In a year-end survey of business conditions for industrial chemicals, the Chemistry Industry Association of Canada (CIAC) portrayed a sector that continues to weather the often daunting political and economic challenges that dominated the news during 2018.
“Base industrial chemical growth has outpaced growth in global GDP and it’s projected to continue to outpace growth in global GDP,” says Greg Moffatt, CIAC’s Senior Director of Business and Economics. He notes that sales of these products are estimated to have increased by some 6% last year, reaching a value of $25.4 billion.
Nor is this a new trend, adds CIAC Senior Policy Analyst Dave Cherniak.
“Even though the North American economy hasn’t been running red hot since the financial crisis of 2008, our sector has benefited from that, with consumers reconfiguring their balance sheets as new products hit the market,” he says. “It’s just been a very consistent decade.”
While capital expenditures last year were only about 50% of what they were in 2014, that number is expected to jump significantly in 2019, as two major projects near completion. In Redwater, Alberta, Inter Pipeline Ltd. is spending $3.5 billion on a propane dehydrogenation (PDH) and polypropylene (PP) plant, while NOVA Chemicals is investing $2 billion in its Sarnia facility to provide ethylene for consumer products.
“Last year was about getting a lot of site preparation done, a lot of front-end engineering, design, and advanced fabrication work completed,” explains Cherniak. “Now the rubber’s really going to hit the road on that, we’re going to see these facilities start coming to fruition.”
CIAC also expected the year to wind up with a 10% increase in Canadian exports of chemical products, worth some $20.5 billion. That represented more than 80% of the country’s entire production, with almost 80% of that total going to the United States. In this context, the tense re-negotiation of the longstanding North American Free Trade Agreement could have been very worrying. But Cherniak says careful planning paid off.
“We got way out in front of the renegotiation process and we worked across borders with our sister organizations in the United States and Mexico — the American Chemistry Council and Asociación Nacional de la Industry Quimica,” he observes. “The North American chemical sector is very integrated across borders. It works very well as is. What we wanted to see was the streamlining of a couple of things, specifically in the category of rules of origin, which establish where a product was made. We also wanted to see better regulatory cooperation on common processes such as chemicals management. In fact, when we saw the final text of the agreement come out, we like to think we got about 95% of what we asked for.”
Now, as the shale oil boom in the United States matures and the petrochemical sector continues to diversify, Moffatt anticipates that Canadian firms will fight for their piece of this expanding market. The ability to compete for new, global scale investments has been aided by recent federal changes to Accelerated Capital Costs Allowance treatment as well as Alberta’s Petrochemicals Diversification Program and Petrochemical Feedstock Infrastructure Program. In addition to these investment support initiatives, Canada has the construction and fabrication capacity to maximize the local benefits of new investments. He points out that a giant splitter that is part of Inter Pipeline’s PDH/PP plant was built entirely in Edmonton and shipped in mid-January, becoming the largest single load ever to travel on an Alberta highway.
“This is not a global incumbent making a new chemical manufacturing investment in Canada,” he says. “This is a Canadian company and a new entrant into the chemical manufacturing marketplace.”