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January 18, 2018

CANADA ECONOMICS



WEF



 THE GLOBE AND MAIL. JANUARY 16, 2018. OPINION. World Economic Forum in Davos needs to foster spirit of openness on free trade
DARRYL WHITE, CONTRIBUTED TO THE GLOBE AND MAIL

Darryl White, chief executive officer of Bank of Montreal, will be attending the World Economic Forum in Davos.

Next week, businesses, government leaders and researchers will be participating in the annual World Economic Forum in Davos, where the topic is "Creating a Shared Future in a Fractured World." This gathering in Europe takes place while the next round of North American free-trade agreement negotiations – widely expected to be one of the most consequential and where a U.S. termination is a real risk – occurs in Montreal.

Given the coincidence of these events, the theme of this year's forum could easily be recast for North American attendees as "Preserving the Gains North America Has Realized with NAFTA." The uncertain future of our North American economic union remains a substantial risk to shared prosperity.

My company has seen first-hand the benefits of trade openness, chief among them the two-way growth opportunities NAFTA provides for our Canadian and U.S. customers, and the communities we serve.

Eliminating barriers to trade brings us closer together. Shared enterprise means common interests, and less impetus for distrust and confrontation. How we achieve this in North America, in a modernized North American free-trade agreement, depends largely on how the United States decides to engage with others. Large economies such as that of the United States can be tempted – as the current administration seems to be now – to see trade as a zero-sum game, and seek to maximize value for themselves at the expense of others. Yet, experience has shown that the benefits of trade are more than a simple tally of trade surpluses or deficits. Our aim, therefore, should be to ensure citizens of all countries – including the largest – see the benefits of growing economic opportunities for everyone.

We should all remember that NAFTA has brought the freer movement in goods, services, people and investment in North America which in turn improved the allocation of capital – boosting efficiency, reducing the cost of capital and helping to increase the competitiveness of North American businesses in the global economy. This has helped support investment and jobs; it is no accident that unemployment rates in North America are now close to their lowest levels in decades.

Not to be overlooked, the increased efficiency from more integrated trade helps reduce prices to consumers. While many factors drive inflation, the average consumer price inflation rate in Canada since NAFTA has been less than 2 per cent a year; it averaged more than 6 per cent in the 25 years before the agreement came into force.

Conversely, we expect Canadian consumer prices would be nearly 1 per cent higher without NAFTA – a result of a weaker exchange rate and higher tariffs. In the United States, consumers will face upward pressure on prices as well; as an example, the average price of a car could ultimately rise by $1,000.

While everyone shares in the benefits of wider choice and greater affordability, some inevitably – and understandably – fail to acknowledge the benefits because they have been negatively affected by a changing marketplace. For those left behind during the transition, we need to establish better adjustment programs – both to help firms that need to refocus their operations, and workers who need retraining for new and different skills. We also need to ensure we share the benefits of globalization with all.

We must not let new trading relationships take the blame for the other forces of economic dislocation. As innovation and new technologies drive workplace change, our labour markets must adapt, as they always do.

Regardless of where NAFTA lands, the United States and Canada will continue to be primary trading partners; thirty-two U.S. states currently count Canada as their biggest export market. But, for the future of Canadian businesses and consumers, it's also incumbent on the federal government to remain focused on diversifying Canadian trade. We urge it to continue prioritizing free-trade talks with our largest export markets, such as China, India and the Trans-Pacific Partnership countries. Freer access to new customers, which such agreements bring, will strongly benefit the economy, workers, consumers and society in general, both for us and for our trading partners. Arguably, consumers realize the biggest benefits of all, due to much wider choice and better affordability of a wide variety of products and services.

When we consider the current political environment, we should be concerned (but perhaps not surprised) at the push for more protectionist trade policies. In such an environment, it's incumbent on those who support liberalized trade to speak out and to demonstrate its benefits in a way that refutes these populist sentiments. This responsibility to play a part is particularly important for both Canadian and U.S. businesses which have seen the benefits first-hand. As a major Canada-U.S., cross-border bank, BMO is committed to playing its part.



INTERNATIONAL TRADE



Global Affairs Canada. January 17, 2018. The Government of Canada brings leadership to responsible business conduct abroad

Ottawa, Ontario - The Government of Canada is committed to ensuring Canadians everywhere can have confidence in our world-class companies and trust that international trade and investment is working for all.

The Honourable François-Philippe Champagne, Minister of International Trade, today announced two new initiatives to strengthen Canada’s approach to responsible business conduct for Canadian companies doing business and operating abroad.

The first is the creation of an independent Canadian Ombudsperson for Responsible Enterprise (CORE), the first of its kind in the world. The CORE will be mandated to investigate allegations of human rights abuses linked to Canadian corporate activity abroad. The CORE will seek to assist wherever possible in collaboratively resolving disputes or conflicts between impacted communities and Canadian companies. It will be empowered to independently investigate, report, recommend remedy and monitor its implementation. The CORE’s scope will be multi-sectoral, initially focussing on the mining, oil and gas, and garment sectors, with the expectation to expand within a year of the Ombudsperson taking office to other business sectors. The creation of the CORE sets a new global benchmark to ensure responsible business conduct globally.

The second is the creation of a multi-stakeholder Advisory Body to advise the Government and the CORE on responsible business conduct abroad.

Progressive trade only succeeds when it works for everyone, including those most directly affected and least able to defend themselves. Building on Canada’s existing expertise and leadership in corporate social responsibility (CSR), these measures will be “best in class,” reinforcing Canada’s approach to inclusive economic growth, and helping keep Canadian companies at the forefront of responsible business conduct abroad, a competitive advantage in today’s marketplace. This announcement also initiates a new era of cooperation between government, business and non-governmental organizations to ensure greater respect for human rights.

Quotes

“Canada’s leadership in strengthening responsible business conduct abroad reflects the values supported by Canada’s progressive trade agenda where all parties should benefit from economic development, and contributes to Canada’s reputation as an international business partner of choice.”

- François-Philippe Champagne, Minister of International Trade

“Canadian companies are recognized globally for their leadership in ethical, social, and environmental practices. We will continue to support sustainable natural resource development – at home and abroad – that respects human rights and promotes community-level partnerships. ”

- Jim Carr, Canada’s Minister of Natural Resources

“Canada’s Feminist International Assistance Policy supports inclusive governance and growth that works for everyone. Well-governed, responsibly-managed Canadian businesses are an important source of jobs, socio-economic development opportunities and government revenues in developing countries.”

- Marie-Claude Bibeau, Minister of International Development and La Francophonie

Backgrounder: Advancing Canada’s Approach on Responsible Business Conduct Abroad

The new initiatives – the creation of an Ombudsperson and a multi-stakeholder Advisory Body – are founded on a commitment to advance human rights and assist Canada in fulfilling its international human rights obligations. In this context, they will support Canadian companies in operating responsibly, and improve access to remedy for alleged human rights abuses arising from Canadian company operations abroad.

