Industrial Sectors

Overview of presentation

• Pharmaceutical- and other main health related industries

• Construction Industry• Maritime Industry• Metals Industry• Creative Industries

Pharmaceuticals and health related industries

Health related sectors as part of GDP

• As of 2009, Industry and construction constitute around 21% of the GDP – Of which construction constituted 12% in 2007 and has

collapsed to 4% in 2010– Manufacturing in general around 16% as of 2010

• Pharmaceuticals constitute an avg. 0,5% of GDP from between 2005-2009

• Manufacture of health related technology an avg. 0,3% of GDP

• Small but important high-tech sectors

Market shares in relation to size of enterprises - pharmaceuticals

less than 10 employees11%

between 10 - 49 employees36%

more than 250 employees53%

Size of enterprises by numbers of employees

Market shares in relation to size of enterprises – manufacture of medical instruments

less than 10 employees9% between 10 -

49 employees7%

between 50-249 employees84%

Size of enterprises by number of employees

Growth in health related industries

• Does not present itself in Value added • Mainly represented in the size and number of

enterprises working in health-related fields• Visible in abroad activites• A few strong global companies, with an

Icelandic base or history• A growing high-prospect genre, enriched by

innovation and entrepreneurship

Health related industries

• Pharmaceuticals–Actavis, IcePharma, Vistor

• Health-related technology–Össur, specializing in non-invasive

orthopaedics and ORF líftækni, a bio-technological innovation enterprise–KÍM – Medical Park, health related

innovation enterprises

Össur - Orthopaedics

• Founded in 1971 in Iceland – employee: 1

• Produce high-technology solutions for prosthetics bracing and support

• Around 250 employees in Iceland and 1800 around the globe

• Operating in five continents

Actavis - Pharmaceuticals• Generic pharmaceuticals• Founded in Iceland since 1956,

headquarters recently moved to Switzerland

• Operates in 5 continents, of which two production plants in Iceland

• More than 10.500 employees worldwide and 700 employees in Iceland

• Recently gone through expansion, enlarging their operations in Iceland

ORF - Genetics

• Founded in 2001• Produce highly valuable

proteins, used for pharmaceuticals, medical research and cosmetics

• Use the seeds of barley as carriers for this protein

• Around 40 employees• Long-standing roots to the

Icelandic Innovation Center and RannÍs

KÍM – Medical Park

• Currently, 12 enterprises are stationed at the KÍM – Medical Park

• Center for entrepreneurship in health-related technology, providing technical assistance, consultation, guidance and research facilities

• A part of the Icelandic Innovation Center (NMÍ), a driving force for innovation in Iceland

Examples of entrepreneurship

• Nox Medical, solutions for sleeping disorders, sleep monitoring and diagnostics

• SagaMedica, manufactures health products from Icelandic medical herbs, e.g. Arctica Angelica (Is. Hvönn)

• Prokazyme, produces enzyme products originating from geothermal microbial ecosystems

Saga Medica – Arctic Angelica

Saga Medica - SagaPro

Saga Medica - SagaVita

Nox medical – T3 a new generation of portable sleep monitors

The Construction Industry

GDP 2005-2010

2005 2006 2007 2008 2009 20100

2

4

6

8

10

12

14

CONSTRUCTION %- of GDP%

No. of dwellings under construction and begun during the year

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

1000

2000

3000

4000

5000

6000

7000

under construc-tion

starting

The economic recession

! The greatest number of insolvencies in 2009 was in construction.

257 construction companies went bankrupt that year, about 6000 employees lost their jobs (about ½ of all jobs lost in 2009) and turnover fell by about 44%.

The housing market• No. of unsold new dwellings has decreased from about 2.000

at end of 2008 to currently being about 1.300 units as demand is gradually increasing this year – in particular from first time buyers. Prices have probably reached the bottom but fell from about 300.000 ISK (1.820 €)/m2 to about 210.000 ISK (1.220 €)/m2 – or by about 1/3.

• Under normal circumstances the demand for new dwellings is somewhat below 2.000 units.

