Author: Consultant

A Canadian forestry research centre that has led efforts to expand the use of mass timber in British Columbia and Quebec is being accused by the U.S. lumber industry of receiving unfair federal and provincial subsidies.

The move is part of a new offensive in the long-running trade dispute over Canadian softwood sold south of the border.

The research centre, FPInnovations, is a private not-for-profit organization that works out of laboratories in Vancouver, Quebec City and Pointe-Claire, Que. It aims to spur innovation and growth in the forest products sector, including by researching and promoting the use of mass timber, a type of building material that consists of layers of wood bonded together for added strength. Its research benefits its members, a who’s who of Canadian forestry companies.

In a complaint lodged with the U.S. Department of Commerce this past summer, a U.S. lumber industry group, COALITION (short for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations), alleged that FPInnovations is helping Canadian producers gain an unfair advantage over their American competitors.

The complaint, citing FPInnovations’ financial reporting from the 2021-22 fiscal year, says the Canadian government provided more than $21-million in funding to the research centre. It notes that FPInnovations also had partnerships with the governments of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia, New Brunswick, the Northwest Territories and Newfoundland and Labrador.

The B.C. government, for example, provided $5.8-million to FPInnovations in the 2021-22 fiscal year, while the Quebec government chipped in $6.7-million.

U.S. plans to raise tariffs against Canadian softwood lumber producers

“In the absence of such funding, FPI’s members would presumably be required to self-finance” this type of research and development, COALITION said in its submission to the Department of Commerce.

A joint filing by the Canadian, Alberta and Saskatchewan governments counters that COALITION’s arguments are without merit. “New subsidy allegations with respect to alleged programs do not meet the standard required for the Department to initiate any further investigation,” it says.

Last month, the Department of Commerce opted to defer a decision on whether to launch an investigation into FPInnovations until its next administrative review, later this year. It also deferred decisions on three other claims from COALITION: one about allegedunfair subsidies provided by the Alberta government for carbon capture, utilization and storage; and two about training programs, one in Alberta and the other in Saskatchewan.

“These four allegations are new to this segment of the proceeding, and include extremely complex issues,” the department said in a recent memorandum.

The Department of Commerce has decided to investigate a fifth allegation from the lobby group, about research-and-development tax credits in Saskatchewan.

COALITION is led by the U.S. Lumber Coalition. Its members include Seattle-based Weyerhaeuser Co.

Forestry companies based in Canada that are FPInnovations members include West Fraser Timber Co. Ltd. WFG-T +2.64%increase, Canfor Corp. CFP-T +4.41%increase, Tolko Industries Ltd., J.D. Irving Ltd. and Paper Excellence Group, which completed its purchase of Resolute Forest Products Inc. last year.

The Department of Commerce has the authority to adjust U.S. lumber tariffs on Canadian softwood, after reviewing submissions from a range of interested parties.In recent decades, the U.S. has repeatedly levied duties on Canadian softwood in retaliation for what it has deemed to be unfair provincial subsidies. The dispute stretches back to the early 1980s.

Inside the never-ending softwood lumber trade war between Canada and the U.S.

The last time Canada and the U.S. reached an agreement on softwood trade was in 2006. That agreement expired in October, 2015, with no replacement.

Most forests in Canada are on Crown land, where buyers pay “stumpage fees” to provincial governments for the right to log.The U.S. has alleged that the fees are too low, and that they amount to government subsidies.

The U.S. has levied countervailing duties in retaliation, focused on the stumpage system. It has also imposed anti-dumping duties in response to Canadian lumber allegedly being sold at below market value.

In the Department of Commerce’s latest assessment, it announced last month that the combined countervailing and anti-dumping duty rates will rise by this autumn to 13.86 per cent for most Canadian softwood producers, compared with 8.05 per cent currently.

Eric Parnes, a lawyer representing the Canadian government, has said the notion of bountiful timber in Canada is outdated.

“There has long been a perception that Canada’s forests are endlessly abundant and readily available to lumber producers. Whatever the reality of that perception may have once been, it is very much not the case today,” he told the U.S. International Trade Commission in October, according to a transcript.

The Canadian government is challenging the lumber tariffs under the United States-Mexico-Canada Agreement, which allows Canada and the U.S. to set up trade panels to settle disputes. Canada also complained about the softwood dispute to the World Trade Organization in 2017.

Monday March 11

China CPI, PPI, aggregate yuan financing and new yuan loans

Japan GDP and machine tool orders

U.S. president Joe Biden releases fiscal 2025 budget proposals.

Earnings include: Altius Minerals Corp.; Ballard Power Systems Inc.

