According to the report, international exports from Newfoundland Labrador will surge 17% this year and a further 5% in 2008.
This year is being led by higher energy and ore shipments, and to a much smaller degree, transportation equipment. Next year, a weaker Canadian dollar will help give exports a kick. Seafood will moderate slightly but energy, forestry and industrial goods should rise.
Because the forecast covers international exports only, most Voisey’s Bay and some other mining activity does not show up their data.
The NL section of the report notes:
EDC is forecasting a 16% increase in energy exports this year and another 7% increase in 2008. We forecast total production of 130 million barrels of crude this year with about half destined for international markets. Next year, production is expected to rise to nearly 150 million barrels on higher output from White Rose and Hibernia.
With no planned production increases slated for the Come-by-Chance refinery, we expect export receipts to move in line with refined petroleum product prices. EDC Economics is forecasting WTI crude to average US$64/barrel in 2008, down slightly from 2007. The longer term outlook for energy is positive, with possible consideration being given to construction of a second refinery and the go-ahead given for Hebron.
Seafood exports rebounded slightly in 2007, but are expected to drop modestly in 2008. Higher prices for crab are the principal driver this year and could surprise on the upside. Shrimp exports to Europe should improve as the autonomous tariff rate quota for that market was increased from 10,000 tons to 20,000 tons in July 2007. While there are no major quota reductions expected for next year, consumers in the US, Japan and Europe appear fatigued, leading to lower seafood prices and a 2.5% drop in agri-food exports in 2008.
Competition from overseas, a strong dollar and high energy costs are hitting the bottom lines of paper manufacturers. Demand is also suffering as North American newspapers get 10% of their revenues from real estate classifieds.
Newfoundland paper often goes to European markets, so exports could fare better for the province than was previously expected. While lumber prices are expected to increase slightly in 2008, this comes after significant price declines in each of the previous 3 years. Regardless, lumber will have little impact on the forestry sector as it accounts for only 6% of the sector’s exports. In sum, forestry exports are expected to rise 5% in 2008 after dropping 13% in 2007.
Exports of industrial goods posted a massive increase this year, as summer shipments of nickel and copper totalled $400 million. This ore is normally processed within Canada but was instead sent to customers in Europe, so while the impact on international exports will be large there will be no extra kick to the province’s real GDP. With respect to iron ore, even with global economic activity slowing, Asian steel demand should remain fairly high, supporting iron ore prices. This, along with a lower C$ and higher production levels, are expected to boost exports of iron ore by 14% in 2008, after a healthy increase in 2007.
Transportation equipment surged in 2007. Increases came from shipbuilding activities and aerospace parts manufacturing, which could hit $60 million this year versus $15 million in 2006.
Next year is difficult to gauge, with growth coming from only a few companies and information scarce. Either way, the gain is impressive and bodes well for future exports of higher valueadded manufactured goods.
So let's see how it all works out.