Modest growth for Sudbury in 2015: Report 0

A building is taking shape on the Kingsway across from the Riocan Centre in Sudbury, Ont. on Thursday July 23, 2015. John Lappa/Sudbury Star/Postmedia Network

Soft nickel prices and uncertainty surrounding Ring of Fire development will limit Greater Sudbury's economic growth in 2015, according to a report by a major Canadian economic think tank.

A Conference Board of Canada report entitled Metropolitan Outlook: Summer 2015, released this week, forecasts the city's GDP growth at a modest 0.7% for the current year.

"The overall message we're conveying in Sudbury is that resource prices have hurt the city just a little bit," said Robin Wiebe, senior economist in the Conference Board's Centre for Municipal Studies and an author of the report. "And the whole Ring of Fire business is something that enters our minds."

Annual real GDP growth peaked at 6.1% in 2011 as nickel's price exceeded $10 per pound, but dropped to 0.1% in 2014 as the price dropped below $7 per pound. It is now hovering around $5.20.

Uncertainty surrounding chromite development in so-called Ring of Fire, a region of the James Bay lowlands rich in the metal, has reigned since Cliffs Natural Resources, which at one time considered building a smelter in Greater Sudbury, sold its interests in there.

Even without a chromite smelter, it's believed development in the Ring would be a boon for the local mining service and supply sector, which accounts for more than 20,000 jobs in Northern Ontario.

For now, however, the modest rise in GDP will keep the local job picture stagnant, the Conference Board says, with employment expected to inch ahead by just half a percentage point.

"Employment growth is going to be slight, but it is going to be growing," Wiebe said. "That's good, because in two of the past three years, in 2012 and 2014, employment actually fell. We're getting back to employment increases and that's got to be a good thing for Sudbury."

The unemployment rate is expected to dip to 6.2%, down 0.2% from 2014.

"That will be the lowest point since before the recession (in 2008)," Wiebe said.

"The unemployment rate is sometimes an unusual indicator, because it depends on both how much employment there is and also on how many people are looking for work, or the labour force. You can sometimes have a situation where employment will fall and the unemployment rate will still drop if the labour force drops faster, because of discouraged workers - people who give up looking. But that's not the case here."

In Greater Sudbury's case, employment is expected to grow slightly faster than the labour force, so the rate will continue to drop.

Also on the bright side, economists predict Greater Sudbury's construction growth will resume at a forecast rate of 1.8% for 2015, following declines in both 2013 and 2014.

"They're going to be spending some money on Highway 69 and they're going to be spending some money at Laurentian (University)," Wiebe said. "Those are things to consider."

The Highway 69 project is expected to extend through 2021, while Laurentian is in the midst of spending $51 million to modernize its campus in Sudbury. The local airport has received $1 million for a six-storey, 32,000-square-foot hangar to house Discovery Air Service and a lake quality research project for the Northern Ontario School of Medicine.

Completion of the Maley Drive extension, if the $80-million project goes ahead, could create some 1,400 jobs.

The project relies on a three-way cost-sharing agreement which would see the provincial and federal governments each contribute $26.7 million, with the city providing the remainder, up to $41 million.

While the province has already committed funding, no federal announcements have yet been made; however, the government cannot make funding announcements during a byelection period, so nothing could be expected before Sudburians go to the polls on Oct. 19.

City council faces a decision whether to spend $50 million to renovate Sudbury Community Arena, home of the OHL's Sudbury Wolves, or $65 million to replace it.

On the residential side, housing starts dropped by 37% in 2014, the third straight annual decline, however falling backlogs of unsold units suggest rising starts this year and next, the Conference Board says.

Stronger than expected nickel prices and Ring of Fire could boost numbers in the near future, as would progress on local ultra-deep mining projects. Glencore is contemplating two ultra-deep projects at its Nickel Rim and Onaping mines, but there are significant technical barriers to extraction. These might be addressed through research by the local Centre for Excellence in Mining Innovation, which received a $15-million federal grant to explore ultra-deep improvements.

"Vale and Glencore are both going to benefit from the extension of the provincial Northern industrial electricity rate, which is important to people who mine and smelt in the area," Wiebe added. "If the Ring of Fire goes ahead, a lower electricity rate would really help a smelter, wouldn't it?"

Forecasts for Greater Sudbury fall generally in line with the Conference Board's outlook for Ontario city's which are expected to continue their road to recovery, but at a modest rate of growth.

ben.leeson@sunmedia.ca

Twitter: @ben_leeson