Canada has the 7th largest economy in the world and is the 2nd largest country by land mass. It has a wealth of natural resources, making it a large energy and minerals exporter. For commodity traders looking to invest primarily in North America, Canada presents a compelling opportunity. [This article takes a look at Canada’s top commodity exports and imports and offers suggestions as how to invest in Canada’s commodity industry.] Words: 905
So says Tim Parker (www.CommodityHQ.com) in edited excerpts from his original article* entitled A Deeper Look At Canada’s Commodity Industry.
Parker goes on to say, in part:
Canada’s Top Commodity Exports
“Energy products are the largest of Canada’s exports and, although Canada has increased energy product exports to China…[dramatically], the United States remains Canada’s principal energy destination, importing nearly 12 times more than China.
- Crude Oil: Canada is the 6th largest crude oil producer on the planet and it is Canada’s largest commodity export. The United States is the top importer of Canadian oil followed by Russia and the United Kingdom.
- Natural Gas: Canada is the 6th largest natural gas producer in the world with 700 active production facilities.
- Coal: Canada has 23 mines producing 68 million tons each year of which almost 50% is exported… Asia is Canada’s largest coal trading partner accounting for nearly 3/4th of total exports.
- Gold: Although none of the world’s 10 largest gold mines are located in Canada, gold is Canada’s 2nd largest export and home to almost 3/4th of the world’s mining companies, making it the 4th largest gold mining country in the world. Most Canadian gold comes from underground and open-pit mines in Quebec and Ontario.
- Maple Syrup: Canada provides more than 3/4th of the global supply. Primarily centered in Quebec, this $6.3 billion industry is comprised of more than 32,000 agricultural businesses. The overall size of the market does not make this a large-scale export but the near-monopoly Canada holds is notable.
Canada’s Top Commodity Imports
Canada is the 12th largest commodity importer in the world of which more than half comes from the U.S.
- Crude Oil: Canadians import approximately 295 million barrels per year for a net expense of $12.2 billion. Imports take place primarily in the winter months when heating energy needs increase and, to a slightly lesser extent, during summer months during peak driving months.
- Natural Gas: Canada imports nearly 700 billion cubic feet of natural gas at a cost of $3.6 billion. As natural gas prices have fallen, Canada has imported more natural gas but spent less on it. The majority of Canada’s natural gas imports come from the United States.
- Electricity: Canada and the United States share an integrated electrical grid serving as importers and exporters to each other in order to meet nearly all of each other’s electrical energy needs. This not only provides for the energy needs of each country but also serves as a key element of national security.
- Food Products: The country imports more than $35 billion in agri-food imports each year. Canola and non-durum wheat top the list for a combined $8 billion. Soybeans, pork, bread, coffee, and frozen snow crabs are among the many other food items imported from the United States and other countries.
Ways to Play the Market
Below, we outline several ways to make a play on Canada’s massive commodity industry.
- Guggenheim Canadian Energy Income (ENY) is an ETF that seeks to replicate the performance of the Sustainable Canadian Energy Income Index-an index of 200 securities listed on the Toronto Stock Exchange representing the Canadian oil and gas industry.
- IQ Canada Small Cap ETF (CNDA) puts more than 75% of its assets in Canadian firms that fall under the energy and basic materials sectors.
- MSCI Canada Index Fund (EWC) is an ETF that focuses on broad Canada exposure, but over 45% of its assets are dedicated to the energy and basic materials sectors.
- Gold Explorers ETF (GLDX) invests in gold exploration companies of which nearly 95% of assets are dedicated to Canadian firms.
- Market Vectors TR Gold Miners (GDX) has over 65% of its assets in Canadian companies.
- Pengrowth Energy Corporation (PGH) explores and develops oil and natural gas reserves in Canada…[with] about 4,000 producing and 1,400 non-producing oil and natural gas wells in Alberta, British Columbia, Saskatchewan and Nova Scotia.
- NovaGold Resources Inc. (NG) is a miner of gold, silver, copper, zinc and lead ores primarily in Alaska and British Columbia. NovaGold is headquartered in Vancouver.
- TransCanada Corp. (TRP) operates natural gas and oil pipelines in the United States and Canada. It currently owns 57,000 kilometers of natural gas pipelines and nearly 3,500 kilometers of crude oil infrastructure. In addition, TransCanada has interests in power plants with a combined total capacity of nearly 11,000 megawatts.
Canada is the second largest country in the world by land mass. It contains a wealth of untapped natural resources. In northern Canada alone, $100 billion is being poured into diamond mines, uranium exploration, new gas wells and pipeline projects. All of this points to some exceptional commodity trading opportunities in this often overlooked country.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
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