at EUR 790 million, a 6.8% increase relative to 2010.

American lobster and sea scallop were the most important species in 2011 in terms of value in the New England Region.

Million EUR

Area (km2)

03

20

Herring

04

20

05

20

06

20

American lobster

07

20

08

20

Blue crab

09

20

Sea scallop

Sources: FAO, NOAA and Fisheries Economics of the United States

10

20

11

20

Other

02

20

Sea scallop

03

20

04

20

American lobster

05

20

06

20

Blue crab

07

20

08

20

09

20

Cod & haddock

10

20

Squid

North Atlantic Report

11

20

Other

27

National Comparisons

Main Fish Stocks in the North Atlantic

These six nations of the North Atlantic are very different in terms of geographic size, population and economic conditions. The US is by far the largest country. However, Norway’s economy is the strongest with 0.6% inflation, 3.1% unemployment and 3.1% economic growth.

Table 03. Comparison of the North Atlantic Countries Economies (Amounts in Million EUR) Iceland

Norway

Canada

Greenland

Faroe Islands

US

Area (km2) Population

103,000 313,183

385,252 4,722,701

9,984,670 34,568,211

2,166,086 56,749

1,393 47,709

9,826,675 316,668,567

GDP (PPP) GDP (growth) (PPP) GDP per capita (PPP)

10,071

216,265

1,143,146

1,529

1,107

12,178,004

2.7% 30,639

3.1% 43,004

1.9% 32,272

3.0% 25,423

2.9% 20,732

2.2% 38,727

Agriculture

5.3%

2.7%

1.8%

4.0%

16.0%

1.2%

Industry

24.4%

41.5%

28.6%

29.0%

29.0%

19.1%

70.3% 5.3% 5.6%

55.7% 0.6% 3.1%

69.6% 1.8% 7.3%

67.0% 2.8% 4.9%

55.0% 2.3% 6.8%

79.9% 2.0% 8.2%

3,966 3,655

126,524 67,484

374,594 373,972

289 613

621 584

1,244,241 1,835,255

GDP composition by sector

Services Inflation rate Unemployment rate Trade balance Export Import Numbers are 2012 est.

28 North Atlantic Report

Sources: CIA World Factbook and Statistics Greenland

North Atlantic Report

29

Atlantic Herring

Atlantic Mackerel

Herring is the most abundant fish in the North Atlantic. It is a pelagic zooplankton feeder, mostly feeding on the copepod Calanus finmarchicus. The herring’s common size is between 30 and 40 cm.

The North Atlantic herring is split into many stocks, based on where and when they spawn. Historically, the largest of these stocks is the Norwegian spring spawning herring. This stock spawns along the coast of central Norway.

The mackerel is a streamlined and fast swimming fish known for extensive migrations. Common size for adults is from 35 cm to 45 cm, but it can reach 60 cm in length. Mackerel feeds on a variety of pelagic animals, mostly crustaceans and fish juveniles.

Herring is processed into meal and oil, and frozen or salted for human consumption.

International landings of herring in the North Atlantic in 2011 were 1,800 MT, a 19% decrease from 2010.

The Atlantic mackerel can be found from the northeast coast of US, up to Newfoundland. On the eastern side of the Atlantic, it is found off Morocco, in the Mediterranean Sea and all the way up to the Barents Sea. Three stocks are recognised in the northeast Atlantic.

Fig. 21. International Landings of Herring (thousand MT)

Fig. 23. International Landings of Mackerel (thousand MT)

Fig. 22. Herring Landings in 2011, by Countries and Volume

880 2,225 879

2,369

2,479

2,510

780

754

2,204 718

856

1,778 658

1,699 1,346

2006

2009

Focus countries

30 North Atlantic Report

37%

Faroe Islands

531

554

2010

Other

1,121

2011

4% 4% 8%

11%

599

697 404

International landings of mackerel in the North Atlantic in 2011 were 938,000 MT, an about 7% increase from 2010.

Fig. 24. Mackerel Landings in 2011, by Countries and Volume

Norway

440

22%

380 283

329

US

1,483

2008

Iceland Canada

1,756

1,514

2007

36%

Norway

938

The mackerel is a valuable pelagic fish and most of the catch is used for human consumption.

249

225

2006

2007

Iceland Faroe Islands

302

Canada

297

317

2008

2009

Focus countries

Other

476

498

2010

2011

47%

Other

17%

1%

13%

Other

Sources: FAO and Ministry of Fisheries Iceland

Sources: FAO and Ministry of Fisheries Iceland

North Atlantic Report

31

Atlantic Cod

Blue Whiting

The Atlantic cod is among the most caught species in the North Atlantic. Common size for the Atlantic cod is in the range of 45 to 85 cm long. The Atlantic cod is distributed from Cape Cod in the Northwestern Atlantic, along the coast of Labrador, off southern Greenland, Iceland, Faroe Islands, south to the English Channel, in the North Sea, Baltic Sea and in the Barents Sea.

Fig. 25. International Landings of Atlantic Cod (thousand MT) 951 834 335

500

2006

784

769 413

538

2007

2008 Focus countries

2009 Other

2010

International landings of blue whiting in the North Atlantic in 2011 were 103,000 MT, an 81% decrease from 2010.

