Canada quietly moves to resolve steel spat with Mexico

Canada quietly moves to resolve steel spat with Mexico

Finance Minister Bill Morneau has quietly reversed a controversial decision to slap a surtax on two types of Mexican steel imports.

Effective Feb. 2, up to a new limit, Mexican energy tubular products (such as those used to build pipelines) and wire rod shipments will no longer cost an extra 25 per cent under Canada’s emergency ‘safeguard’ measures.

Steel from other countries that don’t have free trade agreements with Canada will continue to face the extra tax. 

For Mexico alone, new tariff-free thresholds have been set for the 200-day period to which the temporary surtax applies. The 72,820-tonne quota for tubular products and the 16,776-tonne quota for wire rod are based on an average volume of Mexican imports in recent years, plus a bit of growth, according to Morneau’s office.

Surtax already paid by purchasers will be refunded.

“We made those changes in recognition of Canada and Mexico’s mutual rights and obligations under NAFTA,” Morneau’s spokesperson Pierre-Olivier Herbert told CBC News this week. The safeguards, he said, meet the government’s goal of “protecting steel producers from a harmful surge of imports and minimizing trade disruptions for Canadian businesses.”

Canada’s emergency safeguard measures on seven categories of steel imports (just two of them from Mexico) began last October. They were introduced to prevent dumping of steel in Canadian markets in the wake of the United States’ decision to impose 25 per cent tariffs on steel imports.

Mexico strongly objected to being lumped in with other countries, accused Canada of being unfairly protectionist and threatened to retaliate against Canada — possibly by bringing a case before the World Trade Organization (WTO).

The dispute further strained an already-tense Canada–Mexico relationship in the final weeks leading up to the signing of the revised North American trade agreement on Nov. 30.

Both countries failed to persuade the U.S. to lift its steel and aluminum tariffs before the signing. 

Canada’s surtax suggested Mexican steel is unfairly traded, just as Mexico was struggling to prove the opposite to the Americans.

Mexican said the two taxed products represented 20 per cent of Mexico’s global steel exports.

The decision to target tubular products also worried Canada’s energy sector. Already dealing with low commodity prices and layoffs, the energy industry now faced an extra tax on its production inputs as well.

Negotiations that weren’t publicized in the media led to the signing of a memorandum of understanding (MOU) between Canada and Mexico on Jan.16.

Story continues after this document:

In the MOU, Mexico agreed to not initiate any trade disputes against Canada on the validity of the safeguards. (Other countries may still do so.)

Mexico also agreed to “immediately attend to any backlog of Canadian steel exports at the Mexican border” and ensure that Canadian exports are not unduly delayed — another way Mexico could have retaliated.

Trade tribunal considering future safeguards

Hearings testing the evidence for and against the emergency safeguards were held at the Canadian International Trade Tribunal (CITT) last month.

Domestic steel producers tried to prove the extra safeguards were protecting their businesses from unfairly-traded cheap foreign steel, while manufacturers and other importers argued the surtaxes had inflated their input costs, putting jobs and entire businesses at risk.

At the conclusion of a 200-day period that started in October, Morneau must decide whether to continue the surtax. The tribunal will make its recommendations later this spring.

The CITT asked for an extra $2.1 million beyond its usual budget to conduct this inquiry, which lasted Jan. 7-24 and produced stacks of submissions.

As arguments before the CITT began on energy tubular products, the Canada–Mexico MOU had not been disclosed. Some of the interested parties learned Mexico cut a deal only after the hearings concluded.

Prime Minister Justin Trudeau has visited steelworkers all over Canada, including those at this mill in Hamilton, Ont. last March. To date, his government has been unable to convince the U.S. to lift its tariffs on Canadian steel and aluminum. (Mark Blinch/Reuters)

Tenaris, a company that imports steel products from its Mexican production facilities into Canada, laid off an additional 95 Canadian employees at its Sault Ste. Marie, Ont. facility on Jan. 25.

However, it’s not clear there’s a direct relationship between its Mexican business and this decision to cut its Canadian workforce.

“The Trudeau government is out there saying … this is all about protecting Canadian steel jobs,” said Cyndee Todgham Cherniak, a trade lawyer for other clients participating in the safeguards inquiry.

“What you’ve got in the meantime is the energy sector in Alberta having to pay more for Canadian steel, and not being in a position to afford it at this point in time. It’s causing layoffs in the manufacturing sector because they can’t afford the higher price.”

