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Keystone XL not dead, but how many shippers will flee?

These are stories Report on Business is following Thursday, Jan. 19, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Question of shippers for Keystone President Barack Obama's rejection of Keystone XL isn't seen as the death of the proposed pipeline to the Gulf Coast, but analysts do believe some shippers may defect.

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As The Globe and Mail's Shawn McCarthy and Nathan VanderKlippe report, the Obama administration said yesterday it won't allow the project, which would carry 830,000 barrels of oil sands bitum a day, to go ahead in its current form, but that TransCanada Corp. can reapply.

The company is working on an alternate route, which would skirt an environmentally sensitive area in Nebraska, and plans to submit a new application.

"Plans are already under way on a number of fronts to largely maintain the construction schedule of the project," said chief executive officer Russ Girling. "We will reapply for a presidential permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014."

Producers have stuck by TransCanada. While the project is still seen as going ahead, the question now is "when and how many contracts flee," said analyst Chad Friess of UBS Securities Canada.

Mr. Friess does not expect a mass exodus, but he does see some erosion before a completion date in the second half of 2014.

"The 830,000 barrel-a-day XL project carries significant contractual commitments ... critical to the economic viability of the pipeline," Mr. Friess said.

"The majority of these shippers were content with the revised approval timing of Q1 '13 but we do expect some migration of commitments towards Enbridge's Gulf Coast alternative, though not enough to condemn the project," he said in a research report.

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"The key question will be whether a refile will add further delays to the [Department of State's]original guidance. Ultimately, the results of this fall's presidential election may now play a significant role in the approval timing."

TransCanada said in mid-December that more shippers had signed off, bringing to more than 1.1 million barrels a day for the full Keystone pipeline system, which includes an existing route.

Markets rise Global markets are on the rise so far this morning, digesting news from Europe, China and the United States.

As the U.S. corporate earnings parade continues, investors are also taking some solace from successful debt auctions in France and Spain, jobless numbers in the United States, and reports that Beijing will allow major banks to lend more. Clouding the outlook, though, are talks between Greece and creditors that could determine whether Athens can survive or is headed toward default.

Tokyo's Nikkei 225 climbed 1 per cent, and Hong Kong's Hang Seng 1.3 per cent. In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.5 per cent and 1.6 per cent by about 9 a.m. ET.

Dow Jones industrial average and S&P 500 futures also rose.

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"Global financial markets let out a sigh of relief after a couple of key bond issues by France and Spain were met with strong demand a week following their ratings downgrades," said senior economist Jennifer Lee of BMO Nesbitt Burns.

"Both had shorter-date bill auctions earlier this week (and paid lower yields) but today's auctions were for longer maturities. Spain sold €6.6-billion in bonds ranging from four to 10 years, above the €4.5-billion target, with bid-to-cover ratios over 2x. With the exception of the four-year bond, the other two saw yields fall from their previous auctions. France's sale of just over €7.9-billion of mid-term bonds, near the top of the €6.5-to-€8-billion range, was met also with excess demand. Risk appetite has also been whetted by Bloomberg reports that China was allowing five of its largest banks to bump up lending 5 per cent from a year ago."

Kodak moment Eastman Kodak Co. filed for bankruptcy protection in the United States, giving the 130-year-old photography icon time to overhaul its business and make the most of its patents.

Kodak said in a statement that it had arranged debtor-in-possession financing from Citigroup Inc. to the tune of $950-million (U.S.), and that the move will allow the company to focus on its "most valuable" units. It also plans to "monetize" intellectual properties not deemed strategic.

"Chapter 11 gives us the best opportunities to maximize the value in two critical parts of our technology portfolio: our digital capture patents, which are essential for a wide range of mobile and other consumer electronic devices that capture digital images and have generated over $3-billion of licensing revenues since 2003; and our breakthrough printing and deposition technologies, which give Kodak a competitive advantage in our growing digital businesses," said chief executive officer Antonio Perez.

U.S. jobless claims fall Bit by bit, the jobs crisis in the United States is easing.

Initial claims for jobless benefits declined sharply last week, by 50,000 to the lowest since the spring of 2008, according to data today from the Labor Department.

These numbers are traditionally volatile, particularly at the beginning of the year, but the four-week moving average also dipped, though by 3,500, to 379,000.

It's important to note that that's below 400,000, seen as a key level for continued job creation.

In Canada, the number of people collecting regulator jobless benefits was little changed in November, at 539,000, Statistics Canada said.

Factory shipments climb Shipments from Canada's factories climbed 2 per cent in November as the machinery sector scored its highest level of sales on record.

The overall gain marked the fourth increase in five months, Statistics Canada said today.

Fourteen of 21 industries measured chalked up increases, but that represented about 80 per cent of the sector, the federal agency said.

The machinery industry was a standout, marking a 13.4-per-cent sales increase.

"The growth was mostly concentrated in the mining and oil and gas field machinery manufacturing industry, where a number of companies completed large projects for delivery to both domestic and international customers," Statistics Canada said.

Inventory levels climbed again, for the 14th month in a row, by 0.4 per cent, unfilled orders rose 1.2 per cent, and the inventory-to-sales ratio dipped to 1.31.

"Going forward, while the recent increase in demand for U.S. autos could continue to support factory activity here, the completion of the resource-related machinery sales in November suggests the pace of factory shipments could slow in the months ahead," said Emanuella Enenajor of CIBC World Markets.

Bombardier on luxury list Heremes, Chanel, Louis Vuitton, Versace, Prada and ... Bombardier.

The World Luxury Association today ranks the globe's 100 most valuable brands where bling is concerned after what it calls the "Luxury Oscar Awards" held in Beijing this month.

Bombardier Inc. holds second spot in the aircraft category, just behind Gulfstream, but ahead of rival Embraer.

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