Manufactured Exports from Alaska

All developed economies include a value-added sector; Alaska’s small but nationally competitive manufacturing is strong but narrow, with room to grow. Alaska’s notoriously high energy costs and remote location present unique operational challenges for any business owner, let alone those aspiring to export products overseas. However, data show that the manufacturing sector is thriving in unique ways. International exports are certainly an important piece of that puzzle, and an examination of those trends offers interesting insights into both established and growing industries operating in Alaska.

It is true that compared to other states, Alaska’s manufacturing sector is relatively small. According to the US Census’ State Trade Data, Alaska exported $276.1 million worth of manufactured goods for the year as of October 2016. Included in this figure is October’s total export value of $27.3 million. In 2014, there were approximately 570 manufacturing companies operating within the state. A 2014 planning study for the Manufacturing Extension Partnership reports that 63 percent of 67 surveyed manufacturers explained that they sold products outside of the Alaska market, while 39 percent had tried to access international markets.

In 2015, manufactured products made up 7.64 percent of all Alaska exports, with $353 million worth of products shipped out of state. “Food, beverage, tobacco, and clothing” (manufacturing, part 1) is the smallest industry subset, with a total of approximately $38 million worth of goods (0.83 percent of total exports) exported outside of the state. “Primary metal, machinery, metal works, computer and electronics, appliance, vehicle and furniture,” (manufacturing, part 2) is notably larger, with a total of $138 million in exports (3 percent). The largest manufacturing sector by export value is made up of “wood, paper, petroleum and coal, chemical, pharmaceutical, paint, toilet, non-metallic minerals, and cement” (manufacturing, part 3) at 3.81 percent of total exports, with a dollar value of $176 million.

Manufacturing Parts 1, 2, and 3

The vast majority of “manufacturing, part 1” exports are “food manufactures” due to Alaska’s large fish processing sector. In 2015, $31 million worth of manufactured food products were shipped outside of the state. It is perhaps surprising that this number is not higher. This is because the North American Industry Classification System is very specific about what constitutes a manufactured seafood product.

Producers of minimally processed seafood, such as fish that are merely headed and gutted (H&G), are not considered manufacturers. Even filleted fish do not make the cut. These products are classified under NAICS code 1141, “fishing,” and therefore contribute to Alaska’s largest export industry, with a whopping dollar value of $2.5 billion.

As for “manufacturing, part 2,” petroleum and coal product exports were by far 2015’s largest industry subsector with a dollar value of $163 million. While there are relatively few operational value-added petroleum and coal operations in the state, the cost of goods sold accounts for the high value. In a distant second place come “non-metallic” mineral products, with an estimated dollar value of $6 million. This is a massive increase from the previous year when exports were only $173,604.

Transportation equipment currently comprises the largest subsector of “manufacturing, part 3.” In 2015, $55 million worth of transportation equipment was exported out of Alaska. Although still a significant portion of the state’s international exports, this value has dropped significantly since 2014 when exports were over $218 million.

Smaller, Innovative Companies

Outside of Alaska’s major manufacturing export industries, there are many smaller, innovative companies breaking into international markets. While Alaska’s “other manufacturers” offer extremely diverse products, those companies that succeed in securing sustained international sales tend to have a few things in common. Focusing on building repeat sales from the tourism industry after visitors have returned home and creating products especially suited for places similar to Alaska tend to impact the success of international sales.

Homer-based company Alaska Tough Yurts, for instance, manufactures durable canvas shelters specifically designed to weather Alaska’s harsh climate. Because of this specificity, their high quality, specialty products have broken into markets in both the Lower 48 and internationally.

Another prime example can be found in Dowland-Bach, and an Anchorage based company designing and producing control systems, process modules, and stainless steel fabrication. Founded in 1975, and originally fabricating wellhead shutdown systems for the North Slope, the company’s products are now used in several foreign countries, including the remote jungle oil fields in Cambodia and harsh desert climates in the United Arab Emirates.