In some cases, it’s now cheaper to import final products from China — even as Chinese imports face tariffs — than to manufacture them in a North American supply chain so burdened with tariffs and surtaxes, she said.

“When you strip it away, it’s about collecting additional revenue at the border on steel that’s needed by Canadians, and passing that cost on to the Canadian consumer and businesses,” she said.

Lucrative for government, but risky?

CBC News has asked the Finance Department several times how much revenue the steel safeguards raised for Canada’s treasury since October. No figures have been released.

Finance has disclosed how much it collected in retaliatory tariffs on U.S. imports: $839 million in the first six months leading up to Dec.31.

For its part, the U.S. treasury collected over US$931 million in duties on Canadian steel imports between June and October alone.

Earlier this month, the U.S. International Trade Commission (ITC) instigated an anti-dumping and countervailing duty investigation of fabricated structural steel components from Canada, China and Mexico.

Canada previously launched a similar investigation of fabricated steel from other countries, and that appears to have drawn the American industry’s attention, Todgham Cherniak said. In today’s trade climate, it’s not clear that Canada will be able to separate itself from China and Mexico in the Trump administration’s eyes.

The U.S. ITC investigation will compare the price Canadian companies charge U.S. customers to what it costs to produce these steel components (which could be  more now, thanks to this extra taxation on steel inputs) and judge whether such prices are fair.

But the pricing in U.S. sales contracts could predate the tariffs and surtaxes that started in the second half of 2018.

The ITC investigation also could consider whether the Canadian government is unfairly subsidizing Canadian steel components. The federal government’s $2 billion assistance package for steel producers, meanwhile, continues to roll out. 

“We are in an age where the finding of injury in anti-dumping cases involving steel is quite common,” Todgham Cherniak said. “Are [American] steel producers bringing cases because they know they can? Probably.”

The five years of protection a U.S. producer could get from winning a dumping case could outlast the Trump administration’s “national security” tariffs, which are being challenged in WTO arbitration by several countries.

Some U.S. lawmakers also are refusing to vote to ratify the new NAFTA if these steel tariffs remain in place.

“It’s messy,” Todgham Cherniak said.

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Need to fill up? Best do it today, gas prices are set to jump 7 cents at midnight

Need to fill up? Best do it today, gas prices are set to jump 7 cents at midnight

If your loved one drives, the best Valentine’s Day gift you can get them this year might just be a full tank of gas.

That is, at least, according to Dan McTeague, a senior petroleum analyst with GasBuddy, a real-time online petroleum price aggregator.

That’s because the cost per litre of gas is likely to jump at least seven cents at midnight “right across the GTA” and most of Ontario. Similarly, the price per litre of diesel fuel will increase 11 cents with HST included.

“Today would be a really good day to pick up gasoline, with the long weekend coming up,” McTeague said.

The anticipated jump in price is fuelled by a confluence of factors. Primarily, a glut of inventory that accumulated at Ontario refineries last month — leading to record-low prices for this time of year since about January 20 —  is nearly gone. Further, a slew of refineries in the northeastern U.S. are offline for seasonal maintenance.

“So while demand remains static, it looks like there will be a run on supplies, meaning there is no longer a need for these fire sale prices to move inventory here in Ontario,” McTeague explained.

While actual prices will vary in different parts of the region, you might be able to fill up at some stations for as little as 93 cents per litre.

According to McTeague, your best to chance to score the cheapest price will always come some time between 5 p.m. and 10 p.m.

“Best take advantage of this now while you can, and don’t say you haven’t been warned,” he continued.

Gas prices should hover at a little more than $1 per litre throughout the late winter and spring. Then, on April 1, the federal government will implement it’s levy on the four provinces that have not developed carbon pricing frameworks.

That will automatically add an additional 4.49 cents to the cost per litre of fuel in Ontario, Saskatchewan, Manitoba and New Brunswick, McTeague said. 

That increase, combined with the mandatory switch over to summer blends that generally occurs in April — bringing with it an additional five cent increase in price per litre — will drive the price at the pumps to at least $1.15. Then, as U.S. demand really ramps up during the summer months, drivers in Ontario are likely to see a significant bump in cost that will last until October.

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BlackBerry, federal government pour $350M into autonomous cars

BlackBerry, federal government pour $350M into autonomous cars

BlackBerry and the federal government are spending a combined $350 million on autonomous vehicle technology, which they say will create hundreds of new jobs and co-op placements.

Prime Minister Justin Trudeau made the announcement alongside BlackBerry CEO John Chen Friday morning at the BlackBerry campus in west Ottawa’s Kanata North neighbourhood.