Power- and Industrial plants take 3-6 years in construction and create direct employment for up to 1.000 people. The largest power plant in Iceland has installed capacity of 690 MW and a production capacity of 4.500 GWh/y.

Kárahnjúkar Dam is the largest earth fill gravity dam in Europe 198 m high, 700 m long and 8,5 million m3 in volume

Tunnels for water diversion at Kárahnjúkar are mostly TBM – tunnels about 40 km in length and most of them are about 7 ½ m in diameter

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Number of employees in the construction in-dustry 2000-2010

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

50000

100000

150000

200000

250000

300000

Annual turnover in the construction Industry 2000-2010 m ISK

Export of construction services

• Following the outset of the crises in Oct. 2008 construction sector sought contracts abroad.

• Already in 2009 the export of construction services amounted to 2.330 m.ISK (14.4 m€)

• The export of construction services still increased in 2010

• International tenders show that the Icelandic construction firms are fully compatible.

Tax incentives

• In order to stimulate the local construction an maintenance industry and combat unreported activities (black economy) the government in 2009 decided to repay to house owners all VAT (with an upper ISK limit) on house maintenance and construction work.

• In 2009 12.670 requests for repayment of VAT were received for maintenance amounting to 7.958 m.ISK (50 m€) and 2.135 requests for new construction work amounting to 3.509 m.ISK (22 m€)

• Because of the upper limit on the refundable amount this has primarily benefitted private house owners and smaller contractors.

R&D must continue in spite of the recession:Example: Center of Excellence in Cement Based Materials

• Concrete is the dominating building material in Iceland. It´s quality and durability in the harsh environment of the high latitude is of major importance for all real estate investments. The Innovation Center Iceland is advancing to be an outstanding research facility, mastering state of the art knowledge within the science of rheology of cement based particle suspensions, including cement paste, grouts, mortars, repair materials and concrete.

• The aim is to manage up to date know-how in special concrete areas, such as high performance concrete (HPC), underwater concrete (UWC) and fiber reinforced concrete (FRC). Special emphasis is on mainstream technology like self-compacting concrete (SCC).

• Another aim is to design concrete with a minimum use of cement without loosing any desired properties such as strength or workability. This is a part of the eco-design approach.

New emphasis on sustainable development and eco-buildings• Buildings consume a lot of heat. The average citizen of Reykjavik uses

about 410.000 liters of hot water annually. => Need to improve the energy performance by integration of renewable energy technologies.

• The future design must be environmentally responsible and resource-efficient throughout a building's life-cycle: from siting to design, construction, operation, maintenance, renovation, and demolition.

• This practice expands and complements the classical building design concerns of economy, utility, durability, and comfort.

• The Institute of Natural History was designed according to these principles and is accredited according to the British BREEAM accreditation system.

• http://inhabitat.com/stunning-icelandic-institute-is-an-ice-frosted-eco-citadel/

Maritime Industries

Maritime industries: general status 1/3

• The Icelandic maritime industries have primarily served the fishing fleet – and other vessels up to 40 m in length. The number of shipyards has gradually decreased to 8.

• 40 companies were classified in 2010 as having their main activity from repairing and maintaining ships and boats.

• The shipyards, shipbuilding and steel workshops have over the years suffered greatly from foreign competition, in particular from those that enjoys state aids.

• The shipyards employ about 340 people and their annual turnover is about 25 m €.

• The industry is in general greatly affected by the availability in fishing quotas, fluctuation in the exchange rate of the currency and cost of borrowed capital.

Maritime industries: general status 2/3

• The industry suffered a serious decline during the period 1987-1994. Then the reduction in turnover (sales volume) of the ship builders and service providers (incl. repairs) was about 60% and number of employees went from 900-1000 to less than 400.

• For many years the steel work for the hull and superstructure-shell was contracted to foreign shipyards. Equipment installation and other electro-mechanical work was undertaken in Iceland to the extent possible.