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Tuesday March 12

Germany CPI

(8:30 a.m. ET) U.S. CPI for February. The Street is forecasting an increase of 0.4 per cent from January and up 3.1 per cent year-over-year.

(2 p.m. ET) U.S. budget balance for February.

Also: Quebec’s budget

Earnings include: Kohl’s Corp.; Labrador Iron Ore Royalty Corp.; Transcontinental Inc.; Wesdome Gold Mines Ltd.

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Wednesday March 13

Euro zone industrial production

(8:30 a.m. ET) Canada’s national balance sheet and financial flow accounts for Q4.

(10 a.m. ET) U.S. quarterly services survey for Q4.

Earnings include: Dollar Tree Inc.; Lennar Corp.; North American Construction Group Ltd.; Pollard Banknote Ltd.

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Thursday March 14

(8:30 a.m. ET) Canada’s manufacturing sales for January. Consensus is an increase of 0.3 per cent from December with new orders sliding 0.1 per cent.

(8:30 a.m. ET) Canadian new motor vehicle sales for January. Estimate is a year-over-year rise of 17.0 per cent.

(8:30 a.m. ET) U.S. initial jobless claims for week of March 9. Estimate is 216,000, down 1,000 from the previous week.

(8:30 a.m. ET) U.S. retail sales for February. Consensus is a rise of 0.8 per cent from January (or 0.5 per cent excluding automobiles).

(8:30 a.m. ET) U.S. PPI Final Demand for February. The Street is projecting an increase of 0.3 per cent from January and up 1 per cent year-over-year.

(10 a.m. ET) U.S. business inventories for January. Consensus is a month-over-month increase of 0.2 per cent.

Earnings include: Adobe Systems Inc.; Dollar General Corp.; Empire Co. Ltd.; North West Co. Inc.; Wheaton Precious Metals Corp.

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Friday March 15

(8:15 a.m. ET) Canadian housing starts for February. Consensus is an annualized rate decline of 3.8 per cent.

(8:30 a.m. ET) Canada’s wholesale trade for January. Estimate is a month-over-month decline of 0.6 per cent.

(8:30 a.m. ET) Canada’s international securities transactions for January.

(8:30 a.m. ET) U.S. import prices for January. Consensus is an increase of 0.2 per cent from January but down 0.9 per cent year-over-year.

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for February.

(9:15 a.m. ET) U.S. industrial production and capacity utilization for February.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for March.

Earnings include: Premium Brands Holdings Corp.

U.S. job growth accelerated in February, but a rise in the unemployment rate and moderation in wage gains kept on the table an anticipated interest rate cut in June from the Federal Reserve.

Nonfarm payrolls increased by 275,000 jobs last month, the labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for January was revised down to show 229,000 jobs created instead of 353,000 as previously reported.

Economists polled by Reuters had forecast 200,000 jobs added, with estimates ranging from 125,000 to 286,000. Payrolls are above the roughly 100,000 jobs needed per month to keep up with growth in the working age population.

The labour market is supporting the economy, which is outperforming its global peers. Economists do not expect a recession this year. The unemployment rate rose to 3.9 per cent in February after holding at 3.7 per cent for three straight months.

Despite a rash of high-profile layoffs at the start of the year, employers are generally holding on to their workers after struggling to find labour during the COVID-19 pandemic. Though labour supply and demand are falling back into balance, amid a rise in immigration and older workers delaying retirement, some sectors of the economy remain desperate for skilled workers.

There were 1.45 open jobs for every unemployed person in January, still above the average of 1.2 during the year before the pandemic, government data showed this week. The Fed’s Beige Book report also showed “difficulties persisted attracting workers for highly skilled positions” in February.

Average hourly earnings edged up 0.1 per cent last month after gaining 0.5 per cent in January. That lowered the year-on-year increase in wages to a still-high 4.3 per cent in February from 4.4 per cent in January.

Fed Chair Jerome Powell told lawmakers this week that rate cuts would “likely be appropriate” later this year, but emphasized they “really will depend on the path of the economy.”

Canada’s economy added a net 40,700 jobs in February, double the expected gain, data showed on Friday, and wage growth slowed for a second consecutive month as the central bank continues to hold interest rates at a 22-year high.

However, the jobless rate ticked up to 5.8 per cent, Statistics Canada said.

Analysts polled by Reuters had forecast a net gain of 20,000 jobs and for the unemployment rate to edge up to 5.8 per cent from 5.7 per cent in January. The unemployment rate has been steady at that level for three of the past four months, Statscan said.

“There is still evidence from today’s data that labour market conditions are loosening, but only very gradually and not in a way that demands an imminent reduction in interest rates,” said Andrew Grantham, a senior economist with CIBC Capital Markets, adding he expects first rate cut in June.

