(CALGARY) – November 12, 2009 – Alberta's international exports are forecast to increase by 8 per cent in 2010, in line with an expected rise in energy prices, according to a provincial export outlook by Export Development Canada (EDC).
“With the collapse in energy prices, Alberta's exports had a hard time in 2009, but expected higher energy prices next year should provide for a return to growth,” said Peter Hall, Chief Economist, EDC. “While the mild improvement in prices and U.S. demand next year will see exports regain some lost ground, total foreign sales still remain below 2005 levels.”
“The increase will be moderated by lower crop exports, declining natural gas export volumes and a more challenging environment for the petrochemicals sector thanks to a significant global increase in capacity,” added Mr. Hall.
The province's export picture is dominated by the energy sector, which account for 74 per cent of Alberta's international export total. The decline in crude oil prices from an average USD 100/bbl in 2008 to USD 57/bbl in 2009 will result in a 38 per cent drop in exports of crude and refined petroleum products in 2009. Despite further sluggishness ahead in the U.S. economy, export volumes and prices will rise again next year on an annual average, lifting crude and petroleum products exports up by 7 per cent.
Mr. Hall also examined the natural gas segment in his outlook, where he stated that “faced with bearish fundamentals on both the supply and demand side, natural gas prices and exports will plunge this year, before partially recovering in 2010. The sharp decline in U.S. industrial activity, combined with rising natural gas production in the U.S. from the development of shale gas, has resulted in a surge in underground storage, driving prices down to their lowest level since 2002.”
Even with a dramatic reduction in drilling activity on both sides of the border, U.S. production is on the rise and working off these excess inventories will take time. While EDC does expect higher prices next year as inventories are drawn down, there are considerable downside risks to its outlook.
The second largest sector is industrial goods, accounting for 10.6 per cent of the province's total.
The petrochemicals industry, which dominates Alberta's industrial goods exports, saw exports decline this year on both weaker prices and volumes. Weaker industrial activity in the U.S. resulted in lower demand for ethylene and its derivatives products, while lower feedstock costs puts downward pressure on prices. The drop in agricultural commodity prices is also affecting exports of fertilizer feedstock like urea, ammonia and sulfur.
“After dropping 26 per cent this year, industrial goods exports should rise 9 per next year, as U.S. demand slowly recovers and feedstock costs push prices up. However, the export outlook and the profitability of the sector will be moderated by large capacity expansion starting up in the Middle-East,” Mr. Hall said.
Canadian exports are forecast to contract 23 per cent in 2009 before rebounding 6 per cent in 2010. Nationally, economic growth is expected to fall by 2.3 per cent in 2009 with an upturn to 1.9 per cent in 2010. Internationally, EDC is forecasting a decline of 1.3 per cent in 2009 and 2.9 per cent growth in 2010. EDC's Global Export Forecast is available at http://www.edc.ca/gef .
EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by more than 8,300 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, a recognized leader in financial reporting and economic analysis, and has been named one of Canada's Top 100 Employers for nine consecutive years.
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Media contacts:
Phil Taylor
Export Development Canada
Tel: (613) 598 2904
BlackBerry: ptaylor@edc.ca