BlackBerry pledged $310.5 million to create 800 new jobs and maintain an additional 300 positions in the next 10 years. It also promised 1,000 co-op job placements for students from 10 unspecified Canadian post-secondary schools.

The federal government is spending $40 million from its Strategic Innovation Fund to help develop new software Trudeau called the “central nervous system” of the autonomous cars of the future.

Trudeau said BlackBerry will also be making a new diversity plan and creating scholarships for women and Indigenous students.

It’s also spending $5 million on cybersecurity, according to a news release.

Barrie Kirk, the co-founder and executive director of the Ottawa-based Canadian Autonomous Vehicle Centre of Excellence, or CAVCOE, said the new investment is a signal of the Kanata North hub’s potential. 

“I think in terms of developing the technology, it’s a really big deal,” he said. 

“There’s already a wonderful cluster of AV [autonomous vehicle] related activities in Kanata North and this is further evidence that this is a very significant cluster.”

Neither the news release nor announcement specified where the new jobs and placements would be.

Canadian winter-specific

Richard Yu, a professor at Carleton University’s school of information technology, has been collaborating with BlackBerry QNX to develop and test autonomous vehicles.

“We have some special issues, especially the harsh winters here,” he said.

“We cannot just use the technologies developed in the U.S., so we need to have some big investment, especially from the government and from local industry.”

A BlackBerry QNX driverless car rolls through a street in Kanata during a test on Wednesday, Oct. 12, 2017. (Florence Ngue-No/Radio-Canada)

In January, Ontario Transportation Minister Jeff Yurek announced changes to the automated vehicle industry that would make it easier to test autonomous vehicles in the province, eliminating the need for an operator to be seated behind the wheel during testing.

Instead, the cars will be allowed to operate completely driverless on public roads, either with a passenger inside or with an operator controlling the car remotely. 

BlackBerry subsidiary QNX opened its testing hub for autonomous vehicles in Kanata in late 2016. 

In 2017, the company tested an autonomous car in the Ottawa suburb, marking the first time that an autonomous car had driven on its own on a public road in Canada. 

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B.C. gas pipeline on hold as company investigates Indigenous artifacts claim

B.C. gas pipeline on hold as company investigates Indigenous artifacts claim

Construction on a controversial gas pipeline project in British Columbia’s northern Interior has been suspended while the company investigates claims that Indigenous artifacts were found on a work site. 

The Unist’ot’en Clan of the Wet’suwet’en Nation says it found two stone tools where TransCanada-owned Coastal Gaslink is currently building the camp that will house workers near Houston, B.C.  

“It’s scientific confirmation of what Wet’suwet’en and Unist’ot’en people already know, which is that this is a spiritually and culturally important site,” said Anne Spice, a spokesperson for a nearby protest camp and healing centre, which is currently home to many who have come to support the Unist’ot’en in their opposition to the pipeline.

In a written statement, the company said Friday it has voluntarily suspended work at the site while it investigates the claims.

Spice said two Unist’ot’en supporters had been searching the upturned ground of the future work camp in the evenings, after crews had left, when they found two stone tools. 

The Unist’ot’en say the company didn’t conduct an adequate archeological impact assessment during the permitting process. 

An excavator sits idle on a mound of debris at a Coastal GasLink worksite in northern B.C. (Chantelle Bellrichard/CBC)

Coastal Gaslink says it did complete an archeological impact assessment as part of the permitting process, and the B.C. Oil and gas Commission confirmed that it met provincial requirements for its permit.

However, the company also says a road blockade prevented it from conducting onsite field work.

In an email, the company says the assessment, which used “regulator approved methods” conducted by “experienced, licensed archeologists from Northern B.C.,” found low potential for artifacts at the site which it says has been previously cleared for forestry work.

It also said archaeologists worked with local Indigenous groups to identify traditional ecological knowledge and identify “heritage resources.”

The company says it has has notified the required regulatory authorities. The Oil and Gas Commission says it has sent an operations officer, senior archaeologist and support staff to conduct a site visit. 

Spice said the Unist’ot’en want the company to agree to cease work until a full assessment is conducted.

“We’re just really concerned that that clearing will continue to happen and that they might damage more artifacts in that area,” she said.

Protests and arrests

The gas pipeline, which will run through Wet’suwet’en territory to LNG Canada’s planned $40-billion export facility near Kitimat on the province’s North Coast, has been the site of protests and arrests in the past few months. 