Canadian Ombudsperson for Responsible Enterprise (Ombudsperson)

The Ombudsperson will be authorized to investigate allegations of human rights abuses arising from Canadian corporate activity abroad, recommend solutions and monitor implementation of those recommendations. The Ombudsperson’s mandate will be clearly articulated in an Order in Council. Any evidence of possible criminal wrongdoing may be referred to the appropriate law enforcement authorities.

The Ombudsperson will be guided by internationally respected norms, including the UN Guiding Principles on Business and Human Rights and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.  In addition to its ability to undertake collaborative and independent fact-finding, the Ombudsperson will promote respect for human rights and responsible business conduct, and the adoption and implementation of best practices by Canadian business.

The CORE’s scope will be multi-sectoral, initially focussing on the mining, oil and gas, and garment sectors, with the expectation to expand within a year of the Ombudsperson taking office to other business sectors.

Advisory Body on Responsible Business Conduct

The multi-stakeholder Advisory Body on Responsible Business Conduct will include members from diverse backgrounds including from civil society and industry. The Advisory Body’s role will be to advise the government on the effective implementation and development of its laws, policies and practices related to responsible business conduct by Canadian companies operating abroad in all sectors. It will also advise the Minister of International Trade on the scope and development of the CORE’s operating procedures and future direction, as appropriate.

Canada will be informed by advice from the Advisory Body on emerging developments related to business and human rights, to remain at the forefront of global practice in responsible business conduct.

Reinforcing Canada’s Approach to Inclusive Economic Growth and Sustainable Natural Resource Development

Today’s announcement demonstrates Canada’s leadership in promoting responsible business conduct abroad. As part of ensuring that international trade and investment is working for all, the Government of Canada works with a range of interlocutors to promote responsible business conduct, and provides funding to numerous projects and initiatives in countries around the world. Canada’s network of diplomatic missions abroad actively promotes awareness and understanding of the importance of responsible business practices and creates opportunities for relationship building through conferences, workshops and other activities involving companies, representatives of host governments, and civil society. Canadian Trade Commissioners around the world are a key delivery mechanism for advice and guidance on responsible business conduct for Canadian companies doing business abroad.

Sustainable natural resource development is also an important aspect of Global Affairs Canada’s efforts, focused on reducing poverty. Our work has focused on supporting governance capacity, inclusive green growth that works for everyone and local economic diversification. Canada’s new Feminist International Assistance Policy offers Global Affairs Canada and its partners an opportunity to develop new policies, approaches and programs on the management and use of natural resources from a more inclusive and human rights-based, feminist perspective.
VIDEO: https://www.pscp.tv/w/1YqKDLoaOyAKV

REUTERS. JANUARY 17, 2018. Canada creates watchdog to oversee companies' conduct abroad
Nicole Mordant

(Reuters) - Canada said on Wednesday it is creating an independent watchdog to monitor and investigate claims of human rights abuses by its companies operating abroad, describing it as the first initiative of its kind in the world.

The body, which will initially target the mining, oil and gas, and garment sectors, will also have the power to recommend sanctions against transgressors, including withdrawing Export Development Canada financial support, international trade minister François-Philippe Champagne said.

Its oversight is expected to be expanded to other industries within a year, he said.

Unions, advocates and industry welcomed the creation of the office, to be named the Canadian Ombudsperson for Responsible Enterprise, saying it would promote safer operations and that the body had more “teeth” than a predecessor created by the former Conservative government.

“We now expect that Canadian corporations operating abroad will operate to high ethical standards and if they don’t there will be consequences,” John McKay, a Liberal Party politician who has been advocating for an ombudsman for a decade.

Canada’s mining, oil and gas sectors had been expecting Ottawa to announce an ombudsman to keep tabs on their offshore business, a move demanded by environmental and human rights groups and promised by Prime Minister Justin Trudeau’s Liberal Party.

Non-government groups have for years called for greater oversight of Canadian mining companies abroad following a number of environmental incidents and accusations of human rights abuses, including that of forced labor at Canadian miner Nevsun Resources Ltd’s (NSU.TO) mine in Eritrea. Nevsun has denied the allegations.

NSU.TO

The watchdog’s mandate will be to help solve disputes or conflicts between communities and Canadian companies. It will be able to independently investigate, report, recommend remedy and monitor its implementation. It can refer any evidence of possible criminal wrongdoing to police.

Trudeau’s predecessor, Conservative Stephen Harper, established a Corporate Social Responsibility Counselor in 2009, but critics have said it is toothless as the office focuses mainly on facilitating dialogue between companies and affected communities.

“It has been a long road but we are encouraged to finally see progress,” MiningWatch Canada spokeswoman Catherine Coumans said in a statement.

Reporting by Nicole Mordant in Vancouver; Editing by Susan Thomas and Lisa Shumaker

THE GLOBE AND MAIL. JANUARY 17, 2018. Trade Minister plans to confront CEOs over human-rights rules
BILL CURRY

OTTAWA - Companies could be forced to hand over documents under a new federal human-rights regime, and the Trade Minister says he will personally challenge the CEOs of firms found to be hurting Canada's international reputation.

Surrounded by human-rights advocates and union leaders Wednesday, Trade Minister François-Philippe Champagne announced the creation of a new independent ombudsperson who will have the power to investigate allegations of abuses by Canadian companies operating abroad.

The Canadian Ombudsperson for Responsible Enterprise, or CORE, is being promoted as the first office of its kind in the world and a step up from the existing mediator body, which has been criticized as weak and ineffective.

"We want to make sure that the ombudsperson has all the tools and resources to conduct these investigations," said Mr. Champagne, who made the announcement at the headquarters of Global Affairs. "We have the authority, and I'm prepared to use that authority – to compel documents if need be. We expect companies to engage in that process because we think that this is giving Canadian companies a competitive advantage. … Today, corporate social responsibility is core to business succeeding in the world."

If the watchdog is unable to obtain company records as part of an investigation, the government says it will be able to ask cabinet to approve an order in council compelling the company to hand over the files.

Some key details, such as the budget of the new office, were left for future announcements.

The government will also name an advisory body that will include representatives from industry, labour and human-rights organizations. The body will advise the government and the ombudsperson "on responsible business conduct abroad."

The office will initially focus on the mining, oil and gas and garment sectors, with a plan to include other business sectors within a year.

The minister said the new watchdog position will be independent of government. While the watchdog can only recommend sanctions, Mr. Champagne said the government would face public pressure to follow through on such advice.

"I will certainly do my best to engage with the CEOs or chairman of the board of these entities to say: 'We have an issue. You are damaging the reputation of Canada, for which you are benefiting greatly when you invest in countries,'" he said.

He also said the simple fact the watchdog can issue public reports will provide an incentive for companies to co-operate, given the increased focus on ethical investing.