2,024

Fig. 28. Blue Whiting Landings in 2011, by Countries and Volume

1,673 458

Norway

33%

504 454

The majority of the blue whiting catch is processed into fish meal. However, a small but increasing share is frozen at sea for human consumption.

Blue whiting is among the ten most fished species in the world. The stock is very large and primarily fished in the northeast Atlantic.

Fig. 27. International Landings of Blue Whiting (thousand MT)

Fig. 26. Atlantic Cod Landings in 2011, by Countries and Volume

315

474

32 North Atlantic Report

International landings of cod in the North Atlantic in 2011 were over 1,000 MT, a 10% increase from 2010.

The blue whiting is a rather small codfish, usually 22 to 30 cm long, but can reach up to 50 cm in length. It is unique among codfish since it is purely an open ocean pelagic fish. The blue whiting is a true international fish and feeds on a variety of pelagic organisms, small fishes, small squid, copepods and krill.

866 363

309

1,050

Cod is processed in a variety of ways; a large proportion is salted and sold as quality food to southern Europe. A roughly equal proportion is iced at sea and processed and frozen after landing. A large but declining quantity is processed and frozen at sea, and an increasing proportion is exported fresh by air or in containers by sea.

592

581

Faroe Islands Greenland

44%

739

Iceland

Other

2011

1% 2% 3%

17%

2006

2007

546

231

209

405

337

103 60

2008

2009

2010

2011

Sources: FAO and Ministry of Fisheries Iceland

Other

59%

817

Focus countries

Sources: FAO and Ministry of Fisheries Iceland

Iceland

635

1,092

Norway Faroe Islands

460

1,284

Canada

20%

1,277

16% 45

5%

Other

North Atlantic Report

33

Capelin

Northern Prawn (Shrimp)

Capelin is a small pelagic fish, usually between 15 and 18 cm in length, and has a very short life cycle. It has a key role in the food chain between animal plankton and larger fish. Most groundfish species, feed on capelin at some stage in their life and it is estimated that capelin may be 40% of the total feedstock of cod.

Fig. 29. International Landings of Capelin (thousand MT) 851 47 504 420 267 418 267

2006

253 2 246

2007

2008 Focus countries

34 North Atlantic Report

77

363

803

Most of the capelin catch is processed for fish meal and oil. Part of the catch is frozen at sea, or after landing, and processed for human consumption. International landings of capelin in the North Atlantic in 2011 were 850,000 MT, a 68% increase from 2010.

2010

450

66

70

428 69

US

385

352

71 376

380

20

International landings of the northern prawn in the North Atlantic in 2011 were 328,000 MT, a 6.8% decrease from 2010.

328 20

Fig. 32. Northern Prawn Landings in 2011, by Countries and Volume

7%

1% 2% 6% 3%

359 331

308

36% 2006

2007

2008 Focus countries

Sources: FAO and Ministry of Fisheries Iceland

Norway Iceland Faroe Islands

Other

Other

Greenland

US

Greenland

2011

Canada

45%

314

Canada Faroe Islands

38% 2009

Iceland

42%

427

290

441

Norway

6%

73

The northern shrimp has opportunistic feeding habit. It scavenges on the bottom sediments, is a predator on small benthic invertebrates and also seems to be able to filterfeed during migrations to the water column in the night.

Currently most of the shrimp catch is iced at sea and then processed further and after landing. When shrimp catches were higher, a considerable proportion was also frozen at sea. After landing, the shrimp is cooked and peeled by machines.

Fig. 31. International Landings of Northern Prawn (thousand MT)

Fig. 30. Capelin Landings in 2011, by Countries and Volume 2% 6% 2% 4%

Northern shrimp is a subarctic species, widespread in the northern parts of the North Atlantic and the North Pacific Oceans.

Sources: FAO and Ministry of Fisheries Iceland

2009

2010

Other

2011

Other

North Atlantic Report

35

Aquaculture by Countries

Aquaculture

Aquaculture has grown rapidly over the last decades. In 2011, the total production of farmed fish was 63,000,000 MT with an estimated value of EUR 94 million. Aquaculture accounted for 41.3% of global fish production in 2011, a 6.2% increase over 2010. Aquaculture is predominantly used for human consumption. Asia is by far the largest producer with about 90% of worldwide production. FAO expects that farmed fish for human consumption will outweigh caught fish by 2018.

The state of aquaculture in Canada, Faroe Islands, Greenland and Norway could hardly be more different. Norway is by far the largest producer in the region with 1,138,000 MT produced in 2011, placing them among the top ten producers in the world. On the other hand Greenland has no aquaculture at all. The east coast of Canada produced 71,000 MT in 2011, and Faroe Islands produced 60,500 MT.

