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EDC optimistic about Lakehead's prospects.

The next two years offer good prospects for Thunder Bay's economy, according to a report released in February by the city's economic development corporation (EDC).

The "reluctant recovery" of Canada's economy, a lowering of the value of the Canadian dollar and Thunder Bay's reliance on export industries should result in positive economic growth.

However, the news is not all good.

For example, the corporation predicts that the current economic recovery will be the slowest in Canada's post-war history, at two per cent this year and between 3.5 and four per cent in 1993.

Although interest rates have fallen, the level of consumer debt remains high, and this is expected to restrain spending and slow the recovery.

The EDC predicts that consumer spending will grow by between four and five per cent this year and by as much as six per cent in 1993. Inflation is expected to be between 2.2 and 2.5 per cent this year and between 2.5 and 2.8 per cent in 1993.

Unemployment is expected to decline by one per cent during 1993. While increased investment by the industrial sector could ease the unemployment rate, much of the new capital spending may involve acquiring new technology, thus generating or retaining fewer jobs.

According to the corporation, a real challenge for the community will be to develop appropriate job opportunities to utilize a pool of some 8,000 to 9,000 potential workers who are presently receiving either unemployment insurance or welfare.

The EDC says the number of people in Thunder Bay receiving social assistance is now 4,300, including an estimated 2,000 employable persons. It predicts that the number of recipients will increase this year as present UIC claimants exhaust their benefits.

LEADING AFFECT

The corporation believes that economic conditions throughout northwestern Ontario will mirror national trends, but the recovery may have a "leading" effect on several key regional industries.

For example, the forest products sector, which accounts for more than 85 per cent of the value of manufacturing production in the region, is expected to see improved market conditions.

With the number of permanent reductions in newsprint capacity in Canada during 1991, the pulp and paper industry may also see improved operating rates this year.

The EDC predicts modest growth in pulp and paper markets for later this year and stronger growth in 1993.

In addition, the emergence of "on-site" chipping, whereby pulp logs are debarked and chipped adjacent to the harvesting location, could reduce the industry's costs and improve its competitive position.

A lowering of the value of the Canadian dollar is expected to be of benefit to the pulp and paper industry. However, the corporation is concerned with the rising cost of energy, particularly since the industry is moving towards a greater utilization of thermo-mechanical pulping.

According to the EDC, the growing requirement for "recycled content" in newsprint exports to the United States is a particular concern to northwestern Ontario.

The requirement means that area newsprint producers will need access to substantial quantities of "old newsprint" for de-inking and re-use if they wish to retain their primary export market share.

The EDC says layoffs or closures in the pulp and paper sector may be possible this year, depending on the pace of the recovery of the U.S. economy.

The Thunder Bay region experienced two significant reductions in forest industry activity last year with the idling of an Abitibi-Price mill and the permanent closure of the Canadian Pacific Forest Products stud mill.

The closures were offset, in part, by the completion of a $500-million expansion and modernization of the Canadian Pacific Forest Products mill in Thunder Bay. The program included a new thermo-mechanical pulp mill, newsprint machine, secondary effluent treatment system and newsprint recycling plant.

The prospects for the region's mining sector look good, according to the EDC. However, it points out that the levels of exploration and development activity declined last year due to changes in taxation policy and the economic slowdown.

Production is expected to remain high at the Hemlo/Marathon/Manitouwadge gold mine operations, as world gold prices are expected to rise between five and 10 per cent during the next two years.

PORT ACTIVITY

The 1992 navigation season is expected to get off to a good start with busy grain movement and an anticipated March 30 opening of the Seaway. The port had a 21-percent increase in cargo movement in 1991.

The total tonnage for the season was 17,363,153 metric tons, of which 85 per cent was domestic. Grain shipments increased 44 per cent over the previous year due to a good Prairie production and the late season grain sale to the former Soviet Union. The port's economic impact on the local area and the regional economy was pegged at more than $825.8 million.

The prospects for this year look good with the potential of grain sales to the independent states of the former Soviet Union.

In addition, Ontario Hydro's signing of two three-year contracts for the purchase of western Canadian coal has meant that the port averted the loss of $189 million annually in direct and indirect revenue starting in 1993.

The outlook for the Can Car Thunder Bay Works plant is also good, with current contracts for bi-level cars for Los Angeles and the immediate prospect of major new contracts involving Toronto, Go Transit and Ankara, Turkey.

The development of smaller-scale diversified manufacturing is one of the EDC's primary focuses.

The corporation's efforts to attract new investment from the Far East paid off in 1991 with the opening of Leo Sakata Electronics (Canada) Ltd. and Earnway Industries (Canada) Ltd. The plants have a combined employment forecast of between 150 and 160 people.

MORE TOURISTS

Tourism activity showed some improvement in 1991, and it is expected to be even better in 1992 as the U.S. economy improves.

Meanwhile, the lowering of the value of the Canadian dollar is expected to reduce the attraction of cross-border shopping for local consumers.

The negative side of the reduction, however, is that it will increase the price of imported consumer products, which may add to inflationary pressures.
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Title Annotation:Thunder Bay's economic development corporation
Publication:Northern Ontario Business
Date:Apr 1, 1992
Words:1024
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