Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Michelle Laframboise, co-owner of ClearWater Design Canoes & Kayaks, in the company's sales room in Prince Edward County, Ont., on Sept. 3. Ms. Laframboise, who runs the company with her husband Ian Crerar, has roughly doubled production, hired new staff and added a factory shift to meet demand.

Alex Filipe/The Globe and Mail

Factory orders are piling up. Shipping costs are pricier than ever. And key materials are in short supply.

Eighteen months into the COVID-19 pandemic, companies are grappling with supply-chain troubles that are proving more durable than initially thought. The latest headwind is the Delta variant, which has spread quickly in Southeast Asia, hampering output of everything from shoes to semiconductors.

The situation is causing plenty of headaches for Canadian companies.

Story continues below advertisement

Montreal’s Dorel Industries Inc. said revenue in its homeware division was hit by shutdowns at suppliers in Malaysia and Vietnam. High Liner Foods Inc. of Nova Scotia is dealing with container shortages. Auto parts maker Linamar Corp. can’t fill orders as quickly as usual, owing to supply issues.

Trade disruptions have already taken a toll. In the second quarter, weaker exports dragged Canada into a surprise economic contraction. Statistics Canada noted that auto production – and subsequently, exports – were stymied by the struggle to import parts.

On that front, more trouble is coming. Citing the computer chip shortage, several automakers have slashed production for September. General Motors Co. is reducing output this month at most North American assembly plants, including an extension of downtime at the CAMI plant in Ingersoll, Ont.

Ms. Laframboise walks along rows of canoes and kayaks ready to be shipped.

Alex Filipe/The Globe and Mail

It’s a reminder that, despite boasting one of world’s top vaccination rates, Canada is hardly immune to global forces that are upending trade. While the Delta variant hasn’t derailed Canada’s economic recovery, it’s bound to make things more difficult, analysts say.

Most people felt that “supply disruptions would start to ease around now,” said Stephen Brown, senior Canada economist at Capital Economics. “In reality, it’s become increasingly clear that those disruptions are likely to persist into 2022.”

Trade woes were born out of a unique set of pandemic conditions. Flush with cash, consumers are buying lots of stuff, but factories are struggling to catch up after shutdowns. The shipping industry, meanwhile, is unable to handle a crushing volume of goods, leading to delays and escalating costs. Freight rates are up 580 per cent from two years ago, according to an index of eight major routes from Drewry, a maritime consultancy.

That’s pushing Dan Evans’s business to the brink. He runs a toy importer in Kitchener, Ont., called KidSquad Dealership. The company sells miniature ride-on cars for children, which are manufactured in China and sold in Canada through big-box retailers and online.

Story continues below advertisement

Before the pandemic, shipping costs for Mr. Evans amounted to $30 a car. Now, it’s more than $200. At that price, he can’t justify shipping the tiny vehicles, which retail for between $350 and $750. That’s why a fleet of toddler-sized cars are sitting in storage at a Chinese port.

“I‘ve also just had to say no to sales,” he said. “I’ve got probably $170,000 worth of orders, and I have to say, ‘I can’t do that, sorry ... I just lose too much money on it. I can’t recover the cost increase.’”

George Campbell, production manager at ClearWater Design Canoes & Kayaks, drills holes into a newly molded kayak at their factory.

Alex Filipe/The Globe and Mail

KidSquad has enough inventory in Canada to get through the Christmas season, Mr. Evans said. But if shipping prices remain elevated into the new year, he may decide to pull the plug on the business and leave the inventory in China.

“I can’t lose more money on it,” he said.

The situation is very different at ClearWater Design Canoes & Kayaks in Picton, Ont., around 230 kilometres east of Toronto.

Michelle Laframboise, who runs the company with her husband, has roughly doubled production, hired new staff and added a factory shift to meet demand. Regardless, it’s been a challenging time. The price of plastic has soared to record highs – a cost the company has absorbed rather than pass on to customers. And Ms. Laframboise has to order parts as much as eight months in advance. It used to be one month.

Story continues below advertisement

“The days of just-in-time supply are gone,” she said.

ClearWater has already stockpiled a “good portion” of what it needs for next year’s production. That way, Ms. Laframboise is hopeful the company can avoid any Delta impact on overseas suppliers.

“I’d rather have a year’s worth of hardware … in my door, so that I’m not risking shutting down.”

Unlike ClearWater, many companies have passed on higher input costs. That’s partly why Canada’s annual inflation rate has jumped to 3.7 per cent, the quickest pace in a decade. The Bank of Canada, which targets 2-per-cent inflation, has said temporary factors are driving up prices. It expects inflation to ease in the coming years, but not return sustainably to its target until 2024.

In the interim, the Delta variant could inflame prices, said Doug Porter, chief economist at Bank of Montreal. That’s because it’s more likely that supply is affected than demand, which is supported by accommodative fiscal and monetary policies, plus billions of dollars in pent-up household savings.

The result is that too much cash would chase too few goods, fuelling an even steeper rise in inflation.

Story continues below advertisement

“I’m not that concerned about the demand side” of the economy, Mr. Porter said. “I’m much more worried about the supply side.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the authors of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies