Government of Canada releases Budget 2022

Federal budget 2022: Here are the highlights | CBC News

Finance Minister Chrystia Freeland has tabled her second federal budget. Here are the highlights:

HOME-BUYING HELP

The budget promises to introduce tax-free savings accounts that would give first-time home buyers the chance to save up to $40,000. Contributions would be tax-deductible and withdrawals to buy a first home would not be taxed. The program is expected to provide $725 million in support over five years.

AFFORDABLE HOUSING

The government is launching a new housing accelerator fund — worth $4 billion over five years — to help municipalities speed up housing development. The goal is to create 100,000 new housing units in the next five years. The budget also extends the rapid housing initiative, pledging $1.5 billion over two years to create at least 6,000 new housing units to help tackle homelessness.

DENTAL CARE

Moving on a commitment in its confidence and supply agreement with the NDP, the government is promising $5.3 billion over five years and $1.7 billion each year thereafter for a national dental care program. It will begin this year with children under 12 years old and expand to cover Canadians under 18 years old, seniors and people with disabilities in 2023. The program, which is to be fully implemented by 2025, is limited to families with incomes of less than $90,000 a year. For those with an income of less than $70,000, no co-payments will be required.

DEFENCE AND SECURITY 

The budget boosts defence spending by $8 billion over five years, bringing Canada’s defence budget to a projected 1.5 per cent of GDP. That falls short of the two per cent of GDP NATO has called on member nations to spend — especially since Russia’s war on Ukraine began — but the $8 billion includes $500 million in military aid to Ukraine. The budget also earmarks $875 million over five years to combat rising threats to cybersecurity, and $100 million over six years to strengthen leadership in the Canadian Armed Forces, modernize the military justice system and implement culture change in the CAF.

ENVIRONMENT AND CLIMATE CHANGE

To help meet Canada’s climate change targets, the budget offers $2.6 billion over five years to finance a new investment tax credit for businesses that spend money on carbon capture, utilization and storage (CCUS). The government also plans to extend incentives and expand eligibility for a program to entice more Canadians to buy electric cars, vans, trucks and SUVs, which will cost $1.7 billion over five years. The government also plans to impose a sales mandate to ensure that at least 20 per cent of new light-duty vehicle sales will be zero-emission vehicles (ZEVs) by 2026; that market share is supposed to rise to at least 60 per cent by 2030 and 100 per cent by 2035. The budget also commits $3.8B to launch Canada’s first strategy to develop exploitation of critical minerals used in everything from phones to airplanes.

INDIGENOUS RECONCILIATION

The budget promises to spend an additional $11 billion over six years to support Indigenous children, families and communities, including $4 billion for housing and another $4 billion over seven years to help ensure access for First Nations children to health, social and educational services. Almost $400 million over two years will go to improve infrastructure on reserves, including $247 million for water and wastewater infrastructure. To address a key commitment on reconciliation, the budget sets aside $210 million to help communities document, locate and memorialize burial sites at former residential schools. The money also will help the National Centre for Truth and Reconciliation pay for a new building and assist with the “complete disclosure” of federal documents related to residential schools. The budget sets aside just over $5 million over five years to allow the RCMP to assist in community-led investigations into burial sites at former residential schools.

DIVERSITY AND INCLUSION

In line with the government’s diversity and inclusion agenda, the budget promises $100 million over five years for a federal LGBTQ2 action plan, $85 million more to support ongoing work on the anti-racism strategy and $50 million to support Black-led and Black-serving community organizations. It also commits $15 million to support local journalism in underserved communities and to help racialized and religious minority journalists present their experience and perspectives.

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Canada’s forest industry by the numbers

Forests are a major source of wealth for Canadians, providing a wide range of economic, social and environmental benefits.

In 2013, production in the forest sector contributed $19.8 billion—or 1.25%—to Canada’s real gross domestic product (GDP). In a global context, Canada has the world’s largest forest product trade balance—C$19.3 billion (2013)—a position it has held for as long as trustworthy trade statistics have been compiled. While other countries may produce more of one product or another, no nation derives more net benefit from trade in forest products than Canada, and the gap between Canada and the second largest net trader (Sweden) has been expanding continuously since 2009.

There are three main forest industry subsectors:

Solid wood product manufacturing – Firms in this area engage in both primary (such as softwood lumber and structural panels) and secondary (such as millwork and engineered wood products) manufacturing for domestic consumption and export. This subsector accounted for approximately 44% of the forest sector’s contribution to the Canadian economy (as measured by real GDP) in 2013.

Pulp and paper product manufacturing – Companies in this area produce a wide range of products, covering everything from newsprint and household tissues to dissolving pulp for rayon production. This subsector accounted for approximately 36% of the contribution of the forest sector to the Canadian economy in 2013.

Forestry and logging – Firms in this area are responsible for field operations and harvesting of timber, including felling and hauling it to the mill. In 2013, this sector accounted for 20% of the forest sector’s contribution to the Canadian economy.

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Forest sector transformation

Forest product markets are cyclical, experiencing significant ups and downs over the economic cycle. This constant state of shifting circumstances creates both challenges and opportunities. In recent years, Canada’s forest industry has undergone an especially deep cyclical decline, coupled with structural changes in world markets. In particular, the rise of electronic media has resulted in deep decline for paper-based communications products—including several products (such as newsprint) that have traditionally been critical to the Canadian pulp and paper subsector.

In response to these challenges, the forest industry has begun to transform itself along four distinct lines: market development, operational efficiency, business process change and new product development. One of the most exciting elements of this transformation has been the new and innovative products, materials and services being produced in Canada’s forest sector. These include new building materials, biofuels that can substitute for fossil fuels, and biochemicals that can be used to produce bio-based pharmaceuticals, biodegradable plastics, personal care products and industrial chemicals. Chief among these are cellulosic fibrils and nano-crystalline cellulose—next-generation pulp-based products with the potential to revolutionize the pulp and paper sector.

These and other emerging technologies and business processes offer new ways of generating social, economic and environmental values for Canadians from our abundant forest resource. They generate value from a wider range of forest products and processes than traditional milling and pulping. Whether co-located with an existing establishment or a result of a greenfield investment, these new technologies and business processes increase overall industry productivity: additional revenue streams are available from each log harvested, diversifying product lines to stabilize economic performance and boosting the share of renewable products in the marketplace. These new technologies will also create opportunities for new entrants, enhancing competition and entrepreneurialism in the industry.Find out more

• Industry transformation
• Forest products and applications
• Forest bioeconomy, bioenergy and bioproducts
• Land reclamation and forest science
• Forest industry tools and research

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Current lumber, pulp and panel prices

April 6, 2022

https://www.nrcan.gc.ca/our-natural-resources/domestic-and-international-markets/current-lumber-pulp-panel-prices/13309

WEST FRASER’S HINTON PULP TO REDUCE PRODUCTION CAPACITY AND MOVE TO UNBLEACHED KRAFT PULP

Tue, April 5, 2022, 5:15 p.m.·4 min read

VANCOUVER, BC, April 5, 2022 /CNW/ – West Fraser Timber Co. Ltd. (“West Fraser” or the “Company”) (TSX and NYSE: WFG) announced today that it will permanently reduce capacity at its pulp mill in Hinton, Alberta (“Hinton Pulp”) by the end of this year. One of Hinton Pulp’s two production lines will shut, and the remaining line will produce Unbleached Kraft Pulp (“UKP”) rather than Northern Bleached Softwood Kraft Pulp (“NBSK”).

“Hinton Pulp has been in operation since 1956 and these changes are necessary to simplify our operation, reduce capital requirements and greenhouse gas emissions, and better align with consumer expectations,” said Ray Ferris, President & CEO, West Fraser.

The capacity reduction will see staffing levels transition from 345 positions to 270. West Fraser expects to mitigate the impact on employees through natural attrition, retirements and by offering employment opportunities at other West Fraser operations.

“Our Hinton Pulp team has been engaged in a comprehensive review process and I want to thank them for their creativity and commitment to the mill, our customers and the environment. We remain strongly committed to the community of Hinton, the future of the plant, and to our neighbouring lumber operation, Hinton Wood Products,” said Ferris.

The environmental benefits of moving to a single UKP production line include:

• an estimated 35% reduction in greenhouse gas emissions (“GHGs”), which is equivalent to taking approximately 19,900 cars off the road per year
• an estimated 25% reduction in water use, air emissions and waste generation, and
• elimination of chlorine dioxide emissions

As the world moves away from single-use plastics, UKP is now used increasingly in a wide variety of everyday items including cardboard packaging, grocery bags, fibre-cement board and specialty products.

Since late 2021, the mill has undertaken several product trials and received positive initial customer feedback as to the quality and strength of the pulp produced. Currently, mill employees are preparing for the transition after satisfying all existing customer commitments for NBSK.

It is anticipated that an impairment charge of approximately US$13 million will be recorded in West Fraser’s first quarter 2022 results associated with the write-down of equipment that will be decommissioned permanently as part of the transition to UKP.

About West Fraser

West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States, the United Kingdom, and Europe. From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals, and renewable energy. West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials. For more information about West Fraser, visit www.westfraser.com.

Chip shortage, rising gas prices and inflation hamper auto industry stocks

It has been a rough ride for auto industry investors in recent months: The global semiconductor chip shortage continues to constrain vehicle production and rising costs squeeze company margins, sending share prices in reverse.

