Canadian chemical sales increase by 6% to $20B in 2003

Ottawa, ON – January 9, 2004 – Overall sales of Canadian manufactured chemicals increased by 6% in 2003, despite a delay in the recovery of the US economy. According to the annual survey of business conditions compiled by the Canadian Chemical Producers’ Association (CCPA), respondents expect to see a further 5% growth for 2004.

Growth is strong, but profitability continues to be threatened. “Ontario and Quebec have increased corporate taxes just as the business cycle is set to enter the capital investment phase,” says Steve Griffiths, CCPA chairman. “This may hurt companies seeking new investment to add capacity and new technologies; improve productivity; create jobs; and respond to sustainability challenges like climate change.”

Looking ahead, the latest information on the global and US economies, which have a great effect on the Canadian chemical industry, indicates that the downturn in global chemical industry activity has likely bottomed out and the industry is poised for a recovery in 2004.

Survey respondents expect sales value and volumes to grow by 5% in 2004, while average chemical selling prices are expected to remain unchanged. Exports are predicted to grow by 13%, led by an increase of 16% in exports to the US. Operating profits are expected to recover, increasing by 31% to $1.1 billion in 2004. Fixed capital investment by the chemical manufacturing industry is estimated to have increased by 12% during 2003 to $1.2 billion, and is expected to increase to $1.4 billion in 2004.

Canadian chemical industry growth has been double the US rate in 2003 and, on a cumulative basis, has been 5 times the US since 1997. In 2004 both the Canadian and US chemical industry growth rates are projected to be 3%, with the Canadian rate slightly lagging the US rate. Domestically, low interest rates are supporting higher housing starts and purchases of durable goods that are pushing up chemical demand. Sales to customers in Canada, which increased significantly in 2003 are, however, expected to fall by 9% as more output is redirected to the strengthening US market. A key factor that could negatively impact on growth prospects is a further increase in the Canada-US exchange rate.

Inorganic chemical producers expect increased sales as demand increases, but some electrochemical producers are being hit hard by higher electricity costs, which are having a negative impact on margins. Specialty chemical producers are being negatively affected by the exchange rate and by energy costs.

CCPA represents 67 member companies and partners with over 200 chemical manufacturing sites across the country. These plant operations account for over 90% of the basic chemicals and resins manufactured in Canada.