'We are concerned': How Canadian exporters are being hit by the coronavirus

The coronavirus outbreak is disrupting China’s supply chains and raising concerns among Canadian exporters that rely heavily on trade with the Asian nation.

As the number of coronavirus-related fatalities continues to rise in China, the lockdown of several provinces including Wuhan, the epicentre of the virus, is halting the activity of nearly 60 million people.

A spokesperson for the Canadian Association of Importers and Exporters told BNN Bloomberg it has been receiving calls from its member companies inquiring about the possible impact of the coronavirus.

To put the economic risk in perspective, Canadian exporters are looking back to the last time they were placed in this position with the SARS outbreak in 2003 that claimed more than 700 lives. At that time, only one per cent of Canada’s gross domestic product relied on the Chinese market, according to Pedro Antunes, chief economist at the Conference Board of Canada. He added that that number is at 3.9 per cent today.

The slowdown in demand for goods and services in China for this time of year was expected due to the Lunar New Year holiday. But that window has now passed, and the quarantine measures remain. The restrictions are impacting products that travel through both airfreight and ships, according to Simon Somogyi, Business of Food professor at the University of Guelph. Meanwhile, many companies are trying to send their goods to mainland China through Hong Kong via rail.

In a CIBC Economics report, economist Andrew Grantham noted, “the export channel is larger now, but Chinese exports had already become a drag on overall Canadian growth in 2019 following the Canola ban, with Saskatchewan and Manitoba particularly badly hit.”

“The longer China is in lock- down to try and contain the virus, the bigger the impact will be through the now much more important tourism and supply-chain channels.”

Top Canadian exports to China include meats such as beef and pork, shellfish and agricultural goods including soy, minerals, machinery and wood.

Canada’s forestry industry could stand to lose the most as it is the world’s largest exporter of pulp to China. It sends $4.1 billion worth of pulp to China a year, according to the Forest Products Association of Canada (FPAC).

“All of our forestry exports put us just under $6 billion. That’s six times more in terms of value dollars exposed to China compared to 2003 during SARS,” said Derek Nighbor, president and CEO of the FPAC, in a phone interview with BNN Bloomberg. “We are concerned and are in monitoring mode right now.”

Meanwhile, the East Coast lobster market is already seeing order cancellations.

“People are not going out and stores are closed in China,” Geoff Irvine, director of the Canadian Lobster Council, told BNN Bloomberg.

“This situation reminds us of how important our other markets are.”

Eric Lascelles, chief economist at RBC Global Asset Management, said that although the virus will result in a weaker Chinese economy and a decline in demand for Canadian goods, the impact will be only temporary.

“The story is not over, but I doubt there will be a long-lasting impact beyond the next two to three months,” he said.