Archived — Canadian synthetic resins industry

Introduction

The synthetic resin industry converts or "polymerizes" petrochemicals like ethylene, vinyl chloride, propylene and styrene into a variety of resins or polymers. Resins are used by downstream industries such as those manufacturing plastic products, paints, and adhesives. Also included in the synthetic resin industry are compounders that blend basic resins with additives to produce concentrates and compounds for use by these same downstream industries.

Resins can be broadly subdivided into two categories — thermoplastics and thermosets.

Thermoplastics are the most commonly used materials in plastics processing. Examples include polyethylene, polypropylene, polystyrene, polyvinyl chloride (PVC), polyamide (nylon), and polyethylene terephthalate (PET). These materials soften on the application of heat and solidify when cooled. This ability to soften and solidify is reversible, making the recycling of thermoplastics relatively straightforward.

Thermosets are also used in some forms of plastics processing, including fibre-reinforced composites, and are the most common resins in formulated products like paints, adhesives, and inks. Examples include phenol formaldehyde, urea formaldehyde, epoxy, polyurethane, unsaturated polyester, alkyd, and silicone. These resins are cured via a chemical reaction which is generally not reversible. Whereas thermoplastics soften and can be reprocessed using heat, thermosets generally undergo decomposition when heated. For this reason, recycling of thermosets is difficult.

Relative levels of production by resin type are shown in Figure 1.

Figure 1: Industry Output by Resin Type (percentage of total)

Figure 1: Industry Output by Resin Type (percentage of total) (the link to the long description is located below the image)
Description of Figure 1
Figure 1: Industry Output by Resin Type (percentage of total)
Resin Type Output
Source: Innovation, Science and Economic Development Canada estimates
PE 3,282
PS    30
PVC   250
Nylon   152
MF/UF/PF 1,252
Rubber   150

Another way to characterize resins is by the price versus performance relationship. Commodity resins are produced in high volumes and command a relatively low price per unit volume. Engineering or specialty resins offer higher performance in attributes like heat resistance, flame retardancy, mechanical strength or electrical properties, are produced in smaller quantities, and command a higher unit price.

Structure and Performance of the Industry

The Canadian synthetic resins industry had shipments of $6.2 billion in 2010, and employed about 4,520 people at 144 establishments. See the table entitled Principal Statistics on the NAICS 32521 Synthetic Resins and Rubbers page for more information. Following a decline in output caused by the recession, the industry showed small growth in 2010.

The majority of larger firms operating in Canada are owned by U.S. and European multinational firms that operate subsidiary or joint venture operations around the world.

The Canadian industry is concentrated in three provinces — Alberta, Ontario and Quebec. Figure 2 shows the geographic distribution based on number of establishments. Plants based in Alberta produce commodity-grade thermoplastic resins from raw materials derived mainly from natural gas. The plants in Ontario and Quebec produce both thermoplastic and thermoset resins using raw materials derived from both crude oil and natural gas.

Figure 2: Regional Distribution of Establishments, 2009 (percentage of total)

Figure 2: Regional Distribution of Establishments, 2009 (percentage of total) (the link to the long description is located below the image)
Description of Figure 2
Figure 2: Regional Distribution of Establishments, 2009 (percentage of total)
Province Percentage of Total
Source: Statistics Canada
Quebec 27.8
Ontario 43.8
Alberta 14.6

The synthetic resins industry is capital- and technology-intensive, resulting in high levels of output per employee compared to manufacturing overall (Figure 3).

Figure 3: Shipments per Employee (thousands of constant 2002 dollars)

Figure 3: Shipments per Employee (thousands of constant 2002 dollars) (the link to the long description is located below the image)
Description of Figure 3
Figure 3: Shipments per Employee (thousands of constant 2002 dollars)
Year All Manufacturing Resins
Source: Statistics Canada
2000 288.0   928.9
2001 278.0   884.7
2002 282.0   961.7
2003 294.0   952.9
2004 320.0 1,174.8
2005 330.0 1,315.3
2006 339.0 1,391.3
2007 349.0 1,436.3
2008 363.0 1,292.6
2009 336.0 1,085.6
2010 371.0 1,233.4

Salaries in the industry are also significantly higher than all-manufacturing averages reflecting the need for highly trained workers capable of using the sophisticated technology employed in these plants (Figure 4).

Figure 4: Average Salaries (thousands of constant 2002 dollars)

Figure 4: Average Salaries (thousands of constant 2002 dollars) (the link to the long description is located below the image)
Description of Figure 4
Figure 4: Average Salaries (thousands of constant 2002 dollars)
Year All Manufacturing Resins
Source: Statistics Canada
2000 42.3 66.2
2001 41.9 61.9
2002 41.8 61.2
2003 42.8 60.6
2004 43.9 64.5
2005 44.0 66.5
2006 44.1 68.0
2007 43.6 65.3
2008 43.4 66.4
2009 43.1 65.8

Trade

Trends in trade orientation are shown in Figure 5. In 2010, exports totalled $5.5 billion and imports were valued at $6.0 billion. Canadian exports of synthetic resins have grown from 38 percent of total shipments in 1990 to 89 percent in 2010. Imports of resins have also increased significantly during this period and by 2010 accounted for 90 percent of total domestic consumption. Trade with the United States predominates with 82 percent of exports going there and 87 percent of imports originating there in 2010. This growth in two way trade reflects rationalization and specialization of the resins industry on a North American basis, and the increasing use of complex, higher-performance engineering resins that are mostly not manufactured in Canada.

