Canadian exporters have faced significant new-millennium challenges. The irrepressible loonie, increased global competition, a thickening border with our top customer, bottlenecks in trade infrastructure – any one of these would have been challenge enough.
Even so, exporters have managed to grow their business and create key success stories, thanks to vibrant global demand. With that key element now gone, export sales have suddenly become tough for all industries.
Exports fell into recession last year, led by a sharp drop in auto sector shipments and ongoing woes in the forestry industry. But at the same time, others were soaring. It was a great time to be producing raw materials: the energy, agri-food and fertilizer industries each saw sky-high gains. Also, exports of other transportation equipment, ores and metals, and industrial machinery and equipment posted respectable gains. The story for 2009 is much more uniform.
This year, there seem to be two categories: bad, and worse. Many of last year’s high-flyers will experience the deepest sectoral declines in 2009 export shipments. Few were not shocked by the extent of the collapse in energy and base metal prices, significant enough to put certain key projects in jeopardy, at least in the short term. Energy sector exports are forecast to tumble by 41 per cent this year, before regaining 16 per cent of the lost ground in 2010. Collectively, ores and metals will see a 33 per cent drop in 2009 before a modest rebound in prices lifts 2010 shipments by 11 per cent.
Falling agri-food and fertilizer prices were even more surprising. Growing demand for food from burgeoning new middle class consumers in key emerging markets fomented a wave of concern about food shortages just over a year ago. This sparked a run on supplies in a number of developing economies, and prices soared. Peak price levels were not expected to persist, but the general trend was, given the rise in emerging market wealth. Not so – agri-food exports will likely fall 12 per cent this year, while fertilizer shipments are in store for a 55 per cent hit.
After their 22 per cent drubbing last year, auto sector exports are projected to decline by just three per cent in 2009. It seems impossibly modest, given current news reports, but Canadian dollar movements are a key factor. Net of the boost to the forecast from the loonie’s depreciation this year, price-adjusted shipments are expected to fall by 18 per cent.
If there is better news, it’s in the rail and aerospace industries. Both will experience milder declines in real activity this year. Rail shipments will benefit from substantial fiscal stimulus in a number of international markets, a large share of which will focus on urban infrastructure. The aerospace sector entered the downturn with a decent order book, which will shield near-term exports. For the industry, emerging market exports will outpace sales to traditional customers.
On an even brighter note, most industries will move back into the black in 2010, if only modestly, as the global economy begins to find a more solid footing for future growth.
The bottom line? 2009 will put most industries to the test, and mild growth in 2010 will keep activity levels low. This will restore global supply-demand balances, setting the stage for rebound.