On Friday afternoon, I did a brief presentation at the Impact of Development Conference/Workshop held at the historic Trinity United Church on Algoma Street in Thunder Bay. My talk (which you can access here under "Looking Back and Looking Forward") was titled "Resources and the Northern and Northwestern Ontario Economies: Past, Present and Future." Along with a quick survey of the economic history of northern Ontario and an overview of current economic indicators, I also opined on the current state of developments in the Ring of Fire.
For the benefit of those not fully acquainted with the Ring of Fire, it is of course the massive planned chromite mining and smelting development project in the mineral-rich James Bay Lowland region. The area covers about 5,000 square kilometers but development has been slow. Major players include Noront Resources, the Ontario government and nine first nations. There have been a number of challenges including the cost of capital and transportation infrastructure to access the chromite, energy costs, the lengthy environmental assessment process as well as the process of consultation and negotiation with the nine members of the Matawa Tribal council. You can get a very good detailed analysis of the issues in the Skogstad-Alahmar report here.
However, all of these challenges can be resolved once the real challenge is resolved: commodity prices. Much of the hype in the Ring of Fire springs from the spike in ferro-chrome prices in the 2008-09 period which was followed by a collapse from which there has yet to be a recovery. As the accompanying figure illustrates, there was a 60 percent drop in the price of ferro-chrome and the price has not gone anywhere since.
In the end, its all about commodity prices and until the market price goes up and makes the project profitable, not much else is going to happen.
There is going to be a conference on economic development ithis week. The Impact of Development workshop will be held this Thursday and Friday at Trinity United Hall, 310 Park Street Thunder Bay and has been made possible through the support of the Resources, Economy, and Society Research Group (RESRG) at Lakehead University, ReSDA: Resources and Sustainable Development in the Arctic, Lakehead University Department of History, Canadian International Council – Thunder Bay Branch, and Lakehead University Faculty of Social Sciences and Humanities.
The focus of the conference is single industry communities and features presentations on northern Ontario, Atlantic Canada as well as the Arctic and even Latin America. Among the resource sectors covered are forestry and mining. Moreover, a glance at the program will illustrate that there will be a diverse set of perspectives available with respect to development. I will be doing an overview on the resource sector experience in northwestern Ontario with a foray into mining and the Ring of Fire on the Friday afternoon. See the program below.
Well, traveling in winter is never much fun and this weekend I was in
Montreal for the Fraser Institute Student Seminar Series and my way back has
been affected by snow and freezing rain and assorted other things.Still, there is always time to blog so here
are the economic news stories that have caught my attention over the last
little while with respect to northern Ontario economic affairs.
Well, this makes a lot of sense.I recall speaking on a Thunder Bay Chamber of Commerce panel last spring
where I made a similar remark that it was time to plan for a new span across
the Kam River.I suppose Thunder Bay City
council is gambling that they can get something for nothing by getting CN to
maintain the bridge but it would be forward looking to plan and line up the
funding for a new modern bridge.Best
case scenario – they could end up with two bridges.How’s that for infrastructure!
This is a good news story not least of which is that 40 jobs from the
crew base are coming to Thunder Bay but because it bodes well for the
development of Porter’s air network.With a crew base in Thunder Bay, Porter can use Thunder Bay as a mini
hub perhaps for an expansion west to Winnipeg or a link through Chicago as part
of it existing network.Porter is
innovative and service oriented and a great alternative to Pearson. They are
also adding a 7th daily flight out of Thunder Bay to Toronto. This weekend reminded me why I rarely fly out of Pearson.
In other transportation news, it would appear air travel is big in
northern Ontario. North Bay is also getting some aviation jobs. I guess 40 is a
magic number for airlines as it is expected that 40 jobs will be created here
also.
Apparently, less than a fifth of businesses in northeastern Ontario are
confident in Ontario’s economic future according to this Chamber of Commerce
annual report. This was reinforced by regional data, as the Business Confidence
Survey reveals that nearly half of northeastern Ontario businesses expect their
organization’s revenue to stay the same over the next 12 months.
It could be that the Canadian economy is finally slowing down given the
recent numbers from Statistics Canada.
While Canada lost 88,000 jobs and Ontario and part time workers were
heavily affected, it is only one month’s data – January – and you would need
several months more before you could argue a trend was underway.However, Thunder Bay and Sudbury saw their
unemployment rates remain pretty much the same with Sudbury remaining at 6.8
percent and Thunder Bay dropping slightly from 6.1 to 5.8 percent.However, as I have noted previously, the
unemployment rate in northern Ontario is not the best indicator of job growth
given the shrinking labour force.Indeed, even the
Sudbury Star noted that while Sudbury’s unemployment rate stayed at 6.8
percent, it nevertheless shed 800 jobs.