Market watchers say higher gas prices and rising inflation are also expected to curb consumption of big-ticket discretionary items like cars and trucks, especially if global economic growth slows, which could happen if interest rates rise too quickly.

Demand for electric vehicles (EVs) is increasing, and more companies are making them. However, their higher price tag and the lack of charging infrastructure in North America are still hurdles for many consumers.

“This is a sector to be cautious on at this time,” says Brooke Thackray, a research analyst with Horizons ETFs (Canada) Inc. of Toronto.

Auto industry investors did have a good run coming out of the pandemic. For example, shares of car maker General Motors Co. and parts supplier Magna International Inc. were each trading above prepandemic levels by the end of 2020 – and both reached record highs in the spring of 2021, driven by increased demand.

Then the semiconductor chip shortage hit after the coronavirus pandemic drove up demand for cellphones, laptops and, later on, vehicles, forcing auto companies to cut production just as consumer demand was steadily recovering.

Russia’s invasion of Ukraine could create more problems for the sector. According to Reuters, Ukraine’s two leading suppliers of neon, which produce about half the world’s supply of the key ingredient for the lasers used to make chips, have halted their operations.

“[The chip shortage] has thrown a big wrench into the ability for the supply side to meet the elevated demand levels that are out there,” says Mike Archibald, vice-president and portfolio manager at AGF Investments.

He points to Toronto-based Magna, the largest Canadian-based auto stock, which posted sales of US$9.1-billion in the fourth quarter of 2021, a drop of 14 per cent from the same quarter of 2020. The company said global light vehicle production fell 17 per cent in the fourth quarter ended Dec. 31, “driven by the semiconductor chip shortages the industry has faced throughout 2021.”

Mr. Archibald has no current investments in the auto space, as concerns around chip shortages and production stops and starts led him to sell his holdings. He’s looking for evidence of recovering production levels before considering buying back into the sector.

“The short term is very uncertain for all of these companies,” he says, but he sees better days ahead for auto companies once production returns.

There’s also strong growth potential for the industry as it moves aggressively into EV production. In Canada, suppliers like Magna and Linamar Corp. are also gearing up their EV offerings.

“The tailwinds in that part of the market are there,” Mr. Archibald says, citing Tesla, the EV “poster child,” and the more traditional auto makers that are continuously rolling out EV models and have ambitious plans for EV fleets in the future.

Investors looking for Canadian-based auto industry stocks could look to aftermarket parts provider Uni-Select Inc., which Mr. Archibald has previously owned. The stock has done well amid the increased demand for used cars in recent months, as the supply of new cars was limited.

He also points to dealership company AutoCanada, which sells new and used cars, as an alternative for investors in the sector.

“The stock has come off,” alongside other car companies, he notes, as vehicle sales slow. “But if you want exposure to the auto segment, this is a way that you could get it directly.”

Mr. Thackray says investors looking to buy auto stocks outside of Canada could turn to the large auto manufacturers like GM and Ford Motor Co., both listed on the New York Stock Exchange. Another option is the First Trust Nasdaq Global Auto Index Fund (CARZ-Q), which is more of a technology play. CARZ’s top holdings include Tesla, chip maker Nvidia Corp., Apple Inc. and Alphabet Inc. – the last two are working on autonomous vehicles.

Still, Mr. Thackray notes the exchange-traded fund (ETF) is small, with about US$70-million in assets. The ETF was down 3 per cent year-to-date, as of March 31, and returned 2 per cent over the past 12 months.

Overall, Mr. Thackray warns that the auto industry is cyclical and suggests investors tread carefully whether buying the new, innovative side or traditional auto makers.

Wes Ashton, co-founder, director of growth strategy and a portfolio manager at Harbourfront Wealth Management Inc. in Vancouver, says most investors who buy a U.S. index fund today own Tesla, given its US$1-trillion-plus market share.

Tesla recently announced a plan to increase its share count to enable a stock split to attract more investors. The highly cyclical stock currently trades at around US$1,000 and has traded between about US$545 and US$1,243 over the past year.

“What investors need to understand is that some of these EV stocks can be very volatile,” he says, citing the example of Tesla, a stock his firm owns for some clients.

“For a lot of clients, it’s fun making money when the stock rises,” he says, “but when the stock corrects, it’s not as pleasant. So you have to be more patient and diversify your overall approach.”

Mr. Ashton says he wouldn’t load up on these EV names, “but I think owning some forward-looking innovative stocks in the auto sector isn’t necessarily a bad thing because that’s where the industry is going.”

CI Financial to spin out U.S. wealth business in new IPO

C I Financial CIX-T is spinning out its U.S. wealth management operation with plans to sell as much as 20 per cent of the division in an initial public offering.

