Alberta wildfire hitting rail, hospitality sectors
CN says it ran a freight train to Fort McMurray for the first time since May 3. The company says it typically operated three trains a week to the city. CN Rail photo.
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.
Canadian National Railway Co 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.
“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 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, a provider of camps and lodges for oil sands workers, was completely destroyed by the fire.
Temple Hotels Inc, 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 and Aviva Plc 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.
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)
You can read more of the news on source
