Commodity Boom - Good Times Ahead for Canada

Canada’s economy has prospered in recent years, as demand from growing Asian economies has boosted both the volume and prices of Canadian exports. Although Canada has half the population of the UK, Canada’s exports ($405 billion) are not far behind the UK’s ($468.8 billion).

The year ahead looks like it is shaping up well too as Scotiabank’s Commodity Price Index, which tracks prices of 32 of Canada’s major exports, climbed by 3.4 percent in December to end 2006 at a record high.

“The Metal and Mineral Index rose to new heights, almost 63 percent above the peak in June 1988,” said Patricia Mohr, Vice-President and commodity market specialist at Scotia Economics.

Spot uranium prices have more than tripled since 2004.

Oil prices are expected to bounce back towards US$60 at some point this year as OPEC members stick to their quotas, particularly in Venezuela, where the Chavez government is forcing production cuts in the Orinoco tar sands.

The Agricultural Index ended 2006 on a strong note, up almost 10 percent on last year.

Canola, used in making biodiesel fuel in Europe, has also shot up by 22 per cent since last summer.

“President Bush’s State of the Union Address, targeting a 20 per cent reduction in U.S. gasoline consumption by 2017 through stepped-up use of ethanol and tighter vehicle fuel-efficiency standards, points to ongoing strength in corn and other feedgrain prices in coming years and a new day for Prairie farmers”, said Mohr.

The effect of the commodity boom is apparent in Alberta, where the value of major construction projects reached $158.2 billion last year, driven mainly by the northern oil sands development.