Alberta wildfire economic pain singes beyond energy sector

Dexterra

25/05/2016 17:47

By Euan Rocha and Allison Lampert 
    TORONTO/MONTREAL, May 25 (Reuters) - The wildfire that has 
ravaged northern Alberta and cut Canadian crude output by 25 
percent is set to crimp corporate earnings beyond the oil patch, 
especially hitting the rail and hospitality sectors. 
    The fire, which has caused an estimated $50 million a day in 
lost production for oil sands companies near the evacuated city 
of Fort McMurray, has also caused pain to large companies that 
serve the sector and smaller ones catering to thousands of 
industry workers.  urn:newsml:reuters.com:*:nL2N18H1FA 
    Canadian National Railway Co  CNR.TO  has said it ran a 
freight train to Fort McMurray for the first time since May 3. 
It typically operates three trains a week to the city.  
    Separately, the Bank of Canada came out with a more hawkish 
statement on Wednesday on how the economy will be hurt by damage 
from the wildfires. The central bank said the wildfire disaster 
will shave 1.25 percentage points off economic growth in the 
second quarter.  urn:newsml:reuters.com:*:nL2N18M0SJ 
    "The wildfires in Alberta continue to delay oil production 
restarts, weighing on petroleum product shipments tied to the 
region," said Susquehanna rail analyst Bascome Majors. 
    The effect on Canadian National and Canadian Pacific Railway 
Ltd  CP.TO  results will be limited since crude-by-rail accounts 
for a relatively small part of their revenues, Majors said. 
    Canadian National said crude oil represented just over 1 
percent of car loadings in the first quarter. Canadian Pacific's 
crude shipments have fallen 70 percent, 87 percent and 77 
percent, respectively, over each of the last three weeks, 
according to company data. 
    With the combination of the wildfire and weak commodity 
prices challenging the railroads, Seaport Global Securities 
noted that the latest weekly data showed Canadian crude-related 
rail shipments fell 35 percent from last year and total Canadian 
rail volumes slid 18.6 percent. 
    Parts of the hospitality sector will also be hurt. 
    The Blacksand Executive Lodge owned by Horizon North 
Logistics Inc  HNL.TO , a provider of camps and lodges for oil 
sands workers, was completely destroyed by the fire. 
    Temple Hotels Inc  TPH.TO , which owns and operates 29 
hotels, has nearly one-third of its properties in Fort McMurray. 
Analysts said near-term earnings will be hurt due to the fire, 
though they noted it could benefit when reconstruction begins. 
    Losses for property insurers like Intact Financial Corp 
 IFC.TO  and Aviva Plc  AV.L  are likely to be capped, wrote 
Wells Fargo analyst Elyse Greenspan, who expects the largest 
share of the losses to fall on European reinsurers and Everest 
Re Group Ltd  RE.N .  urn:newsml:reuters.com:*:nL5N1864LU 
    She noted that estimates pointed to overall insured losses 
topping out at close to $7 billion. 
    The fire has also crippled small business owners in Fort 
McMurray as only a trickle of its 90,000 evacuated residents 
will begin to return in early June. 
    "It's really challenging for us right now. Even if we 
reopen, what sort of business will we get?" said Joycelyn 
Reece-Reid, co-owner of A&J's Fashions. "All I know is business 
just won't be like it was for maybe quite a few years." 
    Chad Gergley, who owns a wellness clinic and a yogawear 
business in the city, said 25 percent of his employees do not 
intend to return since they have either lost their homes or been 
forced to find jobs elsewhere. 
    "On top of a revenue hit that businesses in town are taking, 
we're taking a people hit with employees scattering," he said.  
    The eventual rebuilding will boost construction activity, 
but will take time and is unlikely to result in sustained 
growth, said ATB Financial Chief Economist Todd Hirsch, who 
believes many small businesses may never return. 
    "Even though there may be a positive lift to GDP, there's 
absolutely nothing economically positive about this fire," he 
said. 
 
 (Reporting by Euan Rocha in Toronto and Allison Lampert in 
Montreal; Editing by Jeffrey Benkoe) 
 ((euan.rocha@thomsonreuters.com; +1 416 941 8185; Reuters 
Messaging: euan.rocha.reuters.com@reuters.net)) 
 
Keywords: CANADA WILDFIRE/COMPANIES