Growth in sales of Canadian basic chemicals and resins will slow in 2012: report
Canada's chemistry sector showed strong growth and profits in 2011 - but this doesn't necessarily bode well for 2012, according to a year-end report released by the Chemistry Industry Association of Canada (CIAC).
Canada’s chemistry sector showed strong growth and profits in 2011 – but this doesn’t necessarily bode well for 2012, according to a year-end report released by the Chemistry Industry Association of Canada (CIAC).
Sales of basic chemicals and resins totaled $25 billion in 2011 – an 18 per cent increase from 2010, nearly bringing sales back to their pre-recession levels – while operating profits rose 61 per cent, to $3.9 billion.
In addition, the Ottawa-based organization said that export sales increased by 20 per cent to $19 billion, sales to U.S. markets grew by 21 per cent, and sales to Canadian customers rose 13 percent, to $6.5 billion.
On the development side, the CIAC said, there have been some major new investments in the industrial chemical industry in Canada in the past decade. “The situation has changed such that companies are once again studying significant new investment projects in Canada,” the CIAC said. “The main driver for this change is the shale gas phenomenon, and the prospect for long-term availabilities of large volumes of low-cost natural gas and natural gas liquids.”
But the news isn’t all good. “Despite strong growth in 2010 and 2011, industry output remained about six per cent below the pre-recession peak experienced in 2008,” the CIAC said. “Part of this gap is reflective of a few permanent closures that occurred just prior to, and during, the recession.” The organization also said that its members expect their sales to increase by only two per cent in 2012, as a result of global economic uncertainty, the strength of the Canadian dollar, and rising electricity and labor costs.
And the shale gas developments have a downside too, especially in Western Canada. “Growing supplies of shale gas in the Lower 48 States has dampened demand for exports of Canadian gas, and curtailed drilling activity in the Western Canadian Sedimentary Basin,” the report said. “When less gas is produced, less ethane is recovered with the consequence that the Alberta petrochemical industry is currently short on ethane, and ethylene-based derivative units are running under-capacity.”
Combining all these factors, the CIAC projects that operating profits will be 11 per cent lower in 2012 than in 2011.
The full report – which is based on a survey of CIAC members – is available at this link.