Alex Neve, the secretary-general of Amnesty International Canada, was among the supporters at the announcement. He agreed that the watchdog's reports will be used by firms focused on ethical investing.

"The ethical investing community will look with great interest to the work of this ombudsperson," he said. "It offers something that simply hasn't been there before: a credible, independent body with some thorough, meaningful powers to look into the allegations that come forward."

Julia Sanchez, the president and chief executive of the Canadian Council for International Co-Operation, said civil-society groups have been pushing for such an office for more than a decade.

"There were many, many a time where we thought this might never happen, so it's great," she said. "I'm still pinching myself."

Barrick Gold Corp., the biggest gold company in the world by production, said it, too, supports the government's initiative.

"We look forward to engaging with the ombudsperson in a transparent and constructive manner," the company wrote in a news release. "Accountability and respect for human rights are central to our values as a company, and are enshrined in robust policies and procedures that apply to all of our operations around the world."

The Toronto-based company has significant mining operations in countries such as Peru, the Dominican Republic and Argentina. It has faced allegations of human-rights abuses at some operations, including sexual violence at a mine in Papua New Guinea about seven years ago. The company co-operated with a criminal investigation by police, fired a number of implicated employees and offered counselling services to the victims.

With files from Niall McGee in Toronto

EDC. JANUARY 18, 2018. WEEKLY COMMENTARY. Why Are Prices So Tame?
By Peter G Hall, Vice President and Chief Economist

If exporters have a lot of worries these days, prices are not on the list. Prices – or inflation – together with the unemployment rate, are the elements of the ‘misery index’, the brainchild of economist Arthur Okun. Inflation’s recent track record – and we are talking years – should have us jumping for joy. Why are prices so tame, and will they stay that way for long?

Their track record is surprising. Many predicted that by now, inflation should be a problem in the world economy. Those expectations have been repeatedly wrong. Consumer prices in the vast bulk of the developed world have averaged annual growth of 1.7 per cent in the 2010-2016 period.

Why were the pundits so wrong?

Pessimists thought they had their moment when prices began a multi-month upswing in 2016. However, that too came to a swift end, and against fears of worse to come, prices sunk back to growth rates well within central bank target levels.

The misery-hounds have given a lot of reasons for an imminent run-up of prices. Gloom-and-doomers have long since expected that quantitative easing – or as they put it, printing of endless amounts of money – in the post-recession period would inevitably lead to runaway inflation.

Years on, the Fed’s QE program is now in retreat, without a hint of the price nasties that were foreseen. And while Europe’s program is dialing down more slowly, Continental worry-warts have little to show for their post-recession grey hairs. Prices across the Euro-area have been remarkably well-behaved. While full victory is still a number of months away, so far it seems that QE has deftly avoided the fallout that pundits feared the most.

Commodity prices

Commodity prices were another inflation bugbear. Sky-high pre-recession prices fed fears that we were running out of everything from oil and gas to basic metals, and other raw goods. Even after the Great Recession, commodity prices zoomed back to previous peaks on those same tight-supply fears. All that did was to attract investment – boatloads of it – into the commodity space, producing a supply glut that will be ample for years to come. This group of prices is going nowhere fast for a long time.

Canada might have expected to see higher prices as a result of currency swings. The commodity price tumble in 2015 felled our dollar, increasing the prices of imports. But fears of the pass-through of import prices have not materialized; in spite of this, all is still well.

Will we see inflation growth in 2018?

There are more pressing and imminent inflation concerns, though. For years, business in multiple countries has lamented a lack of skilled workers. This is in good part related to the ageing of the population, and is now being exacerbated by a tightening supply of workers in general.

The official US unemployment rate, at 4.1 per cent, is about as low as it ever gets. Canada’s, approaching the 5 per cent level, is in similar relative territory. Western Europe is likewise zooming in on its cyclical lows. Although there are few signs of wage inflation, there are lots of fears that it’s not far off.

At the same time, industrial capacity is tightening. The recent runup in orders has fed expectations of more growth to come, putting pressure on already-skinny spare capacity. On these two key fronts, are we staring out the first big price runup in over a generation?

It’s possible – but given the current labour and industrial capacity statistics, that should already be obvious. The real question is, why are they still so tame? The simple answer is that there must still be capacity to grow, stats notwithstanding. A second look at those stats is revealing. Unemployment rates in the developed world are artificially low; they don’t account for the discouraged post-recession labour force dropouts that are still available to work. It’s a similar story on industrial capacity: facing weak growth, firms under-invested, and added to already vast cash-stashes.

At long last, it’s time to invest again in production facilities – and guess what? There’s plenty of money to do it with. Sure, there may be price pops as things get going, but the constraints will be temporary and manageable.

The bottom line? Central banks have signaled a new concern for imminent inflationary pressures, and are notching up ultra-low interest rates. That’s overdue – but prices are showing us that the economy still has a lot of runway.

 EDC. 01/18/2018. Canadian companies now have a faster, easier way to insure their export sales

(OTTAWA) – January 18, 2018 – Export Development Canada (EDC) today introduced its new online Portfolio Credit Insurance. The solution makes it faster and easier for Canadian companies selling abroad to protect against the risk of foreign buyers not paying for a product or service rendered.  The new online portal will allow businesses to apply for insurance coverage, pay premiums, report overdue payments, submit claims, and speak directly with a dedicated support team.

As the first digital solution of its kind for EDC, the service can be used in real-time, 24 hours a day, seven days a week.

CEO Keith Thomas from Toronto’s Vive Crop Protection (Vive) recently had the opportunity to use the new product. He was looking to expand his business abroad and take on new international contracts, but was concerned about the prospect of not getting paid by potential foreign buyers. He used EDC’s automated platform and streamlined Portfolio Credit Insurance solution to get fast and flexible coverage for his emerging cleantech company.

With the insurance quickly in place, Vive could take on a contract with a major U.S. distributor without the worry of not getting paid. They were also able to leverage their newly insured receivables to secure additional working capital to expand production of their innovative green technology products.

“I was surprised at the simplicity of the insurance application process from start to finish, and of course it was a good result in the end,” says Mr. Thomas, who says his company is on track to grow its current revenue from $1 million to $18 million by 2020. “We have working capital needs when it comes to producing the product and shipping it off to different locations, so the ability to ensure timely payment makes it easier to plan for our business.”

EDC is the leading provider of financing and insurance for Canadian companies that sell to customers outside of Canada. The new online Portfolio Credit Insurance solution is part of EDC’s broader effort to provide simple and affordable service options to exporters, which will give them greater flexibility and speed to respond to rapidly shifting market demands.

EDC’s research shows there are approximately 140,000 Canadian companies that are currently engaged in trade (directly or indirectly exporting or have international investment) or planning to export. About 76 per cent of the companies in the addressable market (approximately 107K) are considered to be “micro” in size (under $1 million in annual volume) and have huge untapped potential for growth.

