A search for Canadian exporters unaffected by the global recession would need a pretty big magnifying glass. Exports have been dented across the industrial spectrum – but the impact has been unequal. Which industries are expected to fare best and worst over the near-term horizon?
Canada’s energy exporters will take the biggest hit in 2009. Prices are a key factor, as the average spot rates for crude oil, natural gas and coal this year are well below 2008 levels. Volume shipments have also been impacted by lower global demand. Technological advances have unleashed large quantities of US shale gas into the North American market, increasing inventories and dampening US demand for Canadian gas. Uncertainty in the global coal market has led to deferral of planned Canadian mine expansions, stunting the near-term export forecast. After falling 43% this year, weak global activity will hold growth in 2010 to just 9%, leaving foreign sales well below peak levels.
Fertilizer shipments will take a similar hit this year, falling by 42% on weaker demand. However, the drop comes after explosive 87% growth in 2008. This sector faces solid long-term prospects, but will be held to 4% growth next year as global markets stabilize.
Sharply lower industrial production planet-wide crimped demand for Canadian ores and metals this year. Sales fell 33% after a tepid 2.5% increase in 2008, largely a result of the across-the-board collapse in base metal prices. A prolonged strike in the nickel industry and weakness in global steel demand are additional factors underlying 2009 performance. Growth of 11% is forecast for 2010, based on a partial price rebound and modestly higher demand for metals.
Weighed down by the collapse of US housing markets, forestry exports have endured a multi-year contraction that will continue this year. Results have been further dampened by weakened exports of pulp and paper, the segments of the industry that take longer to respond to economic weakness. Export sales are forecast to contract by 18% this year and to post modest 4% growth in 2010.
Aerospace exports also lag behind the economic cycle. Currency movements will help the sector to post modest 3% growth. But as other industries return to growth next year, an 11% contraction will hit aerospace exports, as airlines rationalize operations and as sales of business jets suffer.
As unlikely as it may seem, topping the growth charts next year is the auto sector. Volumes will get a needed boost from triple-shift production at CAMI in Ingersoll, increased production of Toyota’s RAV4 in Woodstock and shipments of Oshawa’s hot-selling Camaros. A rebound of parts exports will also help to lift total sector shipments up 16% in 2010. This is good news, but the sector still remains stressed, as 2010 sales levels will still be 30% below what was achieved in 2007. With a few exceptions, the remaining industries will generally follow the national pattern – significant decline this year, followed by a modest rebound that leaves activity levels well below the previous peak.
The bottom line? Results for 2010 are generally modest for all industries, in spite of the drubbing that some are taking this year. There are bright spots, but it will be at least 2011 before activity levels once again approach what Canadian exporters were used to in the boom years.