CANADA ECONOMICS

ENERGY

The Globe and Mail. 2 Oct 2017. Canada’s shale boom attracting U.S. interest. SemGroup: Company eyes possible acquisitions
JEFF LEWIS

U.S.-based SemGroup Corp. is sharpening its focus on Canada and could sell its Mexico business as the company seeks to take advantage of an expected shale boom in Alberta and British Columbia, its chief executive officer says.
SemGroup, known for transporting, storage and processing oil and gas, is investing $500million in Western Canada through 2019 and may consider acquisitions to expand its footprint, chief executive Carlin Conner said in an interview at its Calgary offices.
The growing interest in Canada is notable in a segment of the industry that has seen major companies look south to the United States for growth through a succession of multibillion-dollar deals.
This year, Altagas Ltd. snapped up utility WGL Holdings Inc. and Ontario’s Hydro One Ltd. bought Washington state-based Avista Corp. Those deals followed large U.S. acquisitions by TransCanada Corp. and Enbridge Inc. last year.
“Those big firms, for them to appreciably grow, the lack of Canadian opportunities was real,” Mr. Conner said.
“We’re smaller, right? Investing $500-million, for us, that moves the needle.”
SemGroup has put storage assets in Britain on the block and is making plans to jettison its asphalt business in Mexico as it looks to carve out a bigger niche in Canada.
It’s a corner of the energy world Mr. Conner says has been overshadowed by red-hot exploration regions such as the Permian in West Texas, even though producers have made big strides chopping costs and boosting productivity.
SemGroup, based in Tulsa, Okla., acquired its Canadian assets a decade ago, including a web of pipelines and four plants with combined capacity to process 1.5 billion cubic feet of natural gas a day.
This year, it bought a major oil terminal on the U.S. Gulf Coast in a $2.1-billion (U.S.) deal, a move that puts the company at the centre of expanding U.S. exports of crude.
The company is tailoring its Canadian operations for expected production growth in shale deposits rich in natural gas and other petroleum liquids. Construction is under way on a $350-million (Canadian) plant near Grand Prairie, Alta., that is expected to start up in 2019.
Mr. Conner said the facility is supported by long-term contracts and strong demand in Alberta for condensate. The ultralight oil is used to dilute oil sands bitumen and typically fetches a premium to U.S. crude as a result of local supply shortages.
That has fuelled drilling activity in Western Canada even as Alberta wholesale natural-gas prices have languished at multiyear lows, offering some reprieve for an industry that has been in contraction mode for nearly four years.
Canadian producers also stand to benefit indirectly from the ability of U.S. rivals to export excess production, which would have previously made its way by rail to Alberta, depressing prices, he said. Restrictions on U.S. crude exports were lifted in 2015.
“That’s a huge piece of this, and that’s really just in the last two years that that’s been made available,” he said.
SemGroup is also eyeing potential acquisitions as producers consider infrastructure sales to fund drilling, said David Gosse, vice-president and general manager of the Canadian operations, known as SemCams.
Such transactions have become more common as equity markets remain off-limits for energy deals, forcing producers to seek alternative financing. That includes parting with highly valued processing capacity.
SemGroup was among bidders last year for infrastructure sold by Paramount Resources Ltd. Paramount struck a deal with Pembina Pipeline Corp.
He said Cenovus Energy Inc.’s Deep Basin plants would also be of interest, should the company decide to sell them. The latter has mulled such a move to help fund its megadeal for most of ConocoPhillips Co.’s oil sands and natural-gas assets.
“We’re in the queue, if you will, for when they’re ready to make decisions on what they want to do with those,” Mr. Gosse said.