“We’ve modernized our platform and simplified our products to provide real-time support to Canadian exporters where and when they expect it,” says Clive Witter, EDC’s Senior Vice-President of Insurance. “We recognize how fast the global economy is changing and how Canadian companies are evolving to keep pace and stay competitive; our goal is to find new and innovative ways to help them win.”



NAFTA



Innovation, Science and Economic Development Canada. January 17, 2018. Federal government stimulating economic growth and supporting more than 2,600 middle-class jobs in Canada’s automotive sector. 11 companies in Ontario, Quebec and British Columbia receiving $41 million to advance automotive tech

Windsor, Ontario – The Government of Canada is creating well-paying, middle-class jobs and supporting long-term economic prosperity by investing in Canada's automotive manufacturing sector.

Today, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, announced an investment of $41 million from the Strategic Innovation Fund to create or maintain over 2,600 jobs in Canada’s automotive sector. The funding was announced at Lakeside Plastics near Windsor, Ontario, which will benefit from a $1-million investment that will contribute to creating 60 new skilled jobs. The company is one of 11 recipient companies located in Ontario, Quebec and British Columbia.

The funding will support advancements in automotive technologies to develop safer vehicles that are more fuel-efficient and environmentally friendly.

This investment is made through the Strategic Innovation Fund, a new program to attract and support high-quality business investments across all sectors of the economy.

Quotes

“To get to the cars of the future, we have to start today! Our government is supporting Canada’s strong and vibrant automotive sector and the middle-class Canadians who are employed in it. Fostering automotive technology is essential to the Canadian economy, and we will continue to make Canada a global centre for talent, innovation and technological advancements. We’re creating safer, more environmentally friendly vehicles, and that’s good for all Canadians.”

– The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development

“We are proud of the work we do here at Lakeside Plastics, and we are continuing to push the envelope and innovate to help supply the automotive industry with high-quality products. I want to thank the Government of Canada for its support, which is helping us create jobs, improve our processes and continue producing world-class quality products.”

- Dana Leavitt, CEO, Lakeside Plastics Limited

Quick Facts

  • The automotive manufacturing sector contributes $19 billion to Canada’s gross domestic product.
  • The Canadian automotive sector is one of Canada’s largest manufacturing sectors. It employs over 530,000 people directly and indirectly, and for every job created on an assembly line, six additional jobs are created in other sectors of the economy.
  • Canada’s automotive industry produces more than 2.4 million vehicles every year. This translates into one car being manufactured every 13 seconds.
  • The Strategic Innovation Fund is a flexible program that reflects the diversity of innovation in all sectors of the economy.

Backgrounder

The Strategic Innovation Fund (SIF) is a $1.26-billion program announced in Budget 2017 that aims to attract and support high-quality business investments in Canada’s most dynamic and innovative sectors. This fund supports innovative business activities such as R&D projects, firm expansion, attraction of large-scale investments to Canada and collaborative technology demonstration projects.

Canadians will benefit directly from the well-paying middle-class jobs created through this program, as well as from the economic spin-offs generated and the technologies developed under this initiative. Investment in R&D promotes technology development within diverse sectors of the Canadian economy. In allocating this funding, the government will look to accelerate areas of economic growth, strengthen and expand the role of Canadian firms in regional and global supply chains, support economic strategies, and attract investment that creates new jobs.

In addition, this initiative promotes collaboration between industry and academic institutions (universities, colleges and research institutions), fostering technology transfer and the development of a highly skilled workforce.

About the support to the automotive manufacturing companies

On January 17, 2018, the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, announced an investment of $41 million in 11 automotive companies across the country. The automotive manufacturing projects funded through SIF are as follows:

  • Blue Solutions Canada Inc., of Boucherville, Quebec, will receive $9,043,135 to develop a high-performance, low-cost lithium metal polymer to make battery packs for passenger vehicles smaller and more efficient and improve their storage capacity.
  • SWITCH Materials Inc., of Burnaby, British Columbia, will receive $8,257,600 to develop and implement an advanced glazing technology to make vehicles lighter and, as a result, more efficient. The glazing would also help reduce vehicles’ gas emission.
  • Nova Steel Inc., of Woodstock, Ontario, will receive $7,436,750 to develop second-generation advanced high-strength steel (AHSS) as well as technologies to make its plant more efficient. This will help Nova Steel leverage current and future demands for AHSS for lighter vehicles and for electric and autonomous vehicles.
  • AGS Automotive Systems, of Toronto, Ontario, will receive $7,009,438 to produce lighter composite materials for introduction in the design and commercialization of high-stress, high-performance automotive parts such as battery trays, bumpers, steps for lighter trucks and front suspension tower systems.   
  • Sciemetric Instruments Inc., of Ottawa, Ontario, will receive $2,927,538 to advance its product to meet manufacturers’ next-generation needs within their overall business, bringing visibility into manufacturers’ processes and helping them with quality and cost.
  • JP Bowman Ltd. (o/a Bowman Precision Tooling), of Brantford, Ontario, will receive $2,657,500 to create a prototype of third-generation advanced high-strength steel “B” pillars, the main vertical bar between driver and passenger doors. This could help make vehicles lighter, more fuel efficient and safer.
  • Lakeside Plastics Ltd., of Tecumseh, Ontario, will receive $1,100,250 to develop innovative new molding processes for lightweight and more environmentally friendly material for vehicles.
  • Marwood Metal Fabrication Ltd., of Tillsonburg, Ontario, will receive $953,500 to develop a new production process using carbon fibre to manufacture lighter and stronger roof headers. This will help improve cars’ structural integrity while making them lighter and more fuel efficient.
  • Abraham Innovation Systems Inc., of Markham, Ontario, will receive $701,669 to develop technology that can inspect and repair painted vehicle bodies without any human intervention, thus meeting the growing demand for these types of systems.
  • Synergx Technologies Inc., of Laval, Quebec, will receive $782,401 to create a non-contact 3D glass inspection system that will be more precise, accurate and timely than existing systems.
  • Meridian Lightweight Technologies Inc., of Strathroy, Ontario, will receive $347,840 to build a strong magnesium joint to replace existing steel shock towers. This technology can help reduce vehicle weight by up to 57%, thus increasing fuel efficiency.

About Canada’s automotive manufacturing sector

Canadian automotive suppliers export parts globally and are integral to Canada’s automotive sector, accounting for over $34 billion in sales annually. Manufacturers are looking to meet the demands for fuel-efficient vehicles with sophisticated technologies, which create new opportunities for Canadian automotive suppliers to develop and supply components.

Canada has strengths in traditional automotive supply chains, including in tool, die and mould making, but it also has a large IT sector specializing more and more in products and solutions for the automotive sector. To take advantage of important opportunities and grow their business, automotive suppliers must innovate and make new product development a cornerstone of their business strategies.


