Canada: a reversal of fortune
After a prosperous era on the back of strong international commodity prices, Canada faces a more challenging time in terms of cement demand. The competitive landscape is also set to change with the arrival of a new player and the impact of the LafargeHolcim merger. Upside potential exists in terms of exports to Canada’s main trading partner, the US.
There has been a dramatic reversal of fortune for Canada and its cement industry since The Global Cement Report 10th Edition was published two years ago. Back then, Canada’s economy was a strong performer relative to most other countries still reeling from the aftermath of the Great Recession. It was the beneficiary of strong global commodity prices, especially for energy, and a well-capitalised, carefully-regulated banking system that had avoided most of the problems that other nations’ banks had endured. The greatest worry for Canadians was a sharp run-up in consumer and business debt during the global recovery as they took advantage of historically-low interest rates. There were fears that a housing bubble was in the offing, an issue Canada had largely escaped in the 2007-09 period.
Today, many of the positive factors that aided Canada two years ago have reversed course, and the threat of a bursting housing bubble remains a concern. In particular, world oil prices have plummeted by half over the past six months. As well, most other commodity prices are also in sharp decline including many farm crops, metals, coal and natural gas. There has been a stunning reversal of fortune for Canada’s net energy-producing provinces – Alberta, Saskatchewan, Newfoundland and Labrador – versus the net energy-consuming provinces, especially Ontario.
Canada probably won’t fall into recession in 2015 or 2016 despite its commodity and housing problems. It is a diversified, advanced economy whose biggest trading partner is its southern neighbour, the United States. The year 2014 was a good recovery year for the USA and its economic outlook looks quite positive. This should bolster Canada’s economy. However, the commodity and energy-rich provinces mentioned above are looking at sharply lower growth.