Twenty First Nation band councils along the route have signed agreements with Coastal GasLink, including elected leaders of the Wet’suwet’en. Some have been outspoken in their support for the project. 

The hereditary chiefs at the Office of the Wet’suwet’en have said the band councils have jurisdiction only over reserve lands, and not over the nation’s 22,000-sq.-km of traditional territory that was the focus of a landmark Supreme Court of Canada case.

In early January, RCMP and Wet’suwet’en leaders reached a tentative deal to let gas company workers through.

Depending on who you ask, the work taking place along the forest service road past Unist’ot’en is either scheduled pre-construction work on a welcome, $40-billion natural gas project that has all the necessary approvals or it is the unlawful destruction of a landbase, according to Wet’suwet’en law, in an era when governments are publicly committed to implementing the United Nations Declaration on the Rights of Indigenous People (UNDRIP).  

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Canada’s main stock index reaches highest level since Oct. 5

Canada's main stock index reaches highest level since Oct. 5

Canada’s main stock index posted a triple-digit gain Friday after oil hit a three-month high to extend the market’s winning streak to six weeks.

The S&P/TSX composite index closed up 142.26 points to 15,838.24, after hitting a peak during the day of 15,866.60. That’s the highest level since Oct. 5.

The Toronto market is just 4.4 per cent off the all-time high set last July and up 10.6 per cent so far this year.

Allan Small, senior investment adviser at HollisWealth, foresees the positive momentum continuing as long as geopolitical issues, especially the trade dispute between the U.S. and China, remain positive.

“Yes the year-to-date numbers look really strong in such a short period of time, but we’re just getting back to where we were trading at the end of the summer and early fall,” he said in an interview.

“Let’s get back from the highs … and that’s where things start to get a little bit more dicey. You may see the market start to trade sideways for a little bit until we get some sort of clarity on future and I think that’s where we kind of stall out.”

North American markets increased by as much as 1.7 per cent on continuing optimism about a trade deal with China after U.S. President Donald Trump told reporters he might extend the March 2 deadline for the imposition of tariffs, said Small.

We’ve heard some positive things come out of the administration over the past few days and I think it is no doubt that that’s what’s carrying the markets higher.– Allan Small, senior investment adviser at HollisWealth

In New York, the Dow Jones industrial average was up 443.86 points at 25,883.25. The S&P 500 index was up 29.87 points at 2,775.60, while the Nasdaq composite was up 45.46 points at 7,472.41.

“We’ve heard some positive things come out of the administration over the past few days and I think it is no doubt that that’s what’s carrying the markets higher,” said Small.

Energy sector gains

In Toronto, the key energy sector gained 3.2 per cent as Frontera Energy Corp. increased eight per cent, followed by Encana Corp., Canadian Natural Resources and Suncor Energy Inc.

The April crude contract was up $1.19 at $55.98 US per barrel, the highest level since mid-November on a weaker U.S. dollar and support from production curtailments by OPEC.

The March natural gas contract was up 5.2 cents at $2.62 per mmBTU.

The Canadian dollar traded at an average of 75.38 cents US, compared with an average of 75.20 cents US on Thursday.

The April gold contract was up $8.20 at $1,322.10 an ounce and the March copper contract was 2.4 cents at $2.80 a pound.

The Toronto market had widespread gains as industrials and financials rose.

The positive streak was also extended for another week on strong corporate earnings from several firms, including TransCanada Corp. and Manulife Financial Corp. In addition to beating analyst estimates, several raised their dividends and share buybacks.

“All the stuff that’s great for investors and adding to this positive feel for the market,” he added.

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U.S. trade talks with China to continue as Beijing meeting made progress

U.S. trade talks with China to continue as Beijing meeting made progress

Talks between China and the United States to resolve their bruising trade war will continue next week in Washington, with both sides saying this week’s negotiations in Beijing made good progress.

Still, Washington appeared committed to a March 1 deadline to reach a deal or raise tariffs on certain Chinese goods, despite U.S. President Donald Trump’s recent statements that he was reluctantly willing to let the target date “slide.”

White House Press Secretary Sarah Sanders said in a statement on Friday the two economic superpowers “will continue working on all outstanding issues in advance of the March 1, 2019, deadline.”

“These detailed and intensive discussions led to progress between the two parties. Much work remains, however,” Sanders said about the Beijing round of talks.

The countries focused this week on the U.S. trade priorities involving technology, intellectual property rights, agriculture, services, non-tariff barriers, and currency, and discussed potential Chinese purchases of U.S. goods and services to reduce a “large and persistent bilateral trade deficit,” Sanders said.