AVIATION

BOMBARDIER. The Globe and Mail. Reuters. THE CANADIAN PRESS. 2 Oct 2017. Britain caught in crossfire of trade spat. With 4,200 jobs in Northern Ireland at stake, May government calls for quick resolution in Boeing-Bombardier dispute
KATE HOLTON
ELIZABETH PIPER

A Bombardier employee looks at seats waiting to be installed on C Series jets at the company’s plant in Mirabel, Que., on Thursday. Production of the jets is threatened by a 220-per-cent U.S. duty.
Britain, caught in the crossfire of a damaging trade dispute between airplane makers Boeing Co. and Bombardier Inc., said on Sunday it would fight to protect thousands of jobs put at risk in Northern Ireland.
Trade Minister Liam Fox said Britain was working to find a resolution after the United States last week responded to a Boeing complaint by imposing a 220-percent preliminary duty on Montreal-based Bombardier’s C Series jets, wings for which are made in Belfast.
“We’ve said that we will fight our corner,” Mr. Fox told the annual Conservative Party conference. “We’ve been caught in the crossfire of a much larger dispute.”
“It worries me that we’re seeing a rise in protectionist behaviour … the OECD itself has pointed out protectionism always ends badly,” Mr. Fox said, referring to the Organization for Economic Cooperation and Development. “If we can get them to have a resolution, which is what we are trying to do quietly, so much the better.”
The tariff, which will take effect only if the U.S. International Trade Commission backs Boeing in a final decision expected in 2018, has dealt a major blow to the Canadian company’s flagship project.
It has also cast a huge shadow over Northern Ireland, where Bombardier is by far the most important manufacturer and a pillar of Belfast’s economy, employing 4,200 people and supporting thousands more in the supply chain.
And it also undermines the assurances by Brexit campaigners such as Mr. Fox that free trade and London’s close ties with Washington will drive Britain’s prosperity and global influence after it leaves the European Union in 2019.
James Brokenshire, the British minister responsible for Northern Ireland, echoed Prime Minister Theresa May in saying that Boeing was not behaving in a way the British government would expect a long-term defence partner to behave.
Ms. May and other senior ministers have been highly critical of Boeing, suggesting it could miss out on future defence contracts, after the row put into jeopardy the local economy in Northern Ireland, home to a small party that Ms. May relies on to govern in Westminster.
“I say to Boeing this case is unjustified and unwarranted. This action is not what is expected of a long-term partner to the U.K. They need to get round the table and secure a negotiated outcome to this dispute quickly,” Mr. Brokenshire said.
Ms. May has warned that Boeing was undermining its commercial relationship with Britain and has spoken to U.S. President Donald Trump on the issue.
However, Ms. May is unlikely to retaliate against Boeing, which says the firm and its suppliers account for more than 18,700 jobs in the United Kingdom. Mr. Fox implied the government was working behind the scenes to find a resolution.
Northern Ireland is the poorest of the United Kingdom’s four parts and is mired in political difficulties after emerging from decades of armed sectarian conflict.
Boeing, the world’s largest aerospace company, says it is upholding trade rules and not trying to damage the C Series. It accuses Canada and Britain of unfairly subsidizing Bombardier and says Bombardier has illegally dumped its products in the U.S. single-aisle airplane market out of desperation. “The support that the U.K. provided to the Bombardier operation in Belfast was and remains compliant with international requirements,” Mr. Brokenshire said.

BOMBARDIER. Canada, U.S. risk foul trade war as more Bombardier duties loom, NAFTA irks. Canada, U.S. risk ugly trade war
MICHAEL BABAD, Columnist

I’m going to take my ball and go home!

I want to be in control of the situation and if I can’t then no one is going to be allowed to be happy about the outcome

URBAN DICTIONARY’S DEFINITION OF THE PHRASE

Balls may well be appropriate – and necessary – as Canada stares down the United States amid the threat of a brutal trade war.

It's not just the heavy preliminary duty against Canada's Bombardier Inc. and the anti-dumping levy expected this week. The fight over softwood lumber preceded that, followed by U.S. demands to substantially alter the North American free-trade agreement.

And ignore the fact that many analysts believe Boeing Co. can't justify its allegations against Bombardier. Because American trade officials have new rules of engagement under the Trump administration.

As The Globe and Mail's Robert Fife, Steven Chase, Nicolas Van Praet, Adrian Morrow and others have documented, the Bombardier case and NAFTA negotiations have put Canada-U.S. relations in a precarious state.

So much so that trade with the U.S. now ranks among the biggest economic threats to Canada.

"This latest trade dispute, which is the worst so far and comes after other feuds over softwood lumber and dairy supply-management practices, threatens to exacerbate tensions between Canada and the U.S.," said David Madani, senior Canada economist at Capital Economics in Toronto, warning this flash point raises the "spectre" of a trade war.