Winter finally arrived here in Thunder Bay this week with a plethora of snow, cold and ice. I left for a short trip to Montreal on Monday afternoon with rain and warm temperatures and returned the next evening to a winter wonderland. What better way to spend a cold Saturday here than by warming up the house with homemade pizza....
Without further ado, here are some of the stories making the economic news recently in northern Ontario.
This is yet another positive economic impact story. However, tourism falls far short of the economic impact of Lakehead University as one recalls from this past story.
The Ring of Fire and its associated "production facility" have also been making the news again in the region.
Of course, if you don't get the smelter, there is always the option of storing nuclear waste. Ignace, Manitouwadge and Hornpayne are all still in the running along with two sites near the Bruce Reactor - South Bruce and Huron-Kinloss.
Despite the allure of smelters and nuclear waste disposal sites, there is still a search for economic visions in the north. The Sault is obviously taking the lead in what is one of northern Ontario's booming sectors - economic development consultants.
However, Sudbury's unemployment rate edged up slightly to 6.2 percent from 6.1 percent. Meanwhile, Thunder Bay's rate also went up to 6.1 percent from 5.8 percent the previous month.
One of the hurdles to the economic development of the chromite deposits in northern Ontario's Ring of Fire (along with commodity prices and complex negotiations with First Nations) is transportation access to the remote and geographically challenging region. While there has been talk of road and rail access, both of these options are quite expensive. Well, from the pages of the Winnipeg Fee Press comes an editorial that makes the case for an alternate approach -airships. An editorial in the July 3rd edition highlights the work of University of Manitoba professor Barry Prentice who has invested years of his time (and had to deal with some major challenges) in developing an airship prototype.
The Winnipeg Free Press editorial notes that the precedent for northern access using airships is being pursued in northern Quebec where a Quebec Company called Quest Rare Minerals is planning to use a fleet of seven Lockheed airships to transport supplies to its Strange Lake mine near Labrador as well as then carry out the ore. Needless to say, the applicability of the concept to transport in northern Ontario's Ring of Fire is obvious and I have made the case before. Even the House of Commons has apparently thought airships to access the north was an idea worth exploring. The case seems even more compelling now given the increasing fragility of winter ice roads in getting supplies into the north. The First Nations have also noted the possibility of airships as a potential approach as this piece by Chief Elizabeth Atlookan notes. Is this an idea whose time has finally come?
It has been a slow start to spring across northern Ontario but temperatures are finally starting to warm up. Environment Canada says warmer weather is on its way. Here are a few of the stories of economic significance for northern Ontario that caught my attention over the last week or so.
Regarding the Ring of Fire, here is an op-ed by Heather Hall and Ken Coates that essentially makes the point that ultimately, the Ring of Fire will not proceed "without substantial, clear and significant indigenous engagement." In the end as any good economic historian knows, institutional arrangements are important.
Given this op-ed, selling yourself as a Ring of fire smelter location may be premature. I am also surprised that in this age of heightened sensibilities and sensitivities one is actually using the term 'smelter' and not something like "Value Added Mineral Processing and Community Economic Enhancement Facility".
Sadly, given the presence of the Premier in northern Ontario, there was no reaction in northern Ontario to this item (by yours truly) which Dominic Giroux on Twitter noted as a "blunt assessment". I think this provides support for a case for a government program to provide northern Ontario media organizations with research support as they are probably stretched for resources in pursuing stories. This is not that far-fetched given the unfortunate downsizing that has occurred over the years in local media that I am aware of.
When it comes to economic development, human capital is also important and of course education is a key component of any human capital strategy. Providing government services in northern Ontario is already a challenge given the low population density and geographic dispersion. Doing so in rural northern Ontario even more so.
Related to the motif of northern resentment and unhappiness, there was this interesting segment on TVO's agenda hosted by Steve Paikin. In the interview with former Ontario cabinet minister David Orazietti, the interesting point was made that despite the constant claims of alienation and under representation of northern Ontario interests at Queen's Park, on a per capita basis the north has more provincial cabinet ministers than Toronto. Of course, the related news item is the by-election in the Sault for David Orazietti's vacated seat.
And there is one final item and this again related to institutions and what can often be their indirect impact on business and the economy. In Thunder Bay we have the situation where the police chief has been placed on administrative suspension as a result of being charged with breach of trust and obstructing justice "stemming from allegations that he disclosed confidential information concerning Thunder Bay mayor Keith Hobbs." I must admit this one is quite puzzling to me and comes on the heels of other ratherodd stories involving the Mayor. Without really knowing what is going on here, one must nevertheless express disappointment at a situation involving relationships between the senior figures of Thunder Bay's municipal government that does not reflect very well in the national media on a community constantly trying to sell itself as a good place to do business. Coming at a time when Thunder Bay is also under scrutiny for its relations with indigenous people, one hopes that this matter is speedily resolved and Thunder Bay's leadership quickly moves on to dealing with better things.
Well it has been a few weeks since I did an economic news round-up. To start off, Happy Mother's Day to all the moms in northern Ontario and beyond! Here is a very brief sampling of some of the northern Ontario related bigger picture economic stories that caught my attention over the last little while.
There have been a few interesting items over the last few weeks. To start off, both Lakehead and Laurentian universities will be looking for new Presidents as Dominc Giroux and Brian Stevenson nearly simultaneously announced that they will be moving on. Both institutions are key components of the regional knowledge economy as well as significant economic engines in their own right and the choices made with respect to the next presidents will be critical to the region.
The actual role of a university president has become more difficult over the years given the increasing complexity of universities and the social and economic environments in which they operate. However, the key roles remain threefold: vision, fundraising and community relations. The day to day management of the university is generally delegated to sub-ordinates - or should be especially at larger places. In the end, a successful university president must be judged on their leadership role in terms of providing a general vision of the university's role and articulately communicating it, raising funds - a difficult task in the limited economic environment of northern Ontario - and diplomatic service among the many communities that the university serves ranging from alumni to business to government. Good luck to the respective search committees!
Here
are some of the items that caught my interest this week in terms of some
economic significance for northern Ontario as well as more general interest.
A fair number of stories having to do with mining and the growing feeling that
there is finally a resurgence in the mining sector. A story in this morning's Thunder Bay Chronicle Journal also mentioned that the Hemlo mine may have more life in it. However, it is
important to separate this from the hype regarding the Ring of Fire which faces
a number of other obstacles (see my previous post). As The Economist story
referenced below noted: "The
potential of “green” metals and minerals, which along with copper and cobalt
include nickel, lithium and graphite, is adding to renewed excitement about
investing in mining firms as they emerge from the wreckage of a $1trn splurge
of over-investment during the China-led commodities supercycle, which began in
the early 2000s. The most bullish argue that clean energy could be an even
bigger source of demand than China has been in the past 15 years or so."
In
other news, like Thunder Bay, Sudbury is also going through debate and
discussion on a new arena and like iterations of the debate in Thunder Bay,
location is an issue. One view sees a new arena in the downtown area on
the site of the current arena whereas another view wants it further afield.
Interesting point is the proposed price tag which comes in at $80 million
dollars (plus another $20 million for land) which is below what estimates ($114 million) for a new facility in
Thunder Bay come in at. Sudbury is apparently also getting a new casino.
It
also turns out there is a bit of contention over OPG jobs which have been moved
out of North Bay and partly to Timmins and Cornwall, Ontario. Jobs are a
scarce commodity in the north and the broader public sector has become a pillar
of most communities. When it comes to employment, I suppose the public
sector giveth and the public sector taketh away.
While North Bay is unhappy with the OPG development, it can take
consolation in new dealings with Russia. I would imagine this will provide opportunities for travel.
Thunder
Bay is apparently not getting one yet. However, residents of
Thunder Bay can take some solace in its new transit development courtesy of The
Beaverton and more seriously the proposed infrastructure spending on its recreational facilities at local schools.
Regarding the proposed infrastructure spending on track and field facilities, a
student is quoted as saying: "It's
an opportunity to play on a field like to play on a field like the people down
in southern Ontario get to play (on)." I suppose we can all regard
this development as helping to level the playing field with respect to southern
Ontario at least with respect to sports, if not the use of the English
language. However, it may be a long-term investment in health via exercise as
other stories suggest the North may still not be a very healthy place relative to
southern Ontario. See for example:Grim Data Emerging. The Chronicle Journal. March
12th, 2017.This story did not
provide a regional breakdown on snowmobile deaths but the gender breakdown
shows males are more likely to die in snowmobile accidents. On a per
capita basis, there are probably more deaths in the north. In the week of
February 22nd, there were five fatalities - one in Oro-Medonte, one in
Thorton, two in Nipigon and one in Lindsay, Ontario.
There was an exchange in Ontario’s Legislature yesterday
between MPP Norm Miller and Minister of Northern Development & Mines Bill
Mauro regarding whether or not the government would “finally take a leadership role that will make the Ring of Fire a
reality in Ontario?”The
minister responded that mineral exploration activity in Ontario was climbing
and progress was being made and more specifically asserted that: “there are three other mines under
construction in the province. But they want to spend their time focusing on
one. There’s one not too far from my home community of Thunder Bay called the
New Gold project. Speaker, right now it’s under construction and 600 people are
working on a construction site. When that mine is open for the next 10, 20 or
30 years of its life, there are going to be 450 people working in that mine.”
My belief is that any full-blown development of the Ring of
Fire is many years away given the ongoing negotiations with First
Nations, the immense cost of transportation infrastructure to access the Ring
of Fire as well as the state of resource and commodity markets.However, it is worth examining whether
there has been some progress in northern Ontario’s resource sector particularly
when it comes to employment generation.Figures 1 and 2 present employment in northern Ontario’s resource
extraction sector as measured by Statistics Canada seriesv91415810
(Northeast) and v91415829 (Northwest) on employment in Forestry, Fishing,
Mining, Quarrying, Oil and Gas presented monthly from 3rd month 2001
to 1st month 2017.
The results in Figure 1 show that
while there is some substantial fluctuation in resource extraction over time
with some large upswings, when a linear trend is fitted to the data the
long-term performance is quite flat.Indeed, average monthly employment was 21,500 in 2001 and 21,867 in 2016
– actually a 1.7 percent increase.
Figure 2 is more interesting because it separates the employment data up
into northeast and northwest Ontario.While the northeast has trended up over time, the northwest has trended
down.Average monthly resource
extraction employment in the northeast was 12,470 in 2001 and 17,892 in 2016 –
an increase of average monthly employment over time of about 44 percent.Meanwhile, the northwest has seen
average monthly employment in resource extraction fall from 9,030 in 2001 to 3,975
in 2016 – a decline of 56 percent.
This is a remarkable difference in
performance and likely represents the long-term impact of the forest sector
crisis on the northwest – which was much more forestry intensive than the
northeast – as well as the relative success of mining in the northeast relative
to the northwest.While the
northwest is seeing mining activity, it has not yet been on a sufficiently large
enough scale to be the employment generator it is touted to be.I suppose we are still waiting for the
Ring of Fire to be ignited.
Last Saturday’s Globe and Mail (February 18, B6) ran an article
titled “Rebuilding Ontario: A Plan for the Way Forward” which laid out a discussion
of Ontario's economic future. For Northerners, all the talk of decline and the
need for diversification was strangely familiar. Indeed, one can best describe what is happening as the
“Northern Ontarioization” of Ontario’s economic discourse as Ontario tries to
decide how to grow its future economy in the wake of the Drummond Report, which
seems to have finally crystallized the fact that Empire Ontario has slipped
into decline. Of course, some of
us saw the eclipse of Ontario a bit earlier than that (check out End of Empire, National Post, February
19, 2005, FP19) but better late than never.
The Globe and Mail described four options for the province to get
its “mojo back”. They were financial services, technology, health care and
natural resources. Missing was that perennial Northern Ontario favorite - tourism. Despite the talk of putting a casino in
Toronto, it is unlikely to see Ontario reinventing itself as Vegas North. Vegas style tourism requires a degree of individual and entrepreneurial freedom that regulatory Ontario is unlikely to acquire anytime soon.
Of all these options, the one most likely to kick start Ontario’s
economy is the natural resource sector. The mining frontier in Ontario’s North
– especially the so-called Ring of Fire- can serve as an investment frontier
for the rest of the province much like mining and forestry did in the late
nineteenth and early twentieth century.
However, this does require that the province embrace its North rather
than treat it as a remote relic of the economic past. Here, the contrast is made with Quebec. According to the Globe and Mail:
“Rather than shun its expansive north, Quebec is emphasizing it, hashing out an
ambitious 25-year project dubbed “Plan Nord”. Quebec is betting its future on developing mining, energy
and forestry resources located far north of its major cities. Ontario could
adopt a similar scheme.”
Really? How
interesting. The fact is Ontario
has also developed a Northern Growth Plan – a point the Globe and Mail article seemed
to have missed but then Canada’s “national” newspaper is based in Toronto. Part of what is wrong with Ontario’s
economy is a myopic economic vision that does not look outside of Toronto. Perhaps that is why since the Northern
Growth Plan has been released, all that has resulted is more planning. Given the dominance of
Toronto vision in Ontario and its government, the chromite deposits of the Ring
of Fire could only be developed quickly if they were at the corner of Yonge and
Bloor.
Ontario does not need a growth plan. Ontario needs a set of concrete actions to develop its
northern resource frontier as an investment frontier for the province. The North can be a place for infrastructure
investment and value-added processing that can drive economic growth in
Ontario. The North can be a
frontier for the deployment of Ontario’s labour skills and human capital. Given the capital and technology
intensive nature of modern mining, the North can also be a frontier for high
technology industries. And, the
financial service industry in Toronto got its start in the financing of mining
ventures in Northern Ontario.
Financing new mining ventures in the North can once again be a source of
growth for Toronto’s financial sector.
What is Ontario waiting for?