THE GLOBE AND MAIL. JANUARY 18, 2018. Trump threatens to link Mexico wall to NAFTA renegotiations
ADRIAN MORROW, U.S. CORRESPONDENT

WASHINGTON - U.S. President Donald Trump is threatening to link his promised wall on the Mexican border to the renegotiation of NAFTA, setting up a possible showdown days before talks resume in Montreal.

On Twitter Thursday morning, the President described the North American free-trade agreement as a "bad joke" and insisted Mexico would pay for the wall.

"The Wall will be paid for, directly or indirectly, or through longer-term reimbursement, by Mexico, which has a ridiculous $71-billion dollar [U.S.] trade surplus with the U.S.," Mr. Trump wrote. "The $20-billion dollar Wall is 'peanuts' compared to what Mexico makes from the U.S. NAFTA is a bad joke!"

In a subsequent tweet, he described Mexico as "rated the number one most dangerous country in the world."

According to the United States' own calculations, Mexico's trade surplus was actually $55.6-billion in 2016, the latest year for which numbers are available.

The previous day, in an interview with Reuters, Mr. Trump repeated his long-standing threat to "terminate" NAFTA as a way to crank up the pressure on Canada and Mexico to agree to U.S. demands.

Mexico has repeatedly refused Mr. Trump's demands to pay for the wall. Such a concession would be political suicide for the governing Institutional Revolutionary Party, which is fighting an uphill battle to hold on to power in elections scheduled for July. Mr. Trump, who built much of his presidential campaign on portraying Mexicans as criminals, is deeply reviled in the U.S.'s southern neighbour.

When Mr. Trump last week floated the notion of Mexico paying for the wall through NAFTA, Mexico's chief negotiator immediately shot the idea down.

"Let this be clear: the issue of the payment for a #border #wall is not, and will never be, part of the #NAFTA #negotiations #wearenotjoking," Kenneth Smith Ramos tweeted.

The U.S., Mexico and Canada are renegotiating NAFTA at the behest of Mr. Trump, who blames the deal for moving U.S. factory jobs to Mexico and allowing Canada to "take advantage" of the U.S.

Washington is already at loggerheads with Mexico City and Ottawa over a series of protectionist U.S. demands at the bargaining table, including that all cars and trucks made in Canada and Mexico contain at least 50-per-cent U.S. content.

Canada and Mexico are planning to present compromise ideas in Montreal in hopes of breaking the deadlock.

But putting the wall on the NAFTA negotiating table would create yet another impasse – and could cause Mexico to walk away.

Mr. Trump's Thursday outburst appeared motivated by comments from his chief of staff, John Kelly, that played down the administration's expectations on the wall. Mr. Kelly said it would not be possible to build a physical wall across the entire border and suggested the U.S. might not get Mexico to pay for it after all.

"In one way or another, it's possible that we could get the revenue from Mexico but not directly from their government," he told Fox News.

Within hours, Mr. Trump had smacked him down on Twitter: "The Wall is the Wall, it has never changed or evolved from the first day I conceived of it," the President wrote.

Mr. Trump has offered mixed signals on NAFTA in recent days. In an interview with the Wall Street Journal last week, he both said the deal should be used to pay for the border wall and also offered to extend the timeline of talks to after the Mexican election in July to take the political pressure off President Enrique Pena Nieto's administration. Currently, the renegotiation is under a U.S.-imposed March deadline.

In that same interview with the Journal, Mr. Trump said he preferred a negotiated settlement to pulling out of NAFTA, talks were "moving along nicely" and had "made a lot of headway."

In the Reuters interview Wednesday, Mr. Trump acknowledged the intense pressure he was under from the U.S. business community – particularly the agriculture industry, which sells vast quantities of corn and other goods to Mexico and Canada – not to kill the deal. But he said starting the process of pulling out of the deal would still be a good tactic for forcing Mexico and Canada to do what the U.S. wants.

"We're renegotiating NAFTA now. We'll see what happens. I may terminate NAFTA," Mr. Trump told Reuters. "A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don't realize how good it would be to terminate NAFTA because the way you're going to make the best deal is to terminate NAFTA. But people would like to see me not do that."

REUTERS. JANUARY 17, 2018. Exclusive: Trump says terminating NAFTA would yield the 'best deal' in renegotiations
Jeff Mason, David Lawder

WASHINGTON (Reuters) - U.S. President Donald Trump on Wednesday said that terminating the North American Free Trade Agreement would result in the “best deal” to revamp the 24-year-old trade pact with Canada and Mexico in favor of U.S. interests.

Lawmakers as well as agricultural and industrial groups have warned Trump not to quit NAFTA, but he said that may be the outcome.

“We’re renegotiating NAFTA now. We’ll see what happens. I may terminate NAFTA,” Trump said in an interview with Reuters.

“A lot of people are going to be unhappy if I terminate NAFTA. A lot of people don’t realize how good it would be to terminate NAFTA because the way you’re going to make the best deal is to terminate NAFTA. But people would like to see me not do that,” he said.

Trump’s comments come less than a week before trade negotiators from the United States, Canada and Mexico meet in Montreal for the sixth of seven scheduled rounds of negotiations to update NAFTA.

The talks are viewed as pivotal for the success of the NAFTA renegotiation effort because major differences remain over aggressive U.S. demands on autos, dispute settlement and a five-year sunset clause -- proposals that some business groups have labeled “fatal.”

Trump discussed NAFTA and other trade issues last weekend in Florida with U.S. Trade Representative Robert Lighthizer, who is leading the U.S. negotiating strategy.

Trump’s comments appeared to validate concerns voiced last week by Canadian government sources that the U.S. president, now a year in office, looked increasingly likely to announce a pullout from NAFTA..

Canadian Foreign Minister Chrystia Freeland added that U.S. threats to quit NAFTA had to be taken seriously.

The Reuters interview with Trump also reversed gains on Wednesday in Mexico’s peso MXN=, which has been highly sensitive to NAFTA withdrawal talk.

But Trump told the Wall Street Journal last week that he would be “a little bit flexible” on the withdrawal threat.

Farm state lawmakers have been making the case to Trump in recent weeks that a NAFTA withdrawal could cause a major tariff increase on U.S. corn and other crops sold to Mexico, hurting a major political support base for Trump in the rural United States.

On Monday, automakers from Detroit and around the world urged the Trump administration not to quit NAFTA and to back away from some of its demands in the negotiations.

Reporting by Jeff Mason, Roberta Rampton, Ayesha Rascoe James Oliphant and David Lawder, writing by David Lawder




MONETARY POLICY



The Globe and Mail. 18 Jan 2018. Where does the BoC go after this rate hike?
STEVE AMBLER, is the David Dodge Scholar in Monetary Policy at the C.D. Howe Institute, and professor of economics at the school of management, University of Quebec at Montreal
JEREMY KRONICK, is senior policy analyst at the C.D. Howe Institute

If inflation undershooting persists for too long, it can lead market participants to think that the bank views 2 per cent as a ceiling rather than the midpoint of its target range, and this could eventually lead inflation expectations in a downward direction.