• In recent years all the steel construction work has more or less moved abroad – except for the installation of hi-tech mechanical and electronic equipment manufactured in Iceland.

• Building of steel ships is basically a thing of the past.• Fiberglass boat construction started in the early 80s - building high speed

fishing boats that cruse up to 23 nautical miles/hr. – specially designed for the hardship of the open seas of the high latitude North-Atlantic.

Maritime industries: general status 3/3

• Most fiberglass boats are 5-15 m. long and up to 30 gross tonnage.• Fiber boats are high-tech boats equipped with the best available fishing-,

navigation- and safety equipment. • There are tree major fiberglass boat manufacturers in Iceland, in total

with 100-150 employees, including subcontractors. Most new fishing boats in Iceland are high speed fiber boats. About 80-90% of the production is exported, mostly to other North Atlantic fishing communities, such as to Norway, Scotland and France but also to S-America and Asia.

• The leading manufactures TREFJAR Ltd. has made over 400 boats during the last 30 years. It produces 12-30 boats/year (depending on size) that cost from 1/2 – 1 m. € each

The role of the workshops

• Many of the companies belonging to the maritime industry are small workshops that have a great variety of clients. They may be independent producers or provide parts to other equipment producers and some serve the power-intensive industries as sub-contractors.

• It is estimated that these companies employ more than four thousand tradesmen and skilled workers .

Yards and steel-workshops without equipment producers and service providers

2005 2006 2007 2008 20090

5000

10000

15000

20000

25000

30000

Indicative value added production& value of production

m.ISK

Total value

Value added

The mechanical industry• In spite of the general decline of the traditional ship building industry another

spin-of sector has been growing - the mechanical industry – which is the aggregate of enterprises engaged in the design, manufacture and marketing of steel-, mechanical- and electronic apparatuses for industrial usage, e.g. for ships.

• Several of the companies within this sector are internationality competitive and a few are leaders in it´s field.

• MAREL Ltd is the leading Icelandic company. It started as a University research project in the late 80s but has since grown to a leading global provider of advanced equipment and systems for the food processing industry – with operations in more than 30 countries.

• HAMPIDJAN Ltd, founded 1934, has evolved to become one of the largest Fishing Gear and Super Ropes Manufacturer of the world, having 14 entities in 4 continents with over 600 employees.

---------------------------------*) Aggregate of enterprises is engaged in the design, manufacture and marketing of mechanical

apparatuses for commercial or industrial usage.

Marel: No. of employees 2006-2010

2006 2007 2008 2009 20100

500

1000

1500

2000

2500

3000

3500

4000TOTAL

EU-ROPE

Marel: Annual turnover m €

2006 2007 2008 2009 2010

0

100

200

300

400

500

600

Turnover mEUREurope m EUR

The mechanical industry• MARORKA Ltd. is another university spin-off and a leader in cutting-edge

environmental solutions for the shipping industry. In a few years MARORKA has become a leading provider of energy management solutions on the international market. It's products and services enable vessel operators to optimize fuel consumption by maximizing the energy efficiency of their vessel or fleet. The results are minimized harmful emissions and reduced costs. The North Atlantic ocean is MARORKA‘s home market. In addition to its headquarters in Reykjavik, Iceland, the company has agents and partners in Norway, Finland, Canada, USA, Greece, Germany, Korea and Dubai.

• The DNG computerized jigging reel since 1985 is a typical Icelandic SME. DNG develops and manufactures a highly sophisticated energy efficient fishing device that requires minimum maintenance in the demanding environment. It is programmable and has many different fishing methods in fixed memory.

“It is estimated that fuel usage and emissions from international shipping will more than double by 2020 within the European Union. Similarly, it is expected that SO2 and NOx emissions from international shipping will increase by 40-50% by 2020, as compared to 2000, and even surpass the SO2 and NOx emissions from land-based sources in the 27 EU member states combined.”

Challenges ahead (somewhat like the LeaderSHIP 2015 recommendations)

• Secure the access to a skilled workforce to serve the maintenance and repair needs of the steel ship fleet. Improve education and training.