Improving Alaska Manufacturing

Targeted efforts are being made to improve competitiveness and improve the economic impact of manufacturing in Alaska. Alaska’s designee to the NIST MEP (National Institute of Standards and Technology Manufacturing Extension Partnership) began operations in January of 2016. The Manufacturing Alaska Extension (MAKE) Partnership is hosted by the Southwest Alaska Municipal Conference. MAKE Director Erik O’Brien shares that the program’s goal is simple: to create economic growth.

Hope Broecker, MAKE’s client services manager states, “In the first year, the MAKE Program engaged Debbie Franklin, [Director of Alaska’s US Export Assistance Center under the US Department of Commerce and International Trade Administration] in our first Maker-Manufacturing Forum during Anchorage’s Start-Up Week.”

Additionally, Broecker notes, “MAKE has a newly established relationship with Patrick Muelman from the Northwest Trade Adjustment Assistance Center … services in the past include export and domestic market development, implementing lean manufacturing training, designing new marketing materials, market studies, testing new products, and operations training.”

Importantly for Alaska export firms, Northwest Trade Adjustment Assistance Center funds can be matched with MAKE funds to fund nearly all of the training needs of companies that fit the required criteria.

Expanding Capacity

In order to maximize economic impact, the MAKE program currently focuses its efforts on value-added seafood and marine products operations, though is slowly building the Partnership to expand capacity both geographically and technically by bringing on external subject matter experts. Another crucial player in these efforts is the Alaska Sea Grant program, a partnership between the National Oceanic and Atmospheric Administration and the universities in our state.

Dr. Paula Cullenburg, director of Alaska Sea Grant, explains that “faculty based at the Kodiak Seafood and Marine Science Center do workforce development training for seafood processors including a leadership institute, training in smoking seafood and processing roe, required HACCP [Hazard Analysis Critical Control Point] training, training for thermal processing [i.e. canning], specialty food processing, quality control plant training, and several other classes. In FY16, over 250 people from seafood companies across the state were training primarily in Kodiak as well as a few other coastal communities.”

She also notes that “the Alaska Sea Grant Marine Advisory faculty in Kodiak provide technical assistance to companies, municipalities, and individuals trying to process their fish—over seventy different groups consulted with us in the last year on a wide variety of food safety and product development questions.”

A wide variety of producers take advantage of the manufacturing support services available through programs such as the Alaska Sea Grant and the MAKE Partnership. Cullenberg explains, “there is a lot of interest and questions by these plants and others looking to start up an operation and/or increase value from their fisheries. … We have over 250 plants in our state that really range from very large plants operated by large companies to small mom and pop operations and many in between. … In terms of processing salmon, vacuum packed fillets and smoked salmon seems to be the dominant product forms that are relatively new in our state, other than the traditional canned product and the frozen H&G salmon. And there is, with the growing food movement, there is a growing interest in selling fish locally.”

All in all, while there are certain challenges facing manufacturing operations in Alaska, the sector is undoubtedly contributing to a gradually diversified economy. With new industries emerging, old industries remaining relevant, and a strong network of individuals and organizations dedicated to technical assistance and support, manufacturing is primed to keep a foothold in the 49th State.

ANNELIESE TRAINER IS AN AMERICORPS VISTA CURRENTLY SERVING AT THE UNIVERSITY OF ALASKA CENTER FOR ECONOMIC DEVELOPMENT. HER PROJECT IS A MICROFINANCE INITIATIVE, AND SHE HAS SPENT THE YEAR WORKING TO BUILD A VARIETY OF TOOLS FOR MICRO-ENTREPRENEURS AND RESEARCHING HOW BOTH EXISTENT AND POTENTIAL MICROFINANCE SERVICES COULD AID LOW-INCOME AREAS OF THE STATE. BEFORE MOVING TO ALASKA, TRAINER WORKED FOR A TECH/MUSIC STARTUP IN NEW YORK CITY FOR SEVERAL YEARS.