Chinese President Xi Jinping met on Friday with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin after a full week of talks at senior and deputy levels, and called for a deal both sides could accept, Chinese state media said.

U.S. duties on $200 billion worth of imports from China are set to rise to 25 per cent from 10 per cent if no deal is reached by March 1 to address U.S. demands that China curb forced technology transfers and better enforce intellectual property rights.

After the conclusion of talks, including a banquet on Thursday, Mnuchin said on Twitter that he and Lighthizer had held “productive meetings” with Xi’s top economic adviser, Vice Premier Liu He.

“The consultations between the two sides’ teams achieved important step-by-step progress,” Xi said, according to state television.

“Next week, both sides will meet again in Washington. I hope you will continue efforts to advance reaching a mutually beneficial, win-win agreement,” Xi said at Beijing’s Great Hall of the People.

He added that China was willing to take a “cooperative approach” to settling bilateral trade frictions.

Lighthizer told Xi the senior officials had “two very good days” of talks.

U.S. Treasury Secretary Steven Mnuchin, left, and U.S. Trade Representative Robert Lighthizer have been in talks with Chinese counterparts about trade. (Greg Baker/AFP/Getty Images)

“We feel that we have made headway on very, very important, and very difficult issues. We have additional work to do but we are hopeful,” Lighthizer said, according to a foreign media pool video.

Neither country has offered new details on how they might de-escalate the tariff war that has roiled financial markets and disrupted manufacturing supply chains.

Although Trump said this week that an extension of the tariff deadline was possible if a “real deal” was close, Larry Kudlow, director of the National Economic Council, has said the White House had made no such decision.

But several sources informed about the meetings told Reuters there was little indication negotiators had made major progress on sticking points to pave the way for a potential meeting between Xi and Trump in coming weeks to hammer out a deal.

“Stalemate on the important stuff,” said one source. All of the sources requested anonymity because the talks are confidential.

“There’s still a lot of distance between parties on structural and enforcement issues,” said a second source. “I wouldn’t quite call it hitting a wall, but it’s not a field of dreams either.”

A third source told Reuters the White House was “irate” over earlier reports that the Trump administration was considering a 60-day extension of the tariff deadline.

Lighthizer and Mnuchin left their Beijing hotel on Friday afternoon without taking questions from reporters.

‘Sleight of hand’

Reuters reported earlier that in recent meetings China has pledged to make its industrial subsidy programs compliant with World Trade Organization rules and end those that distort markets, but had offered no details of how it would do so.

The offer has been met with skepticism from U.S. negotiators, in part because China has long refused to disclose its subsidies.

And some in U.S. industry have been unimpressed with the extent of other reported Chinese offers to address U.S. concerns, such as Beijing’s proposal to hike purchases of U.S. semiconductors to $200 billion over six years.

John Neuffer, president and chief executive officer of the Semiconductor Industry Association, told Reuters the offer would be “akin to an accounting sleight of hand” and “an attempt to rearrange our supply chains and drive them deeper into China.”

Neuffer added, “We are confident U.S. government negotiators will wisely dismiss this offer and continue pushing for meaningful reforms that create a fair and level playing field for U.S. companies doing business in China.”

The proposal, first reported by the Wall Street Journal, was part of a “recycled” package of goods purchase offers that Beijing first presented in the spring of 2018, a source told Reuters.

Many U.S. lawmakers and business groups have urged Trump in recent weeks not to settle for a deal based largely on increased Chinese purchases of farm and energy commodities.

Trump has said he did not expect to meet Xi before March 1, but White House spokeswoman Sarah Sanders has raised the possibility of a meeting at the president’s Mar-a-Lago retreat in Florida.

China has long denied Washington’s accusations of trade abuses, and it has retaliated to U.S. tariffs with its own duties on American goods.

Some trade experts say China appears focused on securing a Xi-Trump meeting, in the hope it would make a near-term deal to limit or reduce tariffs more likely.

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Aphria review of acquisitions at centre of short seller allegations finds price paid was on the high end

Aphria review of acquisitions at centre of short seller allegations finds price paid was on the high end

Cannabis company Aphria Inc. says a review of recent transactions that a short seller cast doubt on has found the company paid a high price for the assets in question, and certain company directors had “conflicting interests” in the deals that weren’t disclosed at the time. 

The Leamington, Ont.-based company revealed the results on Friday of a special committee of independent directors tasked with looking into a slew of deals the company made last year.

