By Stefan Baumgarten
The relatively modest 2012 growth forecast reflects fears about global economic uncertainty, in particular concerns about a European - or broader - recession, and its impact on overall demand, Ottawa-based trade group Chemistry Industry Association of Canada (CIAC) said.CIAC sees sales to customers in
In 2011, the industry’s domestic sales rose by 13% year-on-year to C$6.5bn, while chemical export sales rose by 20% to C$19bn. About 75% of
Chemical industry operating profits - before interest, taxes and special write-offs – will likely fall by about 11% to about C$3.43bn next year. This compares with a 61% year-on-year increase in operating profits, to C$3.86bn, in 2011.
Chemical industry employment will likely remain flat at around 14,000.
However, one area where a large jump is anticipated is in fixed capital expenditures, which are forecast to rise by 39% to C$1.3bn next year, reflecting plans by a number of firms to undertake significant temporary shutdowns for turnarounds during 2012, CIAC said
The group highlights a number of challenges facing the industry, including the continuing economic uncertainty, as well as feedstock, currency and other issues.
The main economic issue is the eurozone debt crisis as it is still unclear whether
While the Canadian fiscal environment remains healthy by international standards, and
CIAC also notes negative feedstock impacts on Canadian chemical producers from the US shale gas boom.
Growing supplies of
However, producers such as Canada-based NOVA Chemicals are undertaking strategies to secure ethane supplies, including imports of ethane from North Dakota and increased recovery and extraction of ethane from olefins-rich off-gases generated in the upgrading of Alberta’s oil sands, CIAC said.
The group also said that Canadian-based chemical producers remain worried about the value of the Canadian dollar, vis-à-vis the US dollar.
When the US dollar is relatively weak, US chemical producers become more competitive and gain global market share - at the expense of Canadian and other exporters.
As such, the uncertainty about future exchange rates remains an ongoing concern for the industry as unexpected large upward swings in the Canadian dollar have negative repercussions on the international competitiveness of
Another key competitive concern for
While electricity costs are of concern to all industrial chemical producers, the impact is largest for those firms producing inorganic chemicals, CIAC said.
Chemical firms are also worried about labour costs and the supply of qualified staff.
Labour costs are especially high in
Other labour issues relate to the availability of skilled workers needed to replace an aging industry work force.
($1 = C$1.02)