"It could undermine hopes of a quick agreement on a new NAFTA deal," Mr. Madani added.

"According to U.S. and Canadian trade representatives, some progress was made during the third round of NAFTA meetings held [last] week in the Canadian capital, but they also said that relations had become strained over the aerospace dispute."

Given that the aerospace sector accounts for almost 210,000 jobs, it's no small matter for Canadian negotiators.



To recap, the U.S. Department of Commerce responded to Boeing's allegations that Bombardier is being subsidized with a preliminary countervailing duty of 220 per cent on the Canadian plane maker's crucial C Series models.

A finding on anti-dumping duties will follow this week, as will final determinations and a decision by the U.S. International Trade Commission.

Brazil, whose Embraer is also a Bombardier competitor, is also demanding action.

"Not helping matters, Canadian Prime Minister Justin Trudeau has had harsh words of his own for Boeing, which he accused of trying to eliminate thousands of Canadian aerospace jobs through its attack on Bombardier," Mr. Madani said.

"Complicating the trade outlook even more, Trudeau has threatened to cancel a US$5.2-billion military contract to buy 18 Boeing-built Super Hornet jets."

In their outlooks for Canada, virtually every economist around has cited NAFTA talks as a caveat. Meaning that if the talks fail, all bets are off.

"The NAFTA negotiations are critical to the outlook for trade and investment," Mr. Madani and his colleague at Capital Economics, Paul Ashworth, said in a recent report.

"Progress has been slow and Canada will probably have to make some concessions, or risk the U.S. unilaterally withdrawing. President Donald Trump's threats to withdraw unilaterally can probably be ignored, but the risk can't be dismissed entirely."

Indeed, the U.S. "is taking this very tough stance on NAFTA talks," said David Rosenberg, chief economist at Gluskin Sheff + Associates, adding this bit: "Can you believe that Wilbur Ross is advocating an end to Chapter 19, which deals with how to resolve trade disputes … really?"

INTERNATIONAL TRADE

WTO. REUTERS. OCTOBER 2, 2017. United States takes Canada to WTO over wine retailing

GENEVA (Reuters) - The United States has launched a complaint at the World Trade Organization to challenge Canada over its rules for wine retailing in grocery stores in the province of British Columbia, a document published by the WTO showed on Monday.

“The BC wine measures provide advantages to BC wine through the granting of exclusive access to a retail channel of selling wine on grocery store shelves,” the U.S. complaint said.

Reporting by Tom Miles; Editing by Catherine Evans

WTO. 2 OCTOBER 2017. DISPUTE SETTLEMENT. United States files second WTO complaint against Canadian wine sale restriction

The United States has requested WTO consultations with Canada regarding measures maintained by the Canadian province of British Columbia governing the sale of wine in grocery stores. The request was circulated to WTO members on 2 October.

FULL DOCUMENT: https://www.wto.org/english/news_e/news17_e/ds531rfc_02oct17_e.htm

INDUSTRY

MARKIT. REUTERS. OCTOBER 2, 2017. Canada manufacturing growth edges up in September, prices climb

OTTAWA (Reuters) - The pace of growth in the Canadian manufacturing sector edged up in September as companies saw increased demand for their products, while an increase in prices suggested firms were seeing inflationary pressures, data showed on Monday.

The Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 55.0 last month from 54.6 in August. A reading above 50 shows growth in the sector.

The measure of new orders rose to 54.9 from 54.4, with firms citing increased client demand and product development. New export orders grew more slowly, rising to 51.3 from 50.9, and respondents said there less demand from the United States.

Input prices rose to the strongest level in four months at 62.6 from 58.7 as U.S. supply disruptions following Hurricane Harvey raised the cost of raw materials.

Companies also charged more for their products, with the gauge of output prices rising to 55.5 from 54.3.

Manufacturers also cited a supportive economy and were more confident about the year ahead, with the future output gauge up at 68.1 from 65.1.

The Canadian economy’s solid performance in the first half of the year has made it a leader among its developed peers but the pace of growth is expected to slow as the year progresses.

Reporting by Leah Schnurr; Editing by Chizu Nomiyama

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LGCJ.: