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Deep concerns about COVID-19’s impact on Canadian supply chain as borders close

Angela Gismondi
Deep concerns about COVID-19’s impact on Canadian supply chain as borders close

In response to the COVID-19 pandemic, the Canadian and U.S. governments have decided to temporarily close their borders to all non-essential travel between them, leaving those in the construction industry concerned about the impacts on trade and the supply chain.

In his March 18 address to the nation, Canadian Prime Minister Justin Trudeau said essential travel will continue and travel restrictions will not apply to commerce or trade.

“Our governments recognize it is critical that we preserve supply chains between both countries. These supply chains ensure that food, fuel and lifesaving medicines reach people on both sides of the border,” said Trudeau. “Supply chains such as trucking will not be affected by this new measure. Canadians and Americans cross the border every day to do essential work or other urgent reasons. That will not be impacted.

“We understand it’s very important for the border to remain open because we are talking about $2 billion worth of goods that cross that border every single day, so it is critical not just for the health of our economy but for our citizens that that continues to be the case.”

Members of the Canadian Construction Association (CCA) are already seeing an impact on business due to interrupted supply chains as well as on work sites, Mary Van Buren, CCA president, stated in an email to the Daily Commercial News.

“To help businesses prepare for and manage through a potential COVID-19 escalation in Canada, CCA is referring members to a guide developed by the Canadian Chamber of Commerce on pandemic preparedness that is designed to assist in business planning and continuity efforts,” said Van Buren.

CCA has been in daily contact with the Government of Canada to stay apprised of any policies in support of, or at odds with, the industry’s efforts, wrote Van Buren, adding CCA staff have also been providing advice and support to construction association colleagues.

They are also committed to joining any task forces or committees that any local or provincial associations are creating to help deal with the crisis.

“We will also be engaging with our partner association members, over the next few days, to discuss ways we can work together to help the government minimize the impact of COVID-19 on the industry and to prepare for the eventual return to business as usual,” said Van Buren.

“In the meantime, all levels of government must work together to protect wages, provide flexibility in contracting and ease financial constraints.”

Canadian Manufacturers & Exporters also expects the supply chains will be impacted by measures aimed a curbing the spread of the virus.

 

I don’t see how this can be anything but a recession,

— Alex Carrick

ConstructConnect

 

“While some sectors of the economy can shift delivery models, including working remotely, and continue with minimal impacts, manufacturers cannot. The production workforce can’t work from home. The local and international supply chains of production components will become restricted and their customers will limit purchases,” said Dennis Darby, president and CEO of CME, in an email to the Daily Commercial News.

“It is clear that the manufacturing sector, which represents a third of Canada’s GDP, will be severely affected.”

The good thing is construction is mainly local, said Alex Carrick, chief economist, ConstructConnect.

“At this point we are not dependent on components and modules that have to be shipped from somewhere else for construction activity to take place,” said Carrick, adding the supply chain may be an issue for bigger projects.

Certain products like flat glass and steel come from other countries, which may be an issue too.

“There are supply chain issues, but the bigger effect is the demand side, that is really more significant this time and looking to see how the demand for construction projects and whether projects will be delayed and postponed,” Carrick explained.

“I don’t see how this can be anything but a recession. This has turned negative very quickly…I can’t see how there isn’t going to be a substantial slide in GDP.”

Forecasting agencies are saying it could be as much as a five per cent drop.

“I wouldn’t be surprised if the second quarter was down by as much as 10 per cent because this is an unprecedented event,” said Carrick. “I think we’ve got at least six months that are going to be very difficult.”

He also said megaprojects in the U.S., particularly energy projects, will likely be put on hold.

“With the price of oil dropping the way it has, it’s impossible to imagine that any big energy projects will be started in the next little while,” said Carrick.

He also said there will not be a lot of residential construction, unless people shop online.

“Maybe there will be residential construction and people will be shopping but they won’t do it in their cars or in person, there won’t be model home traffic, it will all be online,” said Carrick.

“People are going to get bored out of their minds so that will be a real incentive for do it yourself projects around the house.”

 

Follow the author on Twitter @DCN_Angela.

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