The investment giant, which manages about $370-billion in client assets, announced Thursday that it intends to submit an application this year to the U.S. Securities and Exchange Commission to launch an IPO for its U.S wealth business, which now accounts for more than half the company.

CI will remain the majority shareholder and said in a release that it currently has “no intention of spinning out or otherwise divesting” its remaining ownership interest. Proceeds of the IPO will be used to pay down debt.

The company has spent the past several years trying to restore its stock price, which at times has plummeted more than 45 per cent from its peak in 2014. Chief executive Kurt MacAlpine, who stepped into his role in 2019, has been busy implementing a new turnaround strategy that includes boosting CI’s presence in the U.S. market.

Throughout the pandemic, the financial services company has been on an acquisition spree, buying more than 25 registered investment adviser firms in the U.S. since January, 2020. Eight of those deals closed in the last quarter.

Once all outstanding acquisitions are completed, CI’s U.S. wealth management assets will total about US$133-billion – more than twice the assets of the Canadian wealth business, which was about $80.6-billion at the end of 2021.

Mr. MacAlpine said the steady growth of the U.S. business has positioned it with “sufficient scale to stand alone as a public company.”

“The growth in our U.S. wealth management business is incredible; however, in our opinion, the value we have created isn’t reflected in our share price today,” he said in a statement.

“After a thorough evaluation of our strategic options, we are confident that a U.S.-listed subsidiary IPO is the best route to shareholder value creation.”

Bank of Nova Scotia analyst Phil Hardie said in a research note that the IPO transaction is positive, providing an “avenue to better reflect the value of CI’s U.S. Wealth Management business.”

Mr. Hardie believes the spun-off U.S. business could trade at an enterprise value – or market capitalization plus net debt – of 9.5 to 12.5 times its earnings before interest, taxes, depreciation and amortization (EBITDA), similar to the valuation of U.S. wealth manger Focus Financial Partners, which launched an IPO in 2018.

Parent CI Financial currently trades at less than six times EBITDA, he said, with the shares having fallen 40 per cent from their November, 2021, high.

The company has not yet determined the size and timing of the IPO but said it will be subject to market conditions.

U.S. Congress votes to revoke Russia’s trade status, ban oil and gas imports following atrocities in Bucha

Ukraine’s Foreign Minister Dmytro Kuleba met with G-7 and NATO leaders in Brussels, one day after the U.S. announced new penalties on Russia that included a ban on all new investment in the country and sanctions on President Vladimir Putin’s daughters.

“I came here today to discuss three most important things: weapons, weapons, and weapons,” Kuleba said in a tweet.

Reports of rape and torture against civilians by Vladimir Putin’s forces drew strong condemnation from G-7 members, who voted to remove Russia from the U.N. Human Rights Council.

The atrocities also galvanized action in the U.S. where the Congress voted to strip Russia of its most favored nation trading status and to ban its oil and gas imports. U.S. President Joe Biden is expected to quickly sign both into law.

Ukraine’s Foreign Minister Dmytro Kuleba (L) and NATO Secretary General Jens Stoltenberg give a press conference before a meeting of NATO foreign ministers at NATO headquarters, in Brussels, on April 7, 2022.Dursun Aydemir | Anadolu Agency | Getty Images15 MIN AGO

Congress votes to ban oil and gas imports from Russia

The U.S. Congress voted to ban oil, gas and coal imports from Russia as part of a governmentwide effort to squeeze Russia’s economy in response to Moscow’s brutal invasion of Ukraine.

The House approved the bill in a 413-9 vote. The Senate passed it unanimously earlier in the day. It will head to Biden’s desk for his signature.

The legislation codifies an executive order Biden issued last month to bar energy imports from Russia. The bill would make it more difficult for a future president to reverse Biden’s action.

Secretary of State Antony Blinken downplayed concerns that the U.S. was withholding weapons explicitly requested by Ukraine.

“They’re coming forward with new systems that they think would be helpful and effective,” Blinken told reporters at NATO headquarters following a two-day ministerial meeting.

“We put our own expertise to bear, especially the Pentagon to help determine what indeed we think could be effective. What Ukrainians will be ready to use as soon as they get it, and what we actually have access to and can get to them in real-time,” he said, adding that the U.S. is working expeditiously to get appropriate weapons to Ukraine quickly.

Blinken’s comments echo those of U.S. Secretary of Defense Lloyd Austin and Chairman of the Joint Chiefs of Staff U.S. Army Gen. Mark Milley. Austin and Milley told lawmakers this week that some weapons systems on Ukraine’s wish list require months of training in order to operate.

Earlier in the day, Ukrainian Foreign Minister Dmytro Kuleba told reporters that he urged allies to catalyze the delivery of their arms commitments.

“Either you help us now, and I’m speaking about days not weeks, or your help will come too late,” Kuleba said.