The wait for the Bank of Canada to move is over; now the waiting for the next steps begins.

Wednesday’s rate increase by the bank did not come as a surprise. In its December interestrate-setting announcement, the bank noted that it would be guided by incoming data before raising its target for the overnight rate. Well, the data have spoken. Headline inflation nudged above the bank’s 2-percent target in November, coming in at 2.1 per cent, and two of the bank’s preferred measures of core inflation, CPI-trim and CPI-median (which remove volatile components from the index), moved up closer to 2 per cent.

The bank also noted the robust pace of business investment, and the positive outlook for future investment as factors influencing its decision. The labour market was also influential, as job growth for December was particularly strong, with a net gain of almost 79,000 jobs and unemployment falling to 5.7 per cent, its lowest level since 1974.

Markets were therefore expecting the bank to raise the overnight target rate to 125 basis points on Wednesday morning, with a 90-per-cent probability of an increase baked in. Now that it has done that, the key question is how much further, and how fast, the overnight rate will go.

In the December announcement, and again on Wednesday, the bank stated it would continue to be cautious. Markets have been expecting two more 25basis-point hikes this year. The tone of Wednesday’s announcement puts that in doubt.

Why the hesitation? Partly because of financial stability concerns, which centre on household debt and the fragility of the Canadian housing market.

A more fundamental reason for caution is how slow inflation has been to increase toward the 2-per-cent target.

Since early in 2012, headline inflation has remained under target except for brief periods, and average inflation since 2012 has been 1.5 per cent. This is within the bank’s target range but represents a shift from the two decades from 1996 until the financial crisis of 2007-08, during which inflation averaged almost exactly 2 per cent. Subdued inflation in spite of improving economic conditions and a tightening labour market is not only a Canadian phenomenon: Inflation has also been muted in the United States, the euro zone and elsewhere.

Inflation weakness is a puzzle and the subject of extensive research – including at central banks. It was the subject of a major speech by retired deputy governor Agathe Côté in 2015. One possible explanation is that inflation responds less to slack in the economy, or its absence, precisely because of the success of the bank’s inflation targeting framework, which has led to medium-term inflation expectations that are firmly anchored at 2 per cent.

The persistent undershooting of inflation did not shake the confidence of the market that the bank could return inflation to target in the medium term. That also suggests that inflation will not readily move above 2 per cent. Just as inflation below target was no emergency for the public, investors, or the bank itself, neither should a period of inflation slightly above target be an emergency.

A period of slightly above target inflation can in fact have benefits. First, it will correct for the undershooting of inflation since 2012 and bring average inflation back up toward 2 per cent. This makes future prices more predictable in the long run. Second, it will help convey the idea that the bank’s concerns about inflation are symmetric around the 2-per-cent target. If inflation undershooting persists for too long, it can lead market participants to think that the bank views 2 per cent as a ceiling rather than the midpoint of its target range, and this could eventually lead inflation expectations in a downward direction.

The preponderance of data argued for a rate increase on Wednesday. If the economy continues to speak loud and clear, more rate hikes are likely on the way. However, the bank’s caution is warranted as a result of both domestic and foreign uncertainty. One thing not to fear is a temporary period of inflation above 2 per cent. That would be a nice “problem” to have.



INVESTMENT - CHINA - CONSTRUCTION



The Globe and Mail. REUTERS. 18 Jan 2018. China’s state-owned Aecon buyer to install Communist Party unit
STEVEN CHASE, OTTAWA, WITH A REPORT FROM REUTERS

The presence of party units in China-based companies has long been a fact of doing business in the Asian country, where the law requires companies, including foreign firms, to set up a party organization.

The Chinese state-owned firm seeking the Trudeau government’s approval to buy one of Canada’s biggest construction companies recently notified its shareholders it will establish a Communist Party of China unit inside its corporate ranks.

While in the past many executives had seen such a measure as symbolic, that is changing under Chinese President Xi Jinping, who seeks to increase the party’s influence in China’s state-owned companies.

China Communications Construction Co. (CCCC), which wants to acquire Canada’s Aecon Group Inc. in a $1.5-billion deal, notified shareholders late last year of the move to give Beijing’s ruling party a place in the firm.

In a filing with the Hong Kong Stock Exchange dated Oct. 30, 2017, the Beijing-based construction giant said it is making room inside its corporate structure for a Communist Party section in which the party “organization shall play the core leadership role and core political role, providing direction, managing the overall situation.” A multitude of state-owned enterprises have been adding the Communist Party to their corporate structures in recent months, giving what appears to be a supporting role to the entity that heads China’s authoritarian state.

The presence of party units in China-based companies has long been a fact of doing business in the Asian country, where the law requires companies, including foreign firms, to set up a party organization.

Under Mr. Xi, the party has sought to address the “weakening, watering down, hollowing out and marginalization” of party leadership at state enterprises, the party’s official People’s Daily newspaper wrote last June.

John Beck, chief executive of Aecon Group, played down the addition of a Communist Party unit to CCCC’s corporate structure.

“We know that its parent company is publicly traded and its biggest shareholder is a Chinese state owned enterprise [SOE], and that some of the world’s leading institutional investors also own shares in the company. These changes are applicable to all SOEs, not just [China Communications Construction]’s parent company, and are not expected to have any impact on Aecon’s business,” Mr. Block said in a statement.

Conservative MP Tony Clement said the issue raises questions about who will make corporate decisions at Aecon should the Trudeau government approve the takeover.

“This shows the continuing close relationship between CCCC, the Communist Party of China and Chinese state interests,” said Mr. Clement, who once served as federal industry minister and was responsible for vetting foreign takeovers. “It’s clear that Canada’s national interests will be subordinate to a foreign authoritarian power and its ruling party.”

Canada’s largest construction companies have been urging the Liberal government to block the Aecon takeover on the grounds that CCCC – which is one of the world’s largest infrastructure companies – has a poor track record when it comes to safety and corruption, and that a state-controlled Chinese entity is not suited to work on projects with security concerns, such as the refurbishment of

Ontario nuclear power stations and building military facilities.

A delegation from domestic construction heavyweights PCL

Constructors Inc., Ledcor Group and P.W. Graham & Sons Construction met last Thursday in

Ottawa with senior civil servants in the federal Department of Innovation, Science and Economic Development, which must approve the Aecon takeover.

The session was part of a last-ditch campaign to stop a deal that would make CCCC a significant player in a booming domestic construction market.

Aecon’s board of directors put the 140-year-old company up for sale in the summer, in part to find an international partner and compete for larger projects and also in response to pressure from an activist shareholder who wanted to see the stock price rise, and announced a deal with Beijing-based CCCC in October.

Aecon shareholders voted overwhelmingly in favour of the takeover in December.

The deal received the blessing of Canada’s competition watchdog and Chinese regulators last month.

