News

Economic doomsday?

 

A newly released report on the “Blue Economy” from the United Nations Conference on Trade and Development contains nary a mention of Alaska, but it is stuffed full of bad news for the 49th state.

The report comes with the SARS-CoV-2-driven pandemic still causing major disruptions in economic markets around the world, and it suggests a tough road ahead for Alaska’s two biggest employers – tourism and fisheries.

The latter is wedded to marine, coastal waters, and the former largely so.

By this time in a normal year, the so-called “Glitter Gulch” – a strip of hotels, bars, restaurants and shops along the George Parks Highway outside the entrance to Denali National Park and Preserve – would be a happening place.

But when cruise lines serving Alaska canceled their summer cruises, a high chunk of the Gulch’s business went away. It isn’t quite a ghost town. Some Alaskans are still visiting, but it is quiet.

Very quiet.

49th State Brewing- the popular brewery and restaurant home to the bus from “Into the Wild,” the movie version – remains shuttered with rumors of a possible Fourth of July opening. 

Many hotels are also closed for the season. Still, it could be worse.

It could be Skagway at the northern end of the Alaska Panhandle where the only summer business comes from the cruise ships now no longer sailing, and the few people who come over the border from Canada on the Klondike Highway now closed to traffic due to the pandemic.

For entertainment in the city which served as the jumping-off point for the Klondike Gold Rush, the Skagway Convention & Visitors Bureau is hosting once weekly video reports “Live from the Red Onion” to keep the handful of year-round residents up-to-date on what’s happening, which is pretty much nothing. 

The last report featured a tour of empty city streets, entertainment from a lone and lonely looking musician on a park bench, and a visit to the empty Red Onion, normally a tourist-filled bar, to pitch the takeout pizza.

From the looks of it, Skagway might be happy if the grim forecast in the Blue Economy report comes true. It would be an improvement on the current situation.

“The U.N. World Tourism Organization (UNWTO) recently revised its 2020 prospects in international tour arrivals from between 3 percent to 4 percent growth to a deep decline of between 20 and 30 percent,” the report said. 

The details in the report only got worse:

  • “More pessimistic forecasts point to a loss of up to US $2.1 trillion in travel and tourism GDP this year.”
  • “Small- and medium-sized enterprises and autonomous workers make up around 80 percent of the tourism sector. They are particularly exposed….”
  • “More than 50 million jobs are at risk.”

Fishing hard hit too

Those who are in the business of hooking fish instead of tourists might not be in much better shape.

“The seafood industry outlook is not bright,” the report says. “The COVID-19 pandemic is is already impacting fish products and seafood value chains through falling consumer demand (restaurants and hotels), closure of retails business, disrupted trade routes, changes in consumer demands as well as a potential increase in sanitary measures on fish and seafood products.”

Alaska’s iconic Copper River salmon fishery found itself caught in this perfect storm when fishing opened in May.

Demand from fine restaurants for first-of-the-season Copper River king (Chinook) and sockeye (red) salmon has for years allowed Cordova-based gillnetters to pocket state-leading, top-dollars payments for those fish.

Only two years ago, the fishermen averaged $12.91 per pound for kings, according to Alaska Department of Fish and Game records. Prices for net-caught Chinook from elsewhere ranged from a high of $3.56 per pound in Cook Inlet to a low of 77 cents per pound in Kodiak.

Not even troll-caught Chinook from Southeast – fish prized as ocean-fresh and carefully preserved by being bled and put on ice within minutes of being caught – came close to soliciting the sort of prices paid for Copper River kings wrapped in a mythical aura of uniqueness. The myth was good for a $5.61 premium over and above the price paid trollers.

Lockdowns driven by COVID-19 fears in major U.S. cities, unfortunately, strangled the demand from high-end restaurants this year. Precautionary measures to avoid SARS-CoV-2 infections that had to be taken by processors to try to protect employees in fish plants drove up costs. Most retail consumers balked at paying more for salmon than filet mignon steak.

And prices paid fishermen dropped.

Chinook were down to $6 per pound at the dock this year, and there are major storm clouds now on the horizon for the industry in general.

“…Massive cancellation of flights by most airlines is directly affecting trade in some high-end fresh products which are mainly transported by air,” the Blue Economy report said. Farmed salmon from Norway, the United Kingdom and Chile are among those products.

Farmed salmon now control about 75 percent of the global market for salmon, and they wholly dominate in fresh fish sales, where profits are generally highest. Wild salmon are nearly all frozen, canned or turned into packaged seafood products.

The salmon farmers have generally avoided those markets, but COVID-19 is changing the game.

“Some producers are freezing and processing their catch not only to react to short-term market signals but to also create adequate stock in view of market recovery,” the report says.

This could put more salmon in the frozen-food cases to drive up competition, which almost always drives down price. As a result, Alaska fishermen are likely to face falling prices for their catches as has already happened in Cordova.

The Blue Economy report did try hard to cast this in the best light.

“Some observers are indicating that hindered economic activity may be a ‘holiday/resting time” for nature and particular for biodiversity,” the report said. “This may well apply to the oceans, too. This critical period can even develop a better understanding of the close links between anthropogenic activity, fish stock pressure, marine biodiversity loss and levels of greenhouse gas emissions.”

