Canada’s chemical industry bounces back

Canada’s chemistry sector was hit hard during the recession but it’s experiencing a solid recovery in 2010, says a year-end survey Canadian chemical companies.

December 10, 2010   by PLANT STAFF

Canada’s chemical industry saw sales increase 14% in 2010.

Photo: iStockphoto

OTTAWA: Canada’s chemical sector was hit hard during the recession but it’s experiencing a solid recovery in 2010, says a year-end survey of Canadian chemical companies.

The Chemistry Industry Association of Canada (CIAC) survey of its members shows an increase in sales of basic chemicals and resins that totalled $21 billion in 2010, which is a 14% increase over 2009, and operating profits of $2.3 billion, a 73% improvement.

“This is a good sign that our industry is on track to reach pre-recession levels of production,” said Richard Paton, president of CIAC in a release. “But to grow beyond that, Canada needs to focus on upgrading more natural resources on Canadian soil, rather than exporting them.”

The sector exports almost 75% of its production, which the CIAC said is roughly double the global average and almost three times the US average. Exports of basic chemicals and resin increased 19% and exports to the US were also up 19%, despite a 96-cent dollar.

Prices were up 8% and the CIAC said the strong profits were driven by a decline in the price of natural gas (from $13/Mbtu in mid-2008 to the $4 to $5/Mbtu range) and a higher crude to natural gas ratio of the price of crude oil to natural gas (from the 7-9:1 range to about 15-20:1). But the profit increase was not reflected in capital expenditures, which the association said declined by 33%, “underpinning investor uncertainty in the economic environment.”

Capacity reached 82% by the end of the second quarter compared to 69% during the same period last year.

Respondents expect sales to increase in 2011, but at a slower rate. There is concern the rate of recovery in the US is slowing and a higher-value dollar will make it more difficult to sustain sales levels. Other challenges cited include continuing protectionism in the US, a declining Canadian manufacturing sector and heightened competition from the Middle East, China and India

Click here for a copy of the 2010 Year-end Survey of Business Conditions.

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