Canada chem sales to rise 2% in 2010, but profits will drop

11 December 2009 19:48  [Source: ICIS news]

TORONTO (ICIS news)--Canadian sales of basic chemicals and resins are forecast to increase 2% next year, but volumes will remain flat and operating profits could fall sharply amid a fragile economic recovery, according to a survey by a producers group on Friday.

Sales for 2010 are projected at Canadian dollar (C$) 17.0bn ($16.2bn), a modest increase above the C$16.6bn expected for 2009, the survey by Canadian Chemical Producers Association found.

However, operating profits could plunge by some 36% from the C$1.4bn expected in 2009, partly due to increased natural gas prices next year, the group said.

The group’s projections are based on a number of factors, including a strong Canadian dollar relative to the US dollar, continuing weakness in the automotive, pulp and paper industries, as well as competition from the Middle East, China and India, it said.

Importantly, natural gas prices would rise because of reduced exploration and production in western Canada, the group said.

The unfavourable outlook for natural gas prices compares with low prices of 2009, which enabled Canadian-based producers to retain their operating profitability despite sharply lower sales in the wake of the recession.

Employment in basic chemicals and resins is projected to fall 11% to around 14,000 next year, coming on top of a 17% decline in 2009 from 2008.

The group also reiterated analysts’ projection of a 70,000 bbl/day shortfall in ethane production by the year 2015 if nothing is done to increase Canadian ethane supplies.

Major chemical firms with production in Canada include NOVA Chemicals, Dow Chemical, Shell, MEGlobal, DuPont Canada, LANXESS and Invista, among others.

($1 = C$1.05)

For more on NOVA Chemicals, Dow, and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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