The Bank of Canada on Wednesday said it was too early to consider lowering borrowing rates. It has kept its key overnight rate unchanged at 5 per cent at the past five policy-setting meetings.

“Wage growth, which had been running at 4 or 5 per cent … there’s certainly some early signs that it’s beginning to ease,”

Governor Tiff Macklem told a news conference on Wednesday, adding that it was still not enough to warrant an early rate cut.

The annual growth in the average hourly wages of permanent employees – a figure tracked by the central bank – slowed to 4.9 per cent from 5.3 per cent in January, reaching its lowest level since June.

Though Canada added jobs, the employment rate fell slightly in part because of population growth, Statscan said.

It was the fifth consecutive monthly decline in employment rate, making it the longest period of consecutive decreases since April 2009, Statscan said.

The US job market report, which came at the same time as Canada’s, showed that its economy also absorbed more jobs than expected by analysts as its economy continued to outperform global peers. However, its unemployment rate rose.

Canada’s February job gains were driven by full-time work, where 70,600 positions were added, more than offsetting the 29,900 jobs shed in part-time work.

Money markets reflect around an 85 per cent chance of a rate cut in June and fully price a 25 basis point cut in July. Those bets did not change much after the release of the jobs report.

The Canadian dollar was trading 0.2 per cent higher at 1.3435 to the U.S. dollar, or 74.43 U.S. cents, after touching its strongest intraday level since Feb. 12 at 1.3427.

Employment in the goods sector decreased by a net 6,300 jobs, mainly in manufacturing and agriculture, while the services sector gained a net 46,900 jobs, led by accommodation and food services and professional, scientific and technical services.

The Bank of Canada held its benchmark interest rate steady for the fifth consecutive time, in a tight-lipped decision that offered few hints about the timing of future rate cuts.

The widely anticipated move keeps the policy interest rate at 5 per cent, a level reached last July after one of the most aggressive monetary policy tightening campaigns in Canadian history, aimed at tackling runaway price increases.

With the rate of inflation inching closer to the bank’s 2-per-cent target, and the Canadian economy growing at a snail’s pace, central bank officials don’t expect to raise interest rates further.

At the same time, they’re not yet willing to entertain rate cuts, which would offer relief to homeowners with mortgages and businesses struggling to pay debts.

Fed Chair Jerome Powell says he still expects rate cuts this year, but inflation progress ‘not assured’

“With inflation still close to 3 per cent and underlying inflationary pressures persisting, the assessment of Governing Council is that we need to give higher rates more time to do their work,” Mr. Macklem said at a news conference after the announcement.

“We don’t want to keep monetary policy this restrictive for longer than we have to. But nor do we want to jeopardize the progress we’ve made in bringing inflation down,” he said.

In a highly unusual move, the bank left the entire last paragraph of its rate announcement unchanged from its previous statement in January, pushing back on private-sector speculation that the bank might use Wednesday’s rate decision to pivot to a more dovish stance.

Bay Street analysts and traders are betting the bank will begin cutting interest rates in the coming quarters. The key question is whether this will happen in April, June, July or perhaps even later.

Market reaction to the announcement was relatively muted, although investors pared back bets on an April rate cut. Interest rate swap markets, which capture market expectations about monetary policy, put the odds of an April rate cut at around 20 per cent, and the odds of a cut in June at just under 70 per cent.

“It wouldn’t be the Bank’s style to hint today about a rate cut as far off as June, so we’ll stick with our call for a rate cut that month despite the lack of fresh dovish talk today,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a note to clients.

“Clearly, we’ll need more progress on inflation, and perhaps on wages, for that outcome, so we’ll be watching at the upcoming jobs and CPI data as we fine tune our forecasts.”

Mr. Macklem batted away questions during the news conference about the possible pace of interest rate cuts once the bank does start easing monetary policy. However, he did suggest that it could be a drawn out process.

“I think it’s very safe to say we’re not going to be lowering rates at the pace we raised them,” Mr. Macklem said.

The bank has made substantial progress in getting inflation under control. After hitting a peak of 8.1 per cent in the summer of 2022, the annual rate of consumer price index inflation came in at 2.9 per cent in January, back within the bank’s 1 per cent to 3 per cent target range.

Encouragingly, this decline has happened without the economy entering a recession or a major spike in unemployment. That increasingly looks like the “soft landing” many economists thought would be impossible a year ago.

The bank also noted that labour market pressures have been easing. That suggests that the rapid pace of wage growth seen over the past year could begin to slow – something the bank thinks is necessary to bring inflation back to its target.