Most commercial fishermen in Alaska, where salmon runs have been well-managed for decades, are unlikely to see restraints on their economic activity as an idyllic rest. Those in Cook Inlet were complaining about getting too little salmon fishing time even before the pandemic hit.

The Blue Economy report does envision marine and coastal businesses playing “a crucial role in global recovery once demand rises again, one hopes within the next months.”

To achieve that in the fishery sector, however, the report suggests governments will need to “apply the least possible trade-restrictive trade measures” to rebuild “international supply chains (that) exchange between 35 and 38 percent of global fisheries and aquaculture output, generating U.S. $152 billion in exports in 2017.”

Alaska is in that global mix. A good share of the state’s salmon processing is tied to China. Fish are headed and gutted here and then shipped overseas for filleting and boning. It was a business model working fine when everything was fine.

A U.S.-China trade war threw a wrench in the gears, and the SARS-CoV-2 pandemic, which is believed to have originated in China before spreading itself around the globe, has not helped relations.

None of this appears to bode well for Alaska unless your one of those who yearn for an older, simpler time in the north when the entire state population was less than that of the Anchorage metro area today.

 

 

 

 

 

 

 

 

 

 

 

9 replies »

  1. If greater than 90% of State revenue is derived from the oil patch, how does tourism or fishing equate to a meaningful indicator of anything?

    And if we all think fishing and tourism is more than a tempest in a tea cup how should we view what might happen in 18 days when BP tosses the keys to Hilcorp, officially 2/3rds of BP’s employees hit the cheese line and the exodus impacts your future home value? Taken a look at listing activity on zillow lately?

    Alaska doesn’t exist on tourism dollars and the larger among those companies are vertically integrated to such a degree that they harvest more than they plant and they pay minimal incomes to locals while posing as some kind of benevolent uncle to their shrewishly paid service industry family. As an example, the commercialized outpost some refer to as Denali is complete artifice and entirely parasitic; expensive places to stay, overpriced food, and plastic gee gaws to remind geriatric tourists of that one trip that started on a brand-x boat, transferred to a brand-x leased train car and after an exhausting brand-x bus ride they all get hammered and snooze in a brand-x room until the order reverses.

    And how much money does the fishing industry provide State coffers again? Express that as a percentage if you like contrasts.

    There are a huge number of changes coming down the pipe and if either fishing or tourism are our best hope we are well and truly stuffed.

    • the oil industry no longer provides 90 percent of revenue, and the number of jobs it provides is rather small.

      but you’re right that Alaskans should be mightily worried about the departure of BP and the downsizing one can expect with Hilcorp, not to mention with the future of the oil patch in general.

  2. Well, it is only fitting that Americans are now getting their news from the UN.
    Journalism in the US now consists of an occasional “retweet” with a couple of photos from social media along with the standard prescribed government “presser”.
    Just one year ago, anyone who dared to speak up of the UN’s Agenda 2030 was labeled a wacko Conspiracy Theorist and dismissed that “it can’t happen here”…well, today after own economy was shot in the foot, chest and head by WHO/CDC medical mandates for a new strain of the flu, we are now seeing the product of millions unemployed and two months of a forced “lockdown” across America.
    As the economy in Alaska continues to crumble and more and more homeless people are showing up on the outskirts of town, we have a Governor and Health Czar that are intent on making it more difficult and more unpleasant for tourists to travel to the 49th state?
    If Governor Dunleavy was a real Conservative, he would do away with Gestapo “Travel Declarations” and forced medical testing at unsanitary airport environments….until these unconstitutional mandates are reversed, the economy is screwed.

  3. Whelp, guess there is always the rent-a-mob and rioting. Seems to be in vogue from one party these days. Who needs fish when you have unlimited financial resources channeled your way? Just “DEMAND” higher-price restaurants buy your salmon. If not, just call them some names. Yep, that ought to do it. But, there will always be a need for fresh sushi in loonie Seattle’s new “Autonomous Zone”.

    • We are at the start of a major transformational change in our country. Go ahead and resist it, as much as you can, none of it will matter in the end.
      Just like Nixon & Agnew (the nattering nabobs of negativity), did not work out so well for them. What you think, time for a change and real change is gonna come!

      • James, please describe just what these changes “and real change” you claim are inevitable will be. And maybe you can let us know what Nixon and Agnew have to do with the upcoming changes.

    • I take umbrage to your comment on Seattle. Without this city, Alaska would still be in uncharted waters. Alaska needs Seattle more than Seattle needs Alaska. Once the oil wells have been sucked dry, Alaska will need to look for their lower 48 connection, which they have had since gold was discovered in the Klondike. Good luck balancing the budget next year, you are going to need it. Not a pretty picture.

      • There’s a lot of oil left. NPR-A, ANWR and offshore individually have as much as Prudhoe Bay did to begin with. After we get finished with oil, next step is to get into CTLs / GTLs and batch synthetic diesel down TAPS to sell on both sides of the Pacific rim.

        As I see it, we ALL are going to need a lot of help balancing the budget next year. Cheers –

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