Fig. 34. Aquaculture by Countries and Value

Fig. 33. Aquaculture by Countries and Volume 1,400 Thousand EUR

Thousand MT

1,200 1,000 800 600 400 200 0

02

20

03

20

Norway

36 North Atlantic Report

Sources: FAO

04

20

05

20

06

20

Canada East Coast

07

20

08

20

Faroe Islands

09

20

10

20

US East Coast

11

20

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

02

20

03

20

Norway

04

20

05

20

Faroe Islands

06

20

07

20

08

20

Canada East Coast

09

20

11

10

20

20

US East Coast

North Atlantic Report

37

Aquaculture Production

Atlantic Salmon

Aquaculture has grown rapidly in Norway, increasing by 600,000 MT or 100% during the period from 2002 to 2011, entirely due to increased salmon production. During this period, aquaculture increased only slightly in the other North Atlantic focus countries.

Atlantic salmon is an anadromus species and has a rather complex life story. Salmon spawns in fresh water and juveniles grow there for two to three years before migrating to the ocean. It stays there for another two to three years before returning to fresh water to spawn.

The value of farmed fish increased significantly during this period from EUR 1.0 billion in 2002 to EUR 4.5 billion in 2011, about 450% jump in value.

Fig. 35. Aquaculture by Species and Volume for the 6 Focus Countries

1,400

Table 04. Aquaculture Production by Countries in 2011 (MT) Iceland

Thousand MT

1,200

Atlantic cod

1,000

Atlantic salmon

Norway

Faroe Islands

Canada East Coast

US East Coast

877

15,249

NA

NA

NA

1,083

1,059,958

60,473

27,184

18,595

800

Arctic charr

3,021

276

NA

NA

NA

600

Blue mussel

46

1,742

NA

25,209

2,213

400

Other salmonids

NA

72

NA

14,264

200

Rainbow trout

226

58,311

NA

NA

NA

Hard clam

NA

NA

NA

NA

28,841

0

02

20

03

20

Salmon

04

05

20

20 Trout

38 North Atlantic Report

06

20

Mussel

07

20

08

20

Hard clam

09

10

20

20

Cod

Other

Fig. 36. World Production of Atlantic Salmon (thousand MT)

NA

1,379

1,440

1,426

569

627

479

402

810

824

2008

961

2009 Focus countries

Sources: FAO

International production of salmon increased by 21% compared to 2010.

Fig. 37. Atlantic Salmon Production 2011, by Countries and Volume

1,721 1,452

2007

11

20

The salmon farming industry started in Norway in the 1980s and has grown dramatically. In 2011, 1,721,000 MT were produced in 12 countries, Norway being by far the largest with about 62% of the production.

Sources: FAO

1,024

2010

554

Norway Faroe Islands

32%

U.S. - East Coast

1,167

2011

Canada - East Coast

62%

Other

1% 2% 4%

Other

North Atlantic Report

39

Conclusion

Conclusion

The North Atlantic Ocean has abundant seafood which is an important resource for many countries. The ocean contains many different species of fish whose harvesting is the foundation of significant populations. It is unlikely that we will see major expansion in wild caught species in the future, and therefore, the focus nations will look for other ways to increase the value of their seafood industry. A major recent development has been improved processing techniques designed to maximise the value ​​extracted from the sea. This involves processing as much of the catch as possible for human consumption, and creating value from the parts of the catch that were previously wasted. This has become a major undertaking for seafood companies and there are a number of opportunities for further efficiencies in processing. Progress in the focus countries varies greatly, but there is much scope for improvement for all of them. In the future increasing supplies of seafood for human consumption will come from further processing along with aquaculture. Aquaculture has shown rapid growth rates in recent years. Today, 47% of seafood for human consumption is farmed and it is believed that farmed fish will overtake fish caught for human consumption by 2018. As shown in the report, some of the North Atlantic countries are already very advanced in aquaculture and have built up strong local industries. Fish farming at sea has limited growth potential due to the fact that it is important not to disrupt the ecology of other organisms.

40 North Atlantic Report

Disclaimer This report was produced by Íslandsbanki hf. The information in this report is based on publicly available data and information from various sources deemed reliable. The information has not been independently verified by Íslandsbanki hf. (“Íslandsbanki”) and Íslandsbanki 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 holds no obligation to update, modify or amend this report or to otherwise notify readers or recipients of this report in the event that any matter contained herein changes or subsequently becomes inaccurate. This report is informative in nature, and should not be interpreted as a recommendation to take, or not to take, any particular investment action. This report does not represent an offer or a solicitation to buy, sell or subscribe to any particular financial instruments. Íslandsbanki accepts no liability for any possible losses or other consequences arising from decisions based on information in this report. Any loss arising from the use of the information in this report 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. International investments include 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. 42 North Atlantic Report

Reports and other information received from Íslandsbanki are intended for private use only. This material may not be copied, quoted or distributed, in part or in whole, without prior written consent from Íslandsbanki. This report is a brief summary and does not purport to contain all available information on the subject covered. Regulator: The Financial Supervision 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 may be a breach of applicable 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 in the United States or Canada. For further information relating to this introduction see: https://www.islandsbanki.is

Íslandsbanki Seafood Team Íslandsbanki, Kirkjusandi, 155 Reykjavík, Iceland Tel.: +354 440 4500 For more information, please visit our websites: www.islandsbanki.is/seafood [email protected]