OUTLOOK '11: Canada's chemical sales to grow only 2% in 2011

29 December 2010 20:02  [Source: ICIS news]

By Stefan Baumgarten

TORONTO (ICIS)--Canada’s chemical sales are expected to grow only 2% in 2011 as uncertainty in the key US export market is looming large.

“We are still looking at a very shallow recovery; it could take some time to build back to pre-recession levels across the overall economy,” said the Ottawa-based trade group Chemistry Industry Association of Canada (CIAC).

The slower growth would come after the chemical industry’s strong recovery this year, when sales of basic chemicals and resins rose 14% to Canadian dollar (C$) 21bn ($21bn, €16bn).

CIACciting its recent survey of member firms, said Canadian chemical producers would see low growth next year because of limited export opportunities to the US, the rising Canadian dollar, as well as increasing protectionist sentiments in the US.

Overall sales volumes were forecast to increase by 5%, with exports volumes to the US expected to increase “by a modest 2%, a reflection of our membership’s ongoing concern for the recovery in our key export market,” the group said.

“The US recovery continues to be uneven,” CIAC said.

“Weakness in the housing sector and personal spending will impact demand for chemistry products which are predominantly exported into this market,” it said.

Meanwhile, globally, high debt levels in many nations continued to threaten financial and banking stability.

A key challenge for 2011 was decreasing feedstock availability in Alberta province, where ethane extraction from conventional natural gas production was falling.

CIAC reiterated earlier predictions of an ethane shortfall of 70,000 bbl/day by 2015 if nothing was done to increase the ethane supply in Alberta.

The group noted, however, that the Alberta provincial government “appears poised to take measures to address the feedstock issues facing the region”.

As one measure, CIAC was advocating an extension of the province’s Incremental Ethane Extraction Policy (IEEP) from 2007 to boost feedstock supplies, it said.

In addition, chemical producers were exploring new feedstock sources such as those from the US Bakken and Marcellus shale deposits, and olefins-rich off-gases from bitumen upgrading in Canada’s oilsands industry, the group said.

Another worry for the industry was that many of its customers were moving production to China or elsewhere in Asia, thereby eroding the Canadian customer base.

Also, the increasing number of new basic chemical facilities in the Middle East was adding competitive pressure to Canadian operations, it said.

In related news this week, a rail industry trade group reported that for the year-to-date period to 18 December, Canadian chemical railcar shipments were up 22.8% to 731,370, from 595,581 in the same period in 2009.

Major chemical firms with production in Canada include NOVA Chemicals, Dow Chemical, Shell, MEGlobal, DuPont Canada, LANXESS, Invista, and ExxonMobil’s Canadian Imperial Oil affiliate, among others.

($1 = C$1.00) ($1 = €0.76)

For more on NOVA, Dow and other producers visit ICIS company intelligence
Read Paul Hodges’ Chemicals and the Economy Blog
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By: Stefan Baumgarten
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