11-010-XIB
Canadian Economic Observer
September 2006

Canada

Several lumber and paper mills were closed in Quebec. Tembec announced a four-week shutdown at its Béarn sawmill, matching Kruger’s closure of four sawmills, while Louisiana-Pacific stopped operations indefinitely at its board mill and Norampac shut its linerboard mill in Ontario. Domtar agreed to a merger with Weyerhaeuser in a $3.3 billion (US) deal, creating Canada’s largest forest-products company.

In Ontario, work began on a $1 billion expansion of power generation at Niagara Falls and a 50 storey tower in Toronto, its largest since 1992.

Xstrata completed its $19 billion takeover of Falconbridge. Harvest Energy bought the Come by Chance oil refinery from a Swiss firm for $1.6 billion.

Crowflight Minerals applied to open a new nickel mine at Bucko Lake in Manitoba. Falconbridge announced a $540 million expansion of its copper and nickel mine in Raglan and $145 million to develop the Perseverance zinc mine. Alcan plans a $1.8 billion expansion of its Kitimat aluminium smelter in BC. Blue Note Metals is investing $48 million to revive two dormant zinc mines in New Brunswick.

Canada Natural Resources announced the scraping of another 308 natural gas wells. Total SA has pushed its 100,000 barrels a day oilsands mining project back by three years due to soaring labour and materials costs. Shell announced it received regulatory approval for a large expansion of its bitumen upgrader near Edmonton, which is about half of its $12.8 billion Athabasca oilsands project. EnCana submitted a new plan for its Deep Panuke gas project near Nova Scotia with 25% less output.

Ford announced four-to-six week shutdowns at 10 assembly plants to trim inventories of trucks and SUVs, and the extension of buyout offers to all its factory workers in North America. Half the cuts were for its F-series trucks, which are not made in Canada. GM is spending $740 million to launch the Camaro by 2008 at its Oshawa assembly plant which had been scheduled to close. Auto parts maker Tenatronics went into receivership and will close its Newmarket plant. Dura Automotive Systems is closing two plants in Ontario and shifting production to Mexico, affecting over 200 workers.

World

The European Central Bank and the Bank of England raised their key interest rates a quarter point to 3% and 4.75%, respectively.

The People’s Bank of China raised its benchmark one-year lending rate 27 basis points to 6.12%.

BHP Billiton, the world’s largest mining group, declared force majeure on copper concentrate contracts due to a month-long strike at its Escondida mine in Chile.