Pickering highlights a degree of ‘flavour of the month’ in the government’s commodities rhetoric. He notes that an emphasis has been placed on critical minerals and rare earths’, which reflects some talk out of the US government from earlier in the year. His concern is that this government may place an undue focus on those commodities and neglect Canada’s traditional strengths: oil, gas, iron ore, uranium, potash, lumber, canola, and grain. Those traditional commodities, he says, have earned a bad reputation in Canada despite enjoying strong demand. He fears that chasing the ‘shiny object’ of critical minerals might see those core commodities neglected further.
While Pickering is happy to see new tax credits, incentives, and public-private partnerships offered as part of the government’s drive to create more resource wealth, he says that challenges could emerge if government, rather than markets, determine where investment should flow. Given the number of cases that could be made for any particular commodity, Pickering argues that if government plays too much of a role in decision-making it could result in less positive outcomes.
In watching to assess the quality of this policy push, Pickering says he’s looking for activity, not language.
“Are we seeing deals getting done? Is xyz mining company going to expand or grow that opportunity in Canada? If not, what difference does any of this even make,” Pickering says. “We might be offering tax credits, but you need revenues and expenses for those to apply. I want to see activity out of this, and if we start hearing that these companies are coming back and looking at Canada, that will be the signal.”
For investors looking at the budget for commodity price guidance, Pickering stresses the global nature of these markets. While Canada plays a massive role as a producer of oil, gas, and uranium among other key commodities, he notes that the timeframe for extraction projects is long and that realizing opportunity can take a great deal of time. While Canada’s play to build wealth with commodities may be long-term, he notes that global demand for commodities continues to grow. The only risk he sees to the broad commodities cycle is a global slowdown and stagflation.