Many industries are wary of takeovers by state-owned entities, which do not have to focus on profit and can undercut competition and distort the market.

CCCC is 63-per-cent owned by the Chinese government.

National security agencies in Canada and the United States have warned that companies owned or partly owned by the Chinese government are not merely commercial operations; they are also prone to passing on information or technology to Beijing and making business decisions that could conflict with Canadian interests but serve the agenda of the Communist Party. In recent years, the construction company, which has 118,000 employees, helped China assert sovereignty over the disputed South China Sea by building artificial islands, and CCCC was barred until recently from bidding on World Bank projects because of an acquisition’s “fraudulent practices.”

Innovation Minister Navdeep Bains’s office declined to comment on the concerns raised by construction companies concerning the takeover of Aecon.

“We cannot comment on what has or has not been said in the meetings you are referring to,” Mr. Bains’s office said in a prepared statement. “We welcome foreign investment that will benefit the Canadian economy but not at the expense of national security.”



ENERGY



THE GLOBE AND MAIL. JANUARY 18, 2018. PIPELINE. Alberta pumps up Keystone XL, sparking ire of rival Enbridge
KELLY CRYDERMAN  AND JEFF LEWIS

CALGARY - The Alberta government is making a two-decade commitment to TransCanada Corp's long-stalled Keystone XL pipeline – a key move that will underpin the $8 billion (U.S.) project that has struggled to gain enough support from major oil shippers.

The Alberta government's crown corporation, the Alberta Petroleum Marketing Commission, will pledge 50,000 barrels of oil per day for 20 years, said Cheryl Oates, communications director for Alberta Premier Rachel Notley.

"The government's commitment is expected to result in this pipeline being built," Ms. Oates said in an e-mail.

While rival Enbridge Inc. calls the deal a "subsidy" for the TransCanada project, the Alberta government said the commitment will bolster industry confidence and stability for the pipeline project, as well as the province's economy as a whole.

Last march, Keystone XL was given the green light by U.S. President Donald Trump – who reversed the previous Obama administration's decision to halt the project. If built, the 830,000-barrel per day pipeline will provide a more direct route for shipping mainly heavy Canadian oil to key U.S. markets. However the 1,897-kilometre pipeline still faces environment and landowner opposition, as well as regulatory hurdles in the state of Nebraska.

On Thursday morning, TransCanada announced it had successfully concluded the Keystone XL open season, securing approximately 500,000 barrels per day of firm, 20 year commitments, "positioning the proposed project to proceed." TransCanada said interest in the project remains strong and the company will look to continue to secure additional long-term contracted volumes.

"We appreciate Alberta Premier Rachel Notley for her government's commitment to the project which was instrumental to achieving the commercial support needed to proceed," Mr. Girling said in a news release.

The Alberta government's decision comes as oil sands producers struggle with steep price discounts as rising production tests the limits of existing pipelines. Producers argue expansions will help them tap markets where prices are stronger, however long-term growth prospects in the oil sands have slowed considerably.

The Wall Street Journal reported last June that the Canadian pipeline company was struggling to line up customers to ship crude from Canada to the U.S. Gulf Coast. TransCanada chief executive Russ Girling has said since the pipeline was first envisioned almost a decade ago, "a lot of water has gone under the bridge" in terms of oil prices. "So it all sort of complicates the negotiation."

The deal with TransCanada can only happen because the Alberta government receives a small portion of its energy royalties in oil – in lieu of cash. That allows the province to use its share of bitumen or conventional oil to strategically supply upgraders and refineries, or other projects such as pipelines it believes will provide the province with an economic boost.

The Keystone XL contract also partly replaces the 100,000-barrel per day, 20-year commitment – worth $5-billion – that the Alberta government had made on TransCanada's now cancelled Energy East pipeline project. However, that project would have allowed Canadian oil to be shipped to global oil markets besides the U.S. – a customer which now buys more than 99 per cent of Canada's crude exports.

Indications that the Alberta government was moving towards the deal with TransCanada late last year rankled cross-town rival Enbridge, which blasted government support for Keystone XL. Enbridge said it is an unwarranted subsidy for a project that would compete directly with its own mainline pipeline network in the key Midwest U.S. market.

"It's up to pipeline companies to determine what projects they should advance, based on market support," Enbridge spokesman Jesse Semko said in December. "TransCanada announced in November it had adequate commercial support for Keystone XL. If that's the case, a taxpayer subsidy is not necessary."

Enbridge has previously warned the industry could face a temporary glut of export capacity should Keystone XL, Kinder Morgan Inc.'s Trans Mountain and its own Line 3 pipeline all proceed as planned.

That would cause volumes to temporarily dip on Enbridge's own mainline system, Guy Jarvis, Enbridge executive vice-president of liquids pipelines, told investors at a conference in New York in December. Still, he insisted the excess would be short-lived, citing industry projections that see 850,000 barrels per day of new supply coming by 2022.

Prices for oil sands-derived crude have in recent weeks slumped to lows not seen since 2013, reviving fears about pipeline bottlenecks as production in northern Alberta surges. The discount on Western Canadian Select, a blend of conventional heavy oil and oil sands bitumen, has approached $30 (U.S) in recent weeks, though it has narrowed of late.

The price difference reflects higher transportation and processing costs for heavy oil sands barrels relative to lighter North American crude. Numerous forecasts say the key price gap will stay wide this year, sapping government and corporate revenues, as a series of major expansions gear up.

Ms. Oates said the Alberta government's decision has been taken in part to reduce the differential between heavy Alberta oil and the light oil price in the U.S. "Based on current production forecasts, we will need two new pipeline expansions as quickly as possible," she said.

University of Alberta economist Andrew Leach wrote last year that a commitment from the Alberta government would essentially de-risk the Keystone XL project. "The government of Alberta has a stronger credit rating than most Alberta-based oil companies, its participation will lower the overall risk of the project and should provide for lower overall system tolls, increasing the value of all Alberta crude and the profitability of Alberta's industry," he said.

Other shippers include Canadian Natural Resources Ltd., Suncor Energy Inc. and Cenovus Energy Inc. The total commitments are unknown but CNRL told Reuters in November that it had increased its volume commitment on Keystone XL by about 46 per cent to 175,000 barrels per day.

Oil sands production is expected to climb by 315,000 barrels per day next year, followed by 180,000 barrels in 2019, according to Royal Bank of Canada. That follows growth of 250,000 barrels per day this year.

Those barrels will exacerbate shipping constraints until at least late 2019, when the first of the three major pipelines is forecast to start up. However, that timeline assumes such projects can overcome entrenched opposition from environmentalists and some Indigenous groups, both of which have contributed to mounting delays and rising costs.

Enbridge, for instance, is awaiting final approvals from regulators in Minnesota for its $9-billion (Canadian) Line 3 project. And Kinder Morgan this week said its Trans Mountain project is a year behind schedule, meaning oil deliveries won't commence on the Alberta-to-B.C. pipeline before December 2020.

