But other sectors also recorded strong YoY growth in nominal terms. For the first nine months of the year, export revenues for various sectors developed as follows:

• Marine products: ISK 258bn (up 19% YoY in ISK terms)
• Aquaculture products: ISK 33bn (up 24%)
• Ferrosilicon: ISK 35bn (up 124%)
• Drugs and medical equipment: ISK 13bn (up 37%)
• Other industrial goods: ISK 72bn (up 39%)
• Agricultural products: ISK 6bn (down 4%)

Wide price fluctuations in global markets

As is widely known, pandemic-related supply chain bottlenecks and the recent surge in demand pushed commodity prices upwards in many markets. The war in Ukraine added insult to injury, although the ambiguous outlook for global demand has put a damper on price hikes in recent months.

Iceland’s key markets for international trade have not been spared these tremors. In many cases, import prices have skyrocketed, although fortunately, many exported goods prices have risen as well.

It is interesting to look closer at the latter trend and see how it has shown on the exports side in the recent past.

As is mentioned above, marine product export revenues grew by 19% YoY in the first three quarters of 2022. In part, this is thanks to a bountiful capelin season, which generated exports valued at ISK 44bn for the period, more than twice the total for the first nine months of 2021.

But other factors play into it as well. Marine product prices have risen markedly since the beginning of the 2020s, even though the pandemic put a spanner in the works for a while. Based on the price index published by SI, marine product prices have risen nearly 18% year-to-date at constant exchange rates. By that measure, marine product prices were a full one-fifth higher, on average, in the first three quarters of 2022 than in the same period of 2021.

If the price of Iceland’s key commercial species remains high, the increase will probably offset – perhaps with room to spare – the reduction in catch quotas for several groundfish species during the fishing year that began this September. For example, there was a 6% reduction in the quota for cod, which is by far the most valuable commercial species in Icelandic waters and accounted for nearly 45% of the fishing industry’s total export revenues in 2021.

Farmed fish prices high

Fish caught in the wild is not the only source of higher prices, however. Farmed fish prices have been high since Russia invaded Ukraine. The price of farmed salmon surged this summer, based on the price of Norwegian salmon, although prices have softened during the recent cooler weather. The increase in farmed fish export values is due almost entirely to higher prices, according to Icelandic Financial News. However, the outlook is for growing aquaculture export volumes, as the sector is expanding rapidly at present and looks set to keep doing so.

The situation is somewhat different for aluminium exports. Aluminium prices spiked right after Russia invaded Ukraine but have lost considerable ground since the spring, in line with the darkening outlook for global demand. The price of a tonne of aluminium is roughly where it was in spring 2021, at around USD 2,200 for high-quality aluminium. Even so, it is still about 10% above its ten-year average.

How large a share of export revenues will stay in Iceland? It depends.

Naturally, comparing gross export revenues from various product classes does not tell the whole story as regards their value for the Icelandic economy. For example, the share of revenues remaining in Iceland is much greater for marine products than for aluminium. In the latter instance, imported inputs account for 30-40% of the export value, and the profit on the production reverts to the aluminium smelters’ foreign owners. The price of both exports and imported inputs moves in line with the price of aluminium itself, and when prices change, the domestic value added fluctuates less in the case of aluminium manufacture than in other export sectors such as fishing.

In the final analysis, sustained high marine product prices are more important for the domestic economy than high aluminium prices are. Fortunately, short-term trends appear to be favourable to Iceland in this respect. Furthermore, there is nothing wrong with boosting revenues from goods exports at the moment, given that Iceland’s goods account balance for 9m/2022 showed a deficit of nearly ISK 210bn, its largest in at least 15 years.