Alaska’s international trade economy surged forward in 2006 with exports from the state to overseas markets climbing to $4 billion, an all-time record. This represents a 12.6% increase over 2005. It also marks the fourth consecutive year of double-digit export growth as the state’s natural resource industries continue to benefit from the global boom in commodity prices, spurred by the rapidly growing economies of China, India and other developing nations.
The surge was driven primarily by higher prices being realized for commodities such as minerals and precious metals. State exporters also benefited from increased production in some sectors and growing recognition of the quality and healthful aspects of Alaska’s wild caught seafood.
At just over $1 billion, Japan was Alaska’s largest export destination in 2006, accounting for 25% of the state’s total worldwide exports. Korea, long the state’s second largest market, retained that position in 2006 and exports to the country reached a new high of $725 million.
Among the state’s other large trading partners, Canada was a stellar performer in 2006 with exports from Alaska growing from $221 million in 2005 to $444 million last year, an impressive 100% increase. Another highlight was the continuing growth of exports to China, now the state’ third largest overseas market. In 2006, exports to China rose 41% to $474 million. Germany rounded out the state’s “top five” markets with a strong performance, up 34% to $241 million.
Seafood has been and remains the state’s major export commodity. In 2006, the value of the state’s seafood exports reached $2 billion, a new high, and a 3% increase over the previous year. The value of minerals, Alaska’s second biggest export commodity, doubled last year from $551 million in 2005 to $1 billion. Consisting mainly of zinc and lead from the Red Dog Mine in Northwest Alaska near Kotzebue, this sector benefited substantially from higher prices; zinc, for example, rose from approximately $1 per pound to more than $2 per pound during the year.
At $263 million, energy (coal and liquid natural gas) was the third largest export sector, followed by fertilizers. In 2006, totaling $163 million, the value of fertilizer shipments dropped 41% from the year prior due to reduced production. Agrium’s manufacturing facility at Nikiski on the Kenai Peninsula was shutdown for a number of months and, during the months that it was open, did not operate at full capacity. The other two major export categories had a mixed performance in 2006. Forest products (mainly whole logs) dropped 11% to $112 million while precious metals (gold and silver) increased from $84 million in 2005 to $110 million.
Looking forward, prospects are bright for Alaska’s export industries.
Developing giants like China and India are expected to continue their impressive economic expansion and modernization. Other markets of importance to Alaska, particularly in Asia, are also growing at a steady pace and their demand for natural resources and foodstuffs is expected to increase accordingly.
While we forecast continuing strong demand for the state’s natural resources, prices may not remain at the historically high levels we have experienced over the past several years. Commodity prices tend to be cyclical and often volatile. At this stage, however, most analysts agree that commodity prices will stay at relatively high levels. This bodes well for Alaskan resource exporters and should provide the economic underpinning for new development projects under consideration.
Greg Wolf is the Executive Director of the World Trade Center Alaska.
FOREIGN INVESTMENT KEY TO
GROWTH IN ALASKA EXPORTS
At $4 billion in annual exports, international trade certainly plays a significant role in the growth and diversification of Alaska’s economy. Exports and other overseas business are relatively more important to Alaska than other states. While Alaska ranks 38th overall in export volume compared with the other states, on a per-capita basis Alaska ranks fourth and when measured as a percentage of the Gross State Product (the sum of all goods and services produced in a state in a given year) Alaska ranks eighth. At current levels, the exports of goods and services account for approximately 10% of the state’s total economic activity.
However, exports tell only a part of Alaska’s international story. Investment by the U.S. affiliates of foreign companies in the state’s major industries is sizable now and growing. According to the U.S. Department of Commerce, cumulative Foreign Direct Investment (FDI) in Alaska totaled $30 billion in 2002, the latest year that statistics are available. This ranks Alaska 12th among the states as a recipient of FDI. The Department also reported that employment by foreign companies (U.S. affiliates) operating in Alaska accounted for 13,000 jobs.
Foreign companies have funded many of the state’s largest resource development projects completely, or in partnership via joint ventures. These investments are important not only because they generate tax revenues and create high-paying jobs for Alaskans, but also because they are a tangible vote of confidence in Alaska as an attractive place to do business. In many cases, companies have a choice of where to direct their investment dollars. When they invest them in Alaska, they are expressing confidence in our stable business environment, the opportunity for profitable operations and in the quality of our workforce.
Alaska has proven itself to be an excellent destination for investment. Continuing to attract these investment dollars will help ensure a bright future for Alaskans today and for many years to come.
