Back in the spring of 2011,
Canada’s dollar was flying
high. It hit a level of almost
five cents above the American
greenback. As experts
pointed to the advantages of Canada’s
banking regulations, the Great White
North was outpacing the United States
coming out of the 2008 worldwide recession.
The purchasing power of Canada’s
printing industry was fantastic. Machinery
was at an all-time low – as much as 40-percent less than 2003 levels. It was never
going to last, however, and today we face
USD 30-per-barrel oil, metal prices spiraling
to near historic lows and our dollar is
trading in the 70-cent range relative to the
once again mighty U.S. buck (USD).
There are serious implications for domestic
manufacturers facing a low Canadian
dollar. First and foremost are the
wild swings occurring as the Loonie bobs
about finding its true value. This is our
most difficult issue. If the Loonie would
just park itself somewhere, we might be
able to cope and adjust. But, fast moving exchange
rates bring chaos to budgets and
Very few businesses can benefit like
billionaire George Soros has amid these
FX swings. Besides machinery, a great
deal of materials and consumables are
priced in USD. Printers quoting work –
even a few weeks ahead are now finding it
difficult to hold firm prices. The Bank of
Canada’s Stephen Poloz opined that it
could be two years before we see the
fallout (both good and bad) from the recent
and drastic decline in our currency.
It is not a simple remedy to buy Canadian
products or to create an artificially
lower exchange rate in-house. Behind the
scenes, financial markets and a global
community are going to close the door.
Products made in Canada will always be
valued not so much on their cost but on
their value in USD. Almost everything
made here has some element of American
content. If by chance they do not have
U.S. content, it still will not matter and prices will rise just because they can!
effect will be best exemplified by paper,
an everyday ingredient of printing, regardless
of whether it is produced in
Canada, Asia, Europe or the United
States. Paper is a worldwide commodity
and, even if it left the factory in Indonesia,
it will be priced in USD. Canadian paper,
with whatever portion of American value
added, will rise to reflect a world value
and not a Canadian value. You cannot
escape the future higher costs of anything
Machinery, the most expensive product
printer’s purchase, will see prices rise
dramatically in the next few months.
Whether these machines come from
Germany, Japan, China or the U.S., they
are usually imported by American companies
first and converted into USD.
With machine inventories mostly American
held, you will pay accordingly.
Meanwhile, China’s Yuan currency rides
the USD and Chinese manufacturers
price their products in USD.
It is not just our Loonie that has been
seeing declines. The Euro has dropped
substantially in 2015 versus the USD.
Companies like Heidelberg have the
ability to play the FX markets and it’s
possible they are able to sell their machinery
in Canadian dollars exchanged
against the Euro. Japan’s manufacturers
work through their American subsidiaries
or dealers and while the machinery may
leave Japan in Yen, it’s bought with USD
in a sometimes forward contract.
Realities of the negative exchange facing
Canadian printers can hit home
hardest when it comes to obtaining
needed parts for their machines. This
revenue stream becomes particularly
important for Canadian dealers if the sale
of large machinery declines.
There is a general assumption around
the world that if a country’s currency
tumbles then it becomes a great place to
shop. This is largely untrue, especially
with equipment. Everyone wants and
expects a world price. Press makers will
not sell any cheaper in Canada than they
do anywhere else. If this were the case
then we could assume all of us Canadians
would be paying even less to for oil and
gas, which is unlikely to ever happen.
Besides labour, occupancy costs and
taxes are safe from a falling dollar. Little
else is and Canada continually faces another
major issue, competitiveness. In
1998, when our dollar started to fall,
Canadian printers like most other manufacturers
used it like a golf handicap.
Great – we just got some free strokes! The
lower dollar maintained our historical
position as faux Americans.
The appetite to compete has been at
the centre of Canadiana since confederation
and why, even in 2016, we find ourselves
not able to keep up with U.S.
entrepreneurship. The immense size of
the U.S. absorbs much of what it produces.
Canada is a nation with risk adverse
businesses, conservative banking and a
labour pool that demands a social net.
Inflation is a by-product of a low dollar,
which may not be as negative as it sounds.
Large printers who do business in the U.S.
can shield themselves from some of the
risk by offsetting their materials purchases
against sales made, both in USD. This
leaves truly Canadian costs (labour) to be
more profitable. The dwindling middle
class of print – companies with limited
sales reach – will face more systemic
As printers wait for calmness in the
big-ticket market, the best thing they can
do is sell products in the U.S. This alone
will not only dampen the effect of bad
rates but help us all in Canada to be more
competitive as we go head to head with
some of the best businesses in the world.
The low Loonie may not be forever.
Oil will shoot back up eventually and
China will hopefully resume its bullishness
for Canadian raw materials. When
this happens our dollar will strengthen..