1.6 Trends in global supply and demand for northern natural resources

Last Updated: 
June 2, 2015

This indicator reports on prices for some commodities important to the NWT economy. The natural resource price index provides an indicator of the global supply and demand for the NWT’s main renewable and non-renewable resources on the world market.

Oil and gas development, NWT
Oil and gas development in the NWT

This information is summarized from the Statistics Canada report Human Activity and the Environment 20111. Text and analysis is from the EnvironStats report ”Canada’s natural resource wealth at a glance”2 tracking the natural resource price index as measured by the “overall price change for the bundle of resources considered”2. These resources are grouped as energy (natural gas, crude oil, oil sands*, and coal), minerals ( gold-silver, nickel-copper, copper-zinc, lead-zinc, molybdenum, uranium, potash and diamonds) and timber (timber stocks physically accessible and available for harvesting). Most of these resources, except potash, are present in the NWT.

The fur price indicator tracks the average annual price obtained per marten pelt. Marten is the most important species in terms of revenue for the NWT fur industry. GNWT Industry, Tourism and Investment compiles information on pelts sold at international auctions in Canada.

NWT focus

As prices for natural resources go up or down, prospects for exploration and development of some of the NWT resources also change. These driving forces have affected past land use patterns in the NWT. They will continue to affect the NWT environment in the future. Fur prices are one of the main causes for changing participation in the trapping portion of the traditional economy in the NWT.

Current view: status and trend

Energy, minerals and timber

Quotes from Canada’s Natural Resource Wealth at a Glance2:

“Unless set by regulatory agencies or organizations, the price of any good or resource is typically determined by supply and demand. The supply of natural resources is usually fixed in the short-term. In the long-term, however, the supply is affected by a number of factors including changes in resource prices, advancement of extraction technologies as well as discoveries of new deposits and depletion of resources.’

“On the other hand, demand for most natural resources is variable in both the short and long run, being affected by fluctuations in domestic and global economic factors. When resource demand rises in the short term, constraints on short-term supply can mean sharp increases in prices. This effect can be seen in the price index of natural resources…, which has been volatile over the past decade, mainly due to fluctuating demand.”

“On average, the all-items natural resource price index grew more than 9% per year from 1997 to 2006. Declines in resource prices in 1998 and 2002 were related to the 1997/98 East Asian financial crisis, and the terrorist attack of September 11, 2001, which triggered slowdowns in the global economy. Between 2002 and 2006, the price index of natural resources increased rapidly.”

“In recent years, the real GDP of India and China, the world’s two most populated countries, grew more than 8% a year. These countries are both large importers of natural resources. In particular, China’s demand for industrial raw materials has pushed up world energy and metal prices.”

“Volatility in the energy resource price index was the main factor for the volatility in the all-items resource price index. During the last decade, the energy resource price index grew on average by 12% per year, followed by minerals (7%) and timber (2%).”

Wealth from energy, timber and mines, NWT, 1990-2008
Source: Statistics Canada. Natural resource price index. 1990-2009. From Human Activity and the Environment 2011: "Economy and the Environment"14.

Marten pelts

Fur prices increased steadily after the Second World War when a large influx of women in the job market created a strong demand for fur items previously only been available to the wealthy few. By the late 1980s, the demand and price for furs had increased to an all-time high. Prices collapsed in the early 1990s with large-scale campaigns for the abolition of trapping and changes in the fashion industry. By 2000, the price of marten pelts had returned to about the same value, accounting for inflation, as the 1960s. China is a major importer of Canadian furs. With the increase in the Chinese economy, the price of fur has increased in the past decade and by 2005-06 had reached levels seen in the early 1980s.

Average value of marten pelts sold 1957-2014 NWT
Source: GNWT ITI - Average price (indexed to 2008) of marten fur pelts sold at international auctions (line). Number of pelts sold (bars). Inflation rates from Canadian Inflation Calculator. For example, due to inflation, receiving $6.71 for a pelt in 1958 is equivalent to receiving $51.53 for it in 2008.

Looking forward

Quotes from Canada’s Natural resource wealth at a glance2:

When prices increase, businesses not only boost production to earn profits but also invest more in exploration and drilling activities. This may result in the discovery of new deposits. Also, with increased prices, previously known but unprofitable resources may become profitable to extract, which in turn increases the size of the economically recoverable reserve.”

On the other hand, exploration and production decrease when prices decrease.

“From 1997 to 2006, the all-items extraction cost index grew, on average, by 10% per year. This increase was mainly due to the increase in labour and capital costs in recent years.”

The price of pelts on international markets can vary with the global economy and fashion. They also vary depending on winter weather. Warm winters in China and other major fur buying areas result in low fur sales. Warm winters in the NWT produce poor quality furs, resulting in low prices. On the other hand, an extremely cold or snowy season may reduce pelt availability, increase demand and increase price. Competition from the wage economy can also reduce the number of furs harvested. This can result in a reduced supply and increase prices. How weather and competition will affect the future of the trapping industry in the NWT is uncertain.

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Contact us

Found an error or have a question? Contact the team at NWTSOER@gov.nt.ca.


References:

Ref. 1. Statistics Canada. 2011. Human Activity and the Environment. 2011. Economy and the Environment. Government of Canada.

Ref. 2. Islam, K. 2007. Canada's natural resource wealth at a glance. EnviroStats 1:4-5.