STRONG PRODUCT PRICING AND STABLE SALES FOR INDUSTRIAL CHEMICALS IN 2017, CONDITIONS RIPE FOR GROWTH
Sales of industrial chemicals on a volume basis remained relatively flat from 2016, according to the Chemistry Industry Association of Canada’s (CIAC) annual survey of business conditions published today. However, 2017 saw relatively strong pricing for chemical products leading to a 7 per cent rise in constant dollar sales over 2016. Exports remained strong at $18.6 billion and capital expenditures increased 7 per cent from 2016.
“Canada’s industrial chemical sector is now in its tenth consecutive year of profitable operations since the last recession,” said Bob Masterson, President and CEO of CIAC. “The stable sales reflect a year when no significant new capacity came on stream and no large facilities closed,” he added.
Looking ahead, a 1 per cent increase in overall sales is forecast for next year, while production volumes are expected to fall by 2 per cent, and operating profits are expected to continue their downward trend. Though exports for 2017 are expected to decrease 4 per cent to $18.5 billion, a 1 per cent increase in exports is forecast for 2018, suggesting some improvements in key export markets. These increases are expected to result in modest growth for the industry.
As 2017 comes to a close, we are starting to see positive improvement in investment conditions for Canada’s chemistry industry. Both Ontario and Alberta have substantial investment assistance programs in place, with additional measures anticipated in Alberta once the province has considered the soon to be released report of the Energy Diversification Advisory Council.
In 2017, the Government of Canada established the technology-agnostic, Strategic Investment Fund (SIF) for which chemistry sector investments are now eligible. In the meantime, the House of Commons Finance Committee has echoed CIAC’s advice and is calling on the government to advance chemistry sector supports within the SIF, and to strengthen depreciation treatments under the temporary Accelerated Capital Cost Allowance (ACCA) measure to match that which is available in the United States.
The recent investment announcement by NOVA Chemicals is proof of the improving conditions. “We are thrilled by NOVA Chemicals’ recent decision to proceed with a $2 billion expansion in Sarnia with support from the Province of Ontario,” continued Masterson. “Looking to 2018, we will be working closely with the Province of Alberta and the Government of Canada to move the nearly $8 billion in proposed PDH/PP projects in Alberta towards final investment decision. This will require an all hands-on deck commitment,” added Masterson.