The controversy began in December after two New York short-selling firms — Quintessential Capital Management and Hindenburg Research — accused the company of paying hundreds of millions of dollars for assets in the Caribbean and South America that the short sellers alleged were basically worthless.

The short sellers also said insiders at Aphria personally profited from the deals because they had financial stakes in some of the companies that were taken over.

Aphria’s shares plunged in the days that followed, even as the company disputed the claims and promised to get to the bottom of the matter by way of an independent review.

That review found the company paid on the high side of what the assets in questions are worth — albeit within a range that would be considered a fair price.

“The consideration paid for the assets purchased in the acquisition was determined to be within an acceptable range as compared to similar acquisitions by competitors, be it near the top of the range of observable valuation metrics,” Aphria said of the so-called LATAM deals, which together cost the company roughly $700 million.

The company also revealed Friday that “it appears that certain of the non-independent directors of the company had conflicting interests … that were not fully disclosed to the board,” but didn’t specify which directors.

Friday’s news is Aphria’s most significant statements on the issue since the story broke last year. During its last earnings release, the company declined to say much on the matter until the review was done.

In late December, Aphria named Irwin D. Simon to be the independent chair of the company’s board of directors, and then in January announced that CEO and founder Vic Neufeld and co-founder Cole Cacciavillani would be leaving their roles at the company, something which will formally happen on March 1.

On Friday, Aphria announced that John Cervini would also leave his position on the board as of that date, although he will stay on in a “non-executive operational capacity.”

Cacciavillani and Neufeld will remain as “special advisers” while having no formal role at the company.

“Though I was not part of Aphria at the time of the LATAM acquisition, the special committee’s findings give me and the board full confidence that it was executed at an acceptable value and is consistent with the company’s international growth strategy,” said Simon, who will become the company’s CEO on an interim basis until a permanent replacement can be found.

“With this behind us, we are committed to fully focus on our bright future and creating value for all Aphria shareholders. I’m optimistic that the special committee’s further recommendations for improving our corporate governance will serve us well in the future.”

One of the author’s of the original short selling report, Hindenburg Research, told CBC News in a statement Friday that the Aphria’s report vindicates their original argument.

“We applaud the independent committee for taking this matter seriously and for making significant changes to the company’s board and governance policies,” founder Nathan Anderson said. “The review largely corroborated our findings that acquisition prices were high and that multiple insiders had undisclosed conflicts of interest. We hope the company can turn a new leaf going forward.”

Investors seemed to welcome the news Friday, as Aphria’s shares gained half a dollar to $12.59 on the TSX. In the days immediately following the short report, the company’s stock bottomed out at $5 a share.

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Exotic car sales in overdrive in Toronto, say dealers at the Canadian International AutoShow

Exotic car sales in overdrive in Toronto, say dealers at the Canadian International AutoShow

Exotic car dealers say they’ve had bumper years for sales recently thanks to Toronto’s strong economy, crediting well-heeled newcomers who are driving an increasing demand for cars that may be unaffordable for most people.

At the Auto Exotica exhibit of the Canadian International AutoShow, 28 exotic cars with a combined value of more than $30 million are on display starting Friday — including the first Canadian appearance of the McLaren Senna, as well as the latest from Lamborghini, Bentley, Rolls-Royce, Aston Martin, Ferrari and Lotus.

The show also landed the North American premier of the Devel Sixteen — it’s the first time the car has been seen at any auto show outside of the company’s home city of Dubai.

“They have to come here. We buy their cars,” said Sonny Yashpal, who does car detailing for Grand Touring Automobiles, a dealership that sells models by Lamborghini, Aston Martin, Rolls-Royce, Bentley, Jaguar, Land Rover and Bugatti.

The McLaren Senna is named after the Brazilian Formula One race driver Ayrton Senna, honouring his success with the McLaren Formula One Team. (Philip Lee-Shanok/CBC)

He says demand has accelerated for high-end luxury and exotic automobiles and the dealership has had double digit sales growth over the last three years, from a few hundred cars a year to thousands — enough to warrant building a new location, the company’s third, just east of the Don River.

“It just seems like Toronto has a larger grasp on the premium car market. You know we are the hub of Canada really when it comes to our GDP,” he said.

“Toronto’s also such a mix of people; people want to live here and that drives foreign investment. Everyone wants to raise their kids here because it’s a safe, diverse place.”

