Iron ore 'one of the highlights' of N.L. economy amid catastrophic pandemic

While oil rigs were shipping out of the Grand Banks and tankers were better off anchored, one part of the natural resources sector in Newfoundland and Labrador quietly chugged on.

The COVID-19 outbreak hasn't affected the price of iron ore in the same way the pandemic has been blamed for the collapse of oil prices worldwide.

While provincial revenue from mining pales in comparison with what usually comes from the oil industry, its continued contributions have become more important during a time of turmoil.

"It's one of the few sectors that really has not turned down or turned off, actually, during this particular crisis," investment advisor Larry Short, a chartered professional accountant with ShortFinancial, told CBC News on Tuesday.

"Everything else has essentially either been delayed, deferred or chopped. So yeah, it's been one of the highlights of the economy."

The mining industry as a whole contributed $235 million in tax revenue to the province in the 2018-19 fiscal year, while also accounting for about $1.5 billion of the province's nominal gross domestic product for the 2018 calendar year.

There could be opportunities for the province to grow those numbers, as governments across the globe start implementing measures to get back to work.

China presents a particularly intriguing potential, as the country's National People's Congress will begin its annual session Friday.

The country responded to the global financial crisis of 2008 with a $563-billion stimulus package to stave off recession, but has been quiet so far as countries like the United States pledge trillions to COVID-19 measures.

Amid the pandemic, China saw its economy in decline for the first time since it began reporting quarterly data in 1992. It remains unclear whether President Xi Jinping will push the country forward like in 2008, or take a more conservative approach.

According to Tony Fang, an economics professor at Memorial University and past president of the Chinese Economists Society, stimulus measures would be north of $1 trillion. 

"That's a lot of money on investments, mostly actually on new infrastructure projects to prop up economic growth," Fang told CBC recently.

"Intercity highways, 5G, new technology sources and so on and so forth, which actually the Newfoundland and Labrador mining industry could potentially benefit [from]."

Staying on China's good side

Newfoundland and Labrador has a long history of trade with China, mostly in exporting seafood and iron ore.

Fang said a Chinese stimulus plan would require plenty of the rich resource, and the Canadian province could find itself in an advantageous position because it has never been a thorn in China's side.

The same cannot be said about the two largest exporters of iron ore to China.

"Australia and Brazil both have engaged in quite aggressive criticisms against China's handling of the virus containment policies, especially early on," Fang said.

Escalating tension could lead to changes in trade, which could put a heavier reliance on iron ore from Labrador.

IOC watching intently

Clayton Walker, CEO of the Iron Ore Company of Canada, will be one of the people paying attention to what the nation does in the coming weeks.

"China is one of the markets we sell to, so we definitely keep an eye on what China is or isn't doing," he told CBC this month.

"China is opening back up and we're encouraged. Hopefully, those dollars they're putting into stimulus will continue coming our way."

IOC has managed to keep production going in Labrador West throughout the pandemic by implementing a number of measures to enhance worker safety.

The company has staggered work schedules, promoted physical distancing, and done daily temperature checks on employees in order to keep work flowing.

"The iron ore price has been relatively steady throughout this process, so we've been quite lucky in that regard," Walker said.

As the rest of the western world watched the outbreak in Wuhan, China, and saw it as a foreign problem, Walker was worried about how it would affect IOC's business in Labrador and Quebec.

"We saw this start to unfold as it kind of travelled around the world and the impacts it had as it went from one market to the next. It gave us some insight into what was going on and also how to prepare ourselves for what might be coming," he said.

The way the virus spread was bad for business, but not as crushing as it could have been.

"As one market opens, another one closes," Walker said.

"Luckily, not everyone's gone down at the same time and not everyone is going up at the same time, which takes some of that massive volatility out, but it does make for some localized pain, as each market goes through that."

Giving back for COVID-19 relief

Walker said the company found itself in a position to help out, as most of the province's industries were thrown into disarray.

Rio Tinto — the global mining giant and majority owner of IOC — committed $10 million to COVID-19 relief in Canada. 

The Labrador West region saw about $200,000 of that money, including $30,000 to the local food bank, $20,000 to the hospital, and other donations to a local shelter for women fleeing domestic violence, an Indigenous community centre, and a program to fly cancer patients to St. John's for treatment.

"We're trying to make sure we've got real dollars showing up in the local community and we'll continue to invest and make sure our communities can make it through this," Walker said.

This coverage is part of Changing Course, a series of stories from CBC Newfoundland and Labrador that's taking a closer look at how the COVID-19 pandemic is affecting local industries and businesses, and how they're adapting during these uncertain times to stay afloat.

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