Sign Up for FREE Daily Energy News
 
BREAKING NEWS:
Hazloc Heaters
WEC - Western Engineered Containment
Copper Tip Energy Services
Hazloc Heaters
WEC - Western Engineered Containment
Copper Tip Energy

No Industry Left Unscathed in Canadian Economy Gearing Down


By Jen Skerritt, Danielle Bochove and Sandra Mergulhao

(Bloomberg)First, office workers and bartenders were sent home. Now, the cogs of Canadian industry are slowly grinding down as major companies curb operations to limit the spread of the coronavirus.Firms like Vale SA are idling some operations while Canadian oil sands producers Syncrude Canada Ltd. and Suncor Energy Inc. are delaying maintenance as coronavirus cases rise across Canada. Growth forecasts that were already revised lower amid the pandemic and tumbling oil prices are being cut again as economists now expect the virus will spur a recession with few industries left untouched.“It looks like it’s going to be a broad-based economic downturn rather than companies being hit on their supply chains,” said Robert Hogue, senior economist at Royal Bank of Canada. “I’m pressed to think of any sectors that will be unscathed.”

In the past week, coronavirus cases have surged to 569 across Canada, including seven deaths in British Columbia and one in Ontario, which has declared a state of emergency. The U.S. and Canada have agreed to close the border between the two nations to non-essential traffic as the virus spreads and Prime Minister Justin Trudeau has moved to restrict the entry of non-residents in Canada.

Newfoundland Touched

The threat of infection spurred Vale, one of the world’s top metal producers, to idle its fly-in mining operations at Voisey’s Bay, Newfoundland, on Canada’s east coast. Concerns about flying workers from out of town led Syncrude to delay coker maintenance at its upgrader near Fort McMurray, Alberta, and Suncor pushed back planned work scheduled for May. Other miners including Teck Resources Ltd. and Lundin Mining Corp. have halted construction on some projects outside Canada, which may have knock-on effects further down the road.

Canadian automakers could be next to halt operations if they follow their U.S. and European counterparts. General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV will temporarily shut down their U.S. plants, and European car manufacturers such as Volkswagen AG idled production until further notice amid coronavirus disruptions. While there are no changes to GM’s Canadian operations, the company expects to address similar health and safety issues as U.S. plants via a task force group that meets weekly, said GM Canada spokeswoman Jennifer Wright.

Linamar Corp. has established a task force and comprehensive action plan to deal with the virus and is keeping employees safe and customers supplied while mitigating the financial impact of the situation “as best we can,” Chief Executive Officer Linda Hasenfratz said in an email statement.

“The sooner we can all rapidly act to contain the spread of the virus as effectively as possible the sooner we will all be back to work and the less the human and economic fallout from the situation,” Hasenfratz said.

Recession Odds

While the Canadian economy was relatively well positioned to navigate the early stages of the coronavirus outbreak, rising domestic case counts and a “sudden stop” in a wide range of industries means it’s no longer an external problem, Bloomberg Economics economist Andrew Husby said Wednesday in a report. Oil prices at or below $30 a barrel will also lead to a significant hit in oil sector investment, depressing growth and incomes beyond the virus shock, he said.

Trudeau unveiled a C$82 billion ($56.7 billion) stimulus package on Wednesday that’s worth 3% of GDP, but the chief economist at Canadian Imperial Bank of Commerce said a recession was “still inevitable.”

A big chunk of the economy is already shutting down with schools, restaurants and entertainment spots closing their doors, RBC’s Hogue said. The shutdowns are broader than “we might’ve imagined just a week ago” and the longer the pandemic lasts the more the risk of a snowball effect, as workers start to see their hours reduced or companies are forced to lay off employees, he said. That, in turn, reduces consumer spending and exacerbates the hit on the economy.

Small businesses are already feeling the pinch. A quarter of small business owners said they won’t survive a month with a big drop in income, according to a Canadian Federation of Independent Business email survey of 748 companies. Hotels, restaurants and retailers are the hardest hit and many are shut down with no real sense of when they’ll be able to reopen, said Ted Mallett, the federation’s chief economist. While new stimulus measures will help give businesses wage subsidies and tax deferrals, companies are still dealing with many unknowns that most disaster plans didn’t account for, he said.

“When the entire economy shuts down that is completely different,” Mallett said by phone. “We’re in unknown territory.”



Share This:



More News Articles


New SHOWCASE Directory Companies

 

GLJ Petroleum Consultants Ltd.
Catch Engineering
DTN
Hy-Lok Distribution Inc
Enverus
Pacbrake Company
Clear Glycol Inc.
Fusion Production Systems Inc