Sonny Yashpal, who does car detailing for Grand Touring Automobiles. (Philip Lee-Shanok/CBC)

Chris Green of Pfaff McLaren Toronto says you only have to look at the Woodbridge-based dealership’s sales figures to explain why so many high-end car manufacturers need to have a presence in the GTA.

“In 2017, we were given the honour of being McLaren’s global retailer of the year,” said Green, adding that the Toronto location sold the most number of the high-end sports cars in the world that year and accounted for half of the 200 cars McLaren sold in Canada.

“We got money in this country, man. There’s definitely money,” Green told CBC Toronto.

A new McLaren Sports Series 540 starts around $200,000 and tops out at more than $1 million for the McLaren Senna, he said.

Chris Green, general manager for Pfaff McLaren Toronto, says strong demand in the city helped the dealership set North American and global sales records in 2017. (Philip Lee-Shanok/CBC)

“What we offer is a useable everyday supercar. And typically you don’t have those words combined in the same phrase, but it’s something that we offer,” he said.

But dealers don’t attribute the healthy sales for these types of cars  to the growth in the number of “one per centers” in this city alone.

Car culture in Toronto is also being fueled by social media, says Marlon Shaw, who has been posting pictures and videos to his Carswithoutlimits Instagram and Youtube channels and has gained almost four million followers.

“I think over the last few years the whole car scene has blown up like crazy,” he said.

“A few years ago you’d see one or two exotic cars. Now, the market has blown up.”

Alexander Lakatos, Indujan Sarvananthan, Marlon Shaw and Austin Pacheco say social media has helped kick exotic car culture in Toronto into overdrive. (Philip Lee-Shanok/CBC)

Indujan Sarvananthan also posts to Carswithoutlimits and says social media has definitely pushed Toronto’s exotic car craze into high gear.

And he says the social aspect has meant more meet-ups and car shows in the city.

The Lamborghini Aventador SVJ on display at the Auto Exotica exhibit of the 2019 Canadian International AutoShow. (Philip Lee-Shanok/CBC)

“A lot of these guys are actually posting their cars on Instagram and it’s out there. People are like, ‘OK, these guys are driving their cars in the winter. These guys are actually outside,'” said Sarvananthan.

“It’s more fun to see these cars on the road. You get cars seen on social media Facebook, Instagram, everywhere.”

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Average Canadian house price fell 5.5% in the past year, realtor group says

Average Canadian house price fell 5.5% in the past year, realtor group says

The average price of a Canadian home has fallen by 5.5 per cent to $455,000 over the past 12 months, the Canadian Real Estate Association said Friday.

The group that represents 125,000 realtors across the country says sales were higher in January than in December, but prices still sank compared to a year ago.

“Homebuyers are still adapting to tightened mortgage regulations brought in last year,” CREA president Barb Sukkau said.

More to come

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Is it the early days of a real estate revolution? Online realtor Redfin launches in Canada

Is it the early days of a real estate revolution? Online realtor Redfin launches in Canada

U.S. real estate brokerage firm Redfin launched in Canada this week — a firm that positions itself as a tech-powered company ready to shake up the way consumers buy and sell homes.

Founded in 2004, the Seattle-based Redfin is looking to challenge conventional brokerages through its primarily online operation and one per cent listing fee. The company offers a suite of online tools, including 3D video tours, but also hires agents on salary, who offer the same services as conventional brokers.

Turning to technology is what allows the company to keep its buying and selling process efficient, Redfin says. In Canada, a listing fee with a conventional brokerage is typically around 2.5 per cent.

“Our track record in the United States is that we sell homes for more money, and we sell them faster and with more certainty,” said Redfin CEO Glenn Kelman. “We hope to do the same thing here in Canada.”

The high tech-low commission combination has helped Redfin grow into 85 markets in the U.S., as well as raise a lot of money through an initial public offering (IPO) in 2017. Now worth about $1.7 billion US, the company has the money to expand — even if it’s not yet profitable.

Redfin CEO Glenn Kelman believes technology’s impact on the real estate sector will continue to grow. (Andy Hincensberg/CBC)

The brokerage launched in Toronto on Tuesday, with plans to open in Vancouver by spring, before expanding to other Canadian cities.

Redfin’s entry into the Canadian market also comes on the heels of two other web-based operators: Purplebricks, a commission-free, U.K-based brokerage, and Zillow, a popular U.S. listing service and mobile app.

It also comes just months after the end of a years-long court battle that saw the Toronto Real Estate Board (TREB) ordered to allow its brokers to publish more sales data online, such as sold prices and delistings — a move touted as a way to start opening up the market to data innovation.