• Strengthen RDI for:– New fishing gear technologies– New environment friendly solutions – New innovative solutions for traditional shipyards and the fiberglass boat industry.

• Promote new and emerging ICT-based electro-mechanical industries and increase RDI for high tech equipment, systems and services for the global food industry.

• Strengthen clustering.

The Metals Industries

The three main pillars:

Fisheries Tourism Metals and energy0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Direct contribution to GDP 2009

%

Investments in: power production and manufacturing

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

50,000

100,000

150,000

200,000

250,000

Total investment in power intensive in-dustries

Production of metals Combined investment - metals + utilites

Electricity consumption 2008

Aluminum production73%

Ferrosil-icon

produc-tion6%

Fisheries0%

Agricul-ture1%

Utilities4%

Other industry

4%

Residen-tial con-

sumption5%

Services7%

Source: National Energy Authority

GHG emissions by sector (2007)

Source: Ministry for the Environment

Industrial processes33%

Fuel con-

sump-tion by

industry7%

Chemical use2%

Fisheries14%

Agriculture12%

Transportation23%

Electric-ity & heat4%

Waste6%

Total share of emissions by industry and chemical use: 41%

Export of goods – main sectors 2010%- total export of goods

Fish products 39%

Agri. Products 2%

Industrial products 59%

Export of goods- main sectors 2010%- of total exports of goods

Fish products 39%

Aluminum 40%

Ferro-alloys 4%

Health tech. 5%

Other ind. 10%

Agricultural prod. 2%

The aluminum industry 1/2

• First plant at Straumsvik started production in 1969 with a capacity of 33.000 t/y. It has been enlarged in several steps up to the present 188.000 t/y. It is now being enlarged by 40.000 t/y.

• Second plant in Grundartangi started production in 1997 with a production capacity of 275.000 t/y.

• Third plant at Reydarfjördur started production in 2007 with a production capacity of 350.000 t/y.

• Fourth plant is under construction at Helguvik. It is estimated to have a production capacity of 350.000 t/y – depending on availability of electricity.

• Total installed production capacity is : 813.000 t/y

Alcan Aluminium Plant

Production capacity 180.000 tpy

Norðurál aluminium plant Production capacity: 260.000 tpy

Alcoa Fjarðarál aluminium plant Production capacity: 350.000 tpy

Under construction: Norðurál Helguvík aluminium plantProduction capacity in 2016: 360.000 tpy

Elkem ferro silicon plantProduction capacity up to 120.000 tpy

Export of aluminum:

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100

50,000

100,000

150,000

200,000

250,000

0%

5%

10%

15%

20%

25%

30%

Aluminum exports - Historical development

Aluminum exports % of overall exports

ISK

Mill

ion

Heimild: Hagstofa Íslands

Aluminum industry: Turnover as % of GDP

2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Export revenue of Aluminum in Iceland

Turn

over

as %

of G

DP

Aluminum industry: Full time jobs

2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

500

1000

1500

2000

2500

3000

3500

Number of full time jobs in the aluminum industry

Direct jobsIndirect jobs

Aluminum: Production and hypothetical prognosis

19711973

19751977

19791981

19831985

19871989

19911993

19951997

19992001

20032005

20072009

20112013

20152017

0

200

400

600

800

1,000

1,200

1,400

Aluminum - volume of production

Annual production Planned production increase

Ton

'000

Iceland Europe World0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

PFC Emissions within the aluminum industry in 2009

Tons

CO

2 Eq

. / T

on A

l

Source: IAI/EAA

Iceland Europe World0

1

2

3

4

5

6

7

8

9

CO2 Emissions within the Aluminum in-dustry in 2009

Process related emissions Overall emissions incl. electricity

Tons

CO

2 /

Ton

Al

Source: IAI/EAA

Iceland Europe World0

0.2

0.4

0.6

0.8

1

1.2

Fluor Emissions within the Aluminum industry in 2009

Tons

CO

2 Eq

. / T

on A

l

Source: IAI/EAA

Creative Industries