Lower crude prices to slow Alberta exports in 2011, says EDC

CALGARY, Nov. 9 /CNW/ - Alberta's international exports are forecast to grow by 16 per cent in 2010 and 5 per cent in 2011, according to a provincial forecast by Export Development Canada (EDC). The province's exports declined 36 per cent in 2009.

"Double-digit growth in energy exports will power Alberta exports to a second place finish among the provinces for 2010," said Mr. Hall.

"In 2011, we see continued expansion, but without the kick from higher energy prices Alberta's overall export growth will ease off this year's sturdy pace. The province's strongest performing sectors in 2011 will be industrial goods and machinery and equipment."

Primary energy exports account for nearly 69 per cent of Alberta's exports, which are forecast to grow by 24 per cent in 2010 and 4 per cent in 2011.

"Although we expect strong growth for primary energy exports this year, 2011 sales will remain 25 per cent below 2008 boom levels," Mr. Hall said. "A slowing global economy and bloated inventories are expected to weigh on crude oil prices next year. WTI is forecast to slide back to US$75 per barrel next year."

EDC expects natural gas exports to rise 6 per cent in 2010 and 8 per cent in 2011, with market price being the main driver. The forecast calls for gas prices at Henry Hub to average $4.6/MMBtu in 2010 and US$5.4/MMBtu in 2011. High production costs and declining conventional production in the maturing Western Canadian Sedimentary Basin will likely lead to falling export volumes from Alberta through 2011.

"Exports of crude and petroleum products will rise 31 per cent this year, principally on higher product prices," Mr. Hall said. "This source of growth will turn slightly negative in 2011, limiting export growth to only 3 per cent."

The industrial goods industry is the second largest export sector in Alberta, accounting for nearly 11 per cent of the province's total. In Alberta, the industry is heavily weighted towards petrochemicals and fertilizers, and is forecast to grow by 15 per cent in 2010 and 8 per cent in 2011.

"Alberta's petrochemicals industry will enjoy strong export growth this year thanks to price gains stemming from the resumption in U.S. industrial activity and an earlier rise in feedstock costs," Mr. Hall said. "However, large scale additions to capacity in the Middle-East will limit growth potential in 2011."

The machinery and equipment (M&E) industry accounts for 6 per cent of the province's total exports, and is forecast to contract by 17 per cent in 2010 before rebounding with 10 per cent growth in 2011.

"The glut of oil and gas drilling equipment on the market has continued through 2010, but the demand for newer, more advanced oil and gas rigs is likely to grow in 2011," Mr. Hall said. "While exports of M&E continue to plunge in 2010 despite overall investment growth in the U.S., renewed investment spending in the U.S. will help to lift foreign sales by 10 per cent next year."

Canadian exports are forecast to rise 12 per cent in 2010 and 6 per cent in 2011. Nationally, economic growth is expected to rise 3 per cent in 2010 and 2.2 per cent in 2011. Internationally, EDC is forecasting global growth of 4.3 per cent in 2010 and 3.9 per cent in 2011. EDC's Global Export Forecast is available at http://www.edc.ca/gef.

EDC's semi-annual Global Export Forecast addresses the latest global export conditions including perspectives on interest rates, exchange rates as well as export strategies to help Canadian companies minimize risk. It also analyzes a range of risks for which exporters should be prepared.

EDC is Canada's export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC's knowledge and partnerships are used by more than 8,400 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining, a recognized leader in financial reporting and economic analysis.

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Phil Taylor   
Export Development Canada
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