Tech transforming home-buying for Americans

The arrival of these potentially disruptive new players might be the early days of a real estate revolution long-awaited by industry watchers, according to Will Strange, a professor of economic analysis with the University of Toronto’s Rotman School of Management.

“It’s the kind of industry that is really ready to be revolutionized,” said Strange, who has been predicting change in the real-estate sector for more than two decades.

While Strange initially believed that revolution would come to real estate as quickly as it came to the travel industry — starting in the late 90s. Now there are signs it may have finally arrived.

An Offerpad home is shown for sale in Gilbert, Ariz. The company is what’s known as an iBuyer. (Offerpad)

Over the past two years, investors have poured billions into real estate firms that are using technology to do more than just list and promote homes. 

And while online realtors like Redfin may challenge convention in Canada, much more radical changes are being rolled in the U.S. market.

The ‘iBuyers’

One of the biggest disruptions south of the border has come in the form of real estate companies known as “iBuyers,” or institutional buyers.

These investor firms use algorithms, or automated valuation models (AVMs), to determine the market value of a home, before making an initial offer on the property, often sight unseen. They’ll then send in staff to inspect the home, finalize the price and close the deal within a week.

The process is aimed at speeding up and streamlining the selling process for homeowners, providing certainty about the sale, the price and giving them control over the timeline. The seller picks the closing date and can change it as needed — an ideal scenario for people who might unexpectedly be relocating for a job or moving into a house still under construction. There’s also the bonus of not having to spruce up your home for showings.

But the convenience also comes at a cost: iBuyers charge a fee of anywhere from six per cent, up to as much as 13 per cent — the top end being significantly higher than a traditional commission.

Consumers can make offers online on homes listed for sale with Offerpad. The company can also give sellers an initial offer on their a home within hours of them answering some questions about the home. (Offerpad)

Still, the iBuying space is taking off in the U.S. Opendoor got it started in 2014; Offerpad quickly followed. Both have raised hundreds of millions in investment and are expanding rapidly. Zillow and Redfin have, too, recently moved into iBuying, and growth in the sector convinced traditional brokerages, like Keller Williams and Coldwell Banker, to test the concept.

Offerpad, which operates in nearly a dozen U.S. markets, says the fee model — not profit on resale — is the key to the business. 

“Our intention is to get people as close as possible to what they think their home is worth,” said Cortney Read, Offerpad’s communications director.

Offerpad’s sweet spot is in cities with diversified economies, buying houses built after 1960 that are generally priced under $600,000. The company believes its model could work in Canada, even accounting for seasonal buying trends.

​Trading in your house like a car

Another radical iBuyer approach comes from Knock, which essentially arranges a home swap for its consumers.

The company buys their clients’ new home for them in cash and moves them in. Then it does the needed repairs on the homeowner’s old home, before putting it up on the market as a Knock listing.

Knock co-founder Sean Black says the trade in model solves a chicken-and-egg problem because “70-plus per cent of people in the U.S. that are buying homes every year are also selling one.”

Knock advances up to $10,000 US to the homeowner to pay for repairs on the old house, which is paid back when it sells. The client also continues to pay the mortgage on their old home until it is sold, when the title and mortgage for the new property is finally transferred over.

Knock CEO Sean Black believes his company is part of a long-awaited real estate revolution in an on-demand world. (Knock)

Knock makes its money by taking a three per cent commission from the homeowner on the sale of their old house, and another three per cent from the seller of the new house. Tech is at the core of the company, which uses algorithms to determine how much a home is likely to sell for, and to help choose which markets to enter.

Black believes his company, and the other innovators in the space, like Ribbon and Bungalow, are the long-awaited real estate revolution in an on-demand world, where consumers expect consistency and transparency.

“The big picture here is what you’re witnessing is the transformation of this industry,” he says, moving from a world where going individual agents have control to one where institutional buyers can “give you a really professional, certain and hopefully cost-effective solution.”

Black admits the change could a take a generation — a sentiment echoed by industry-watcher Strange.

Still, there’s also the potential for the snowball effect to take hold, Strange says.

“I would expect change to happen overnight, I just don’t know which night.”

WATCH: Tech-brokerage Redfin hopes to shake up Canada’s real estate market

As the price of a home in Canada has shot up over the years, the corresponding fees have skyrocketed as well. Now Redfin, a tech-focused U.S. brokerage, is hoping to change that by promising lower fees in a push to shake up Canada’s real estate market. But will it work? And if so, at what cost? 2:53

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