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Top 5 Exports: Canada

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Crude oil, cars, gold, LPG, and coal top the list of Canada's biggest exports.

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Cars

When you think of Canadian industry, it's likely that car manufacturing isn't the first thing that comes to mind. So it might be somewhat of a surprise to hear that (according to the International Organization of Motor Vehicle Manufacturers) Canada produced 2.1 million cars in 2011 and exports $49.2 billion worth of "Motor Vehicles For Passenger Transport (Excluding Buses) and Motor Vehicles Parts (Excluding Body, Chassis and Engines)," according to StatsCan.

Although Canada only produced 1.68% of last year's global output of just over 80 million vehicles, it ranks as the eleventh largest car manufacturer in the world. Canada's largest domestic auto manufacturer is Magna International, Inc. (MGA)

Notably a majority of the industry is centered around assembly plants belonging to foreign manufacturers. Between 2003 and 2011, over 110 foreign companies joined what is now more than 1300 automotive producers operating in Canada today.

This foreign presence is quite familiar -- the first cars to be manufactured in Canada in 1904 were Ford (F) Model Cs. Currently, Ford is joined in Canada by Honda (HMC), General Motors (GM), Fiat (FSOR.PA), Toyota (TM), and Volkswagen (VOW.DE), who produce the roster of passenger vehicles currently being manufactured.

Yesterday, the Canadian Auto Workers Union lodged a number of complaints against the Canadian automobile industry's three biggest players:GM, Ford, and Chrysler (of which Fiat is a majority owner). Grievances include the increasing demands being put on the Canadian workforce, as well as these companies' refusal to commit further, new investment to their Canadian operations, or willingly negotiate "fair terms" with workers. A strike deadline has been set for September 17.

Meanwhile, analysts at Scotiabank (BNS) underscored Canada's strengths and weakness as an auto-parts exporter in a press release earlier this year.

Global Vehicle sales are improving and the Canadian auto parts industry is bouncing back, however, the inability of suppliers to make inroads in the fast-growing markets of Asia and Latin America is undermining Canada's position as a major automobile parts producer... Shipments in the Canadian auto parts industry posted a double-digit year-over-year increase in the opening months of 2012, lifting volumes to an annualized pace of $20 billion -- the highest level since early 2008 and prior to the global economic downturn.

Gold

Gold is the third largest export from Canada, at $17 billion. According to the most recent Forbes' Global 2000, six of the top 12 gold miners in the world are Canadian companies, with Canada's Barrick Gold (ABX) and Goldcorp (GG) topping the list with 2011 profits of $4.4 billion and $1.9 billion respectively.

Canada is, in fact, home to 75% of the world's mining companies, which might come as a surprise, as Canada's gold reserves are only the sixth largest in the world. Not a single one of the world's 10 largest gold mines is located in Canada; however, four of these mines are fully owned by Barrick, and one mine splits ownership between Barrick and Colorado-based Newmont Mining (NEM), which itself owns two more mines on the list.

Yesterday, The Globe and Mail reported that Canada's Detour Gold (DGC.TO) will open the country's largest gold mine in Ontario in early 2013. The news comes as the price of gold (GCU12.CMX) continues on its five-month high following Fed Chairman Ben Bernanke's August 31 Jackson Hole speech.

Shares of Barrick, Goldcorp, and another Canadian-based miner, Kinross Gold (KGC), were trading up at the end of last week as gold traded above $1,700 for the first time since March. On Monday, gold stocks were down on profit taking.

Today, Barrick's CEO Jamie Sokalsky addressed the news that his company would sell its majority stake in China National Gold Group Corp. He acknowledge that talks were in the earlier stages, and beyond that gave no indication of how things might proceed.
No positions in stocks mentioned.
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