REUTERS. JANUARY 18, 2018. TransCanada closes Keystone XL open season after 'strong' demand

(Reuters) - TransCanada Corp (TRP.TO) (TRP.N) said it received strong commercial support for its Keystone XL pipeline and closed its window for shippers to sign up for committed capacity, taking it one step closer to starting construction on the project.

TransCanada has secured firm, 20-year commitments for about 500,000 barrels per day of oil and oil equivalents as it concluded its open season for the project, the company said on Thursday.

The controversial pipeline overcame its final hurdle when Nebraska regulators approved a path for the project through the state in November.

Earlier last year, the Trump administration granted TransCanada a federal permit for the pipeline, reversing a decision by former President Barack Obama to reject the project on environmental grounds.

“Interest in the project remains strong and TransCanada will look to continue to secure additional long-term contracted volumes,” the company said in a statement.

TRP.TO

Primary construction expected to begin in 2019, TransCanada said.

The controversial pipeline has been has been a lightning rod of controversy for nearly a decade, pitting environmentalists worried about spills and global warming against business advocates who say the project will lower fuel prices, shore up national security and bring jobs.

Reporting by Nivedita Bhattacharjee; Editing by Saumyadeb Chakrabarty

REUTERS. JANUARY 17, 2018. Oil slips towards $69 ahead of U.S. supply report
Alex Lawler

LONDON (Reuters) - Oil slipped towards $69 a barrel on Thursday, weighed down by a reported rise in U.S. fuel stocks and expectations that OPEC-led efforts to boost prices by cutting output will increase supply from the United States and other rivals.

Crude is still within sight of its highest since December 2014, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and concern that unrest in producer nations such as Nigeria could further curb output.

But a weekly supply report from the American Petroleum Institute (API) on Wednesday said inventories of gasoline and diesel had risen. OPEC’s monthly report on Thursday raised its forecast for oil supply from non-members in 2018. [API/S]

“Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil,” OPEC said in the report, using another term for shale.

Brent crude, the global benchmark, slipped 35 cents to $69.03 by 1418 GMT. On Monday it touched $70.37, the highest since December 2014. U.S. crude was down 18 cents at $63.79, having hit its highest since December 2014 on Tuesday.

U.S. government supply data at 1600 GMT will be in focus as traders look for confirmation of the API report. [EIA/S]

Brent has risen from $61 a barrel in early December and some analysts say the rally may be about to run out of steam.

“The upside is now limited for oil prices,” said Fawad Razaqzada, market analyst at brokerage Forex.com. “U.S. oil producers will ramp up production in the coming months.”

OPEC’s report follows a forecast from the U.S. Energy Information Administration (EIA) on Tuesday that it expects U.S. oil output to continue to rise in February with production from shale increasing by 111,000 barrels per day (bpd).

The agency previously said U.S. output could reach 10 million bpd in February and 11 million bpd in 2019.

Even so, traders said prices were unlikely to fall far due to the OPEC-led curbs and the risk of further disruptions.

Militant group Niger Delta Avengers threatened to attack Nigeria’s oil sector in the next few days, potentially hampering supplies in Africa’s largest exporter.

“The impact of such a threat, if carried out, would be significant on the global supply and demand balance,” said Tamas Varga of oil broker PVM. “The market is still sensitive to geopolitical developments.”

Additional reporting by Henning Gloystein; Editing by Dale Hudson



AVIATION



REUTERS. JANUARY 18, 2018. Emirates hands Airbus A380 superjumbo a lifeline with $16 billion order
Tim Hepher

NANTES, France (Reuters) - Emirates announced a deal for up to 36 Airbus (AIR.PA) A380 aircraft on Thursday worth as much as $16 billion at list prices, saving the world’s biggest passenger jet from death row and securing its future for at least another decade.

The European planemaker said Emirates [EMIRA.UL] had placed a provisional order for 20 of the double-decker superjumbos, with an option for 16 more. Deliveries are due to start in 2020.

The agreement hands a lifeline to the slow-selling aircraft, in service for just 10 years, and rescues one of Europe’s most visible industrial symbols overseas.

“The A380 is good to go,” Emirates President Tim Clark told Reuters.

Airbus shares rose more than 3 percent after the announcement to touch a record high of 92.56 euros.

The deal ends months of tough-fought negotiations. Talks between Airbus and Emirates about a fresh A380 order broke down at the last minute at the Dubai Airshow in November, when the Gulf carrier placed an order for 40 smaller Boeing (BA.N) 787s.

Earlier this week, Airbus confirmed a Reuters report that the A380’s survival lay with Emirates, saying it would have “no choice” but to close production if the Emirates deal fell through despite interest in smaller orders from others.

Emirates and Airbus both said the deal would bring stability to the A380 production line.

The deal marks a final flourish for veteran Airbus sales chief John Leahy, one week before he retires after more than 20 years as the driving force of European aircraft exports.

“Emirates is committing to the program for the long term and plans to take six airplanes a year for 9-10 years,” the 67-year-old New Yorker told Reuters from onboard an A380 on his way back to France from Dubai.

Calling time on the A380 would not have caused major financial damage to Airbus, but would have been “emotionally expensive,” a company source said.

SUPERJUMBO VS TWIN-ENGINES

Leahy said he was now convinced the A380 would be built well into the 2030s.

Sales of the A380 have fallen short of expectation and rival Boeing says the future lies with smaller, twin-engine models like its 777 and Dreamliner that offer more flexibility and are at least as efficient.

AIR.PA

But Airbus believes its 544-seat superjumbo still has a role as air traffic rises and airports become ever more congested.

The Emirates deal also means a potential revival for one of the world’s largest aircraft engines, co-produced by General Electric (GE.N) and Pratt & Whitney (UTX.N). Their Engine Alliance venture powers most Emirates A380s, but it has lost out to competitor Rolls-Royce (RR.L) on the latest deliveries.

Emirates has, however, appeared unhappy with the performance of the Rolls-Royce Trent 900 engines. It has invited the two engine makers to compete for the new A380 order, two industry sources said.

Rolls-Royce had no immediate comment. Emirates said it had yet to make a decision on engine supplier.

Emirates’ commitment to take six A380s a year for a decade fills a gap in planned production as Airbus touts business from other airlines.

“That provides a base allowing the program to continue so that Airbus can sell two or three planes here, four there,” Leahy said.

Analysts say Airbus is unlikely to break even on the A380 at such production levels, but that the losses will not make a big impact on the company’s accounts, which are dominated by sales of smaller jets worth tens of billions of dollars a year.

Emirates is by far the largest operator of the A380 with 101 in service today and a backlog of 41 superjumbos on order before Thursday’s announcement. The last order by another airline for the A380 was in 2015 when Japan’s ANA booked three.

Reporting by Tim Hepher; Writing by Richard Lough; Editing by Mark Potter


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