Still, overall price pressures in the economy remain elevated. The bank’s preferred measures of core inflation, which strip out the most volatile parts of the CPI, are running in the 3 per cent to 3.5 per cent range. Mr. Macklem said he and his team need to see “sustained easing in core inflation” before considering rate cuts.

“One month doesn’t make a trend; you need to see a few months,” he said.

There are also pockets of the economy where prices continue to rise rapidly, putting pressure on household finances. Shelter price inflation, which includes mortgage interest costs, rent and other housing expenses, came in at 6.2 per cent in January.

Shelter inflation poses a particular problem for the central bank. Mortgage interest costs, which are directly tied to the bank’s own rate decisions, are the single biggest driver of CPI inflation. But if the bank cuts rates, offering relief to homeowners with mortgages, it would likely cause home prices to rise, further hitting housing affordability.

Likewise, Mr. Macklem has said the bank can do little to bring down rent inflation, which is being driven by a structural mismatch of housing supply and demand.

“Gasoline prices are expected to continue to add volatility to inflation in coming months, and shelter price pressures are likely to persist. In other words, the path back to our 2 per cent target will be slow, and progress is likely to be uneven,” Mr. Macklem said.

“Risks to global energy prices and transportation costs related to conflicts remain elevated. Domestically, inflation could prove more persistent than expected,” he added.

The bank expects CPI inflation to remain near 3 per cent until the middle of the year, then to decline to around 2.5 per cent by the end of the year and back to the 2-per-cent target in 2025.

The bank’s next rate announcement is on April 10, at which time the bank will also publish a new forecast for inflation and economic growth.

PUBLISHED TUE, MAR 5 20248:22 AM EST

Crude oil futures fell for a second consecutive day Tuesday as China’s pledge to boost economic growth and OPEC+ production cuts failed to lift prices.

The West Texas Intermediate contract for April dropped 72 cents, or 0.91%, to $78.02 a barrel. May Brent futures shed 57 cents, or 0.69%, to $82.83 a barrel.

The Beijing government on Tuesday set an economic growth target of about 5% for 2024 and announced the issuance of $138.9 billion in “ultra-long” special Treasury bonds to fund major projects.

OPEC and its allies, OPEC+, agreed on Sunday to extend crude production cuts of 2.2 million barrels per day through the second the second quarter.

Walter Chancellor, an energy strategist with Macquarie, told clients in a note Sunday that the extension of OPEC+ cuts, which was widely expected, had probably already been priced into the market.

Traders have worried for months that faltering economic growth in China and an abundance of crude produced in the Americas, above all the U.S., will put downward pressure on prices.

• Gold futures for April settled at $2,126.30 per ounce, the highest level dating back to the contract’s creation in 1974.
• When adjusted for inflation, gold set an all-time high of about $3,200 in 1980, according to Peter Boockvar, chief investment officer at Bleakley Financial Group.
• “We’re still a ways away, which then also points to the potential upside,” said Boockvar, who believes gold will also test the inflation-adjusted record.

https://www.cnbc.com/2024/03/04/gold-rises-above-2100-to-highest-level-ever-as-traders-bet-on-interest-rate-cuts.html

George Weston Ltd. (WNGRF) on Wednesday reported a loss of $20.6 million in its fourth quarter.

The Toronto-based company said it had a loss of 22 cents per share. Earnings, adjusted for non-recurring costs, were $1.84 per share.

The baked goods maker and parent of the conglomerate Loblaw posted revenue of $10.8 billion in the period.

For the year, the company reported profit of $1.14 billion, or $7.96 per share. Revenue was reported as $44.54 billion.

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This story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research.

Access a Zacks stock report on WNGRF at https://www.zacks.com/ap/WNGRF

TC Energy TRP-T +0.45%increase said on Monday it has agreed to sell Portland Natural Gas Transmission System (PNGTS) to BlackRock for $1.14-billion as part of its ongoing efforts to reduce debt and fund investments.

Best known for its Keystone oil pipeline, the company is undergoing an overhaul. Last year, it said it would spin off its liquids business to focus on transporting natural gas.

CEO Francois Poirier had said in 2022 TC Energy planned to raise more than $5-billion through 2023.

The company is grappling with long-term debt of about $49.976-billion as of Dec. 31, 2023, as well high costs at its Coastal GasLink pipeline in British Columbia.

PNGTS is a 475-kilometer (295-mile) transporter of natural gas serving the upper New England and Atlantic Canada markets.

Blackrock will assume $250-million of outstanding debt at PNGTS. The deal is expected to close mid-2024, with the cash being split pro-rata according to the current PNGTS ownership interests (TC Energy 61.7 per cent and Energir, owned by Northern New England Investment Company, 38.3 per cent).

The company is aiming to sell at least $3-billion worth of assets this year to reduce debt, likely through two to four sales.