Figure 5: Trade (percentages)

Figure 5: Trade (percentages) (the link to the long description is located below the image)
Description of Figure 5
Figure 5: Trade (percentages)
Year Imports as Percentage of Domestic Market Exports as Percentage of Shipment Ratio of Trade Balance to Shipments
Source: Statistics Canada
2000 77.2 76.4 -3.4
2001 84.3 84.4  0.4
2002 76.7 75.5 -5.5
2003 72.8 72.2 -2.4
2004 61.2 62.0  2.1
2005 66.6 67.4  2.2
2006 69.2 70.8  5.5
2007 68.9 71.2  7.3
2008 71.8 73.8  6.9
2009 78.3 77.6 -3.4
2010 89.9 89.1 -8.2

Tariffs on synthetic resins traded between Canada and the United States were completely eliminated on January 1, 1993. Under NAFTA, tariffs on resins between Canada and Mexico were completely eliminated by January 1, 2003.

On a broader front, many countries participated in the Uruguay Round of multilateral trade negotiations under the General Agreement on Tariffs and Trade. Canadian Most Favoured Nation import tariffs on resins will be harmonized at 6.5 percent, once fully implemented. Export tariffs from Canada into other countries are highly variable. For countries, like Canada, that have signed on to the Chemical Tariff Harmonization Agreement, tariffs will drop to 6.5 percent once fully implemented.

Non-tariff barriers are most commonly encountered when exporting to Asian countries. Vertically integrated market structures in Korea and Japan limit the prospects for Canadian exporters. Trigger price mechanisms have been used in some ASEAN economies. Access to China is always uncertain due to factors like inconsistent customs administration and assessment of import fees for import of new products.

Technology

Access to technology is not an issue in the industry. For the most part, both the process and product technologies utilized in Canada are up-to-date and are licensed from parent companies or other foreign chemical companies. Much of the new capacity that was recently built was designed using state-of-the-art technology. Dow Chemical's new plant in Fort Saskatchewan uses its metallocene technology. NOVA's new plant in Joffre represents the first commercialization of its Advanced Sclairtech technology, which was developed in Canada. There is very little production of engineering resins in Canada. Such plants were not built prior to the FTA, even though import tariffs from the United States existed, because the domestic market in Canada was insufficient to make the economics attractive. In today's environment, investment in commodity resins is attracted to Canada, primarily Alberta, due to the raw material advantage that can be realized. This same advantage is much less critical in deciding where to locate an engineering resin plant, and companies have tended to supply Canadian markets from U.S. or off-shore sites.

Environmental Challenges

The environmental challenges within the industry, summarized below, are being addressed in a manner consistent with the Responsible Care ethic.

The main environmental challenges are:

Solid Waste

Solid waste reduction was first focussed on packaging, although it has been extended to other areas like automotive shredder residue and construction products. Progress in reducing packaging waste is measured against the targets of the National Packaging Protocol. The Protocol called for a 50 percent reduction, from 1988 levels, in the amount of solid waste going to landfill by the year 2000. In fact, this target was achieved by the end of 1996 — four years ahead of schedule. Industry and governments continue to develop practices for minimizing the amount of packaging and other materials destined for landfill.

Polyvinyl Chloride

All industrial chlorine-based activity is currently under scrutiny by environmental groups such as Greenpeace. In the resin industry, PVC is the material under most scrutiny since its production is the largest single consumer of chlorine.

The PVC debate is also occurring in other parts of the world. As with most environmental issues, there is a need to monitor events internationally so that scientifically valid environmental goals can be achieved without taking any actions that would place Canadian companies at a competitive disadvantage.

Endocrine Disruptors

A broad range of chemicals is being investigated to determine whether they disrupt the normal hormone balance of living things. Some researchers have drawn links between the presence of these so-called endocrine disruptors in the environment and a variety of health problems in humans and animals, including:

  • increased rates of testicular cancer and declining sperm count and quality in men
  • increased rates of breast cancer in women
  • population decreases and increased rates of deformity in wildlife.

From the perspective of the plastics industry, the following commercially important chemicals are among those being studied:

  • bisphenol A, which is used in the manufacture of polycarbonate and is present in some epoxies that are used to coat the inside of food cans
  • phthalates, which are used as plasticizers in PVC
  • nonylphenol, which is an additive in polymers like polystyrene and PVC.

New Substances Notification

As part of the "cradle to grave" management approach to toxic substances, regulations under the Canadian Environmental Protection Act are intended to ensure that no new substance is introduced into the Canadian marketplace before it has been assessed for risks to human health and the environment. The new substances program includes identification criteria, an assessment mechanism and powers to implement special controls.

Canada–U.S. Comparison

Average salaries in the United States (converted to constant Canadian dollars) had consistently been higher than those in Canada (Figure 6) until recently. The level of output per employee was also higher in the United States until the last few years (Figure 7). The recent rise in Canadian output per employee reflects the impact of major new capacity additions that have occurred.

Figure 6: Comparison of Average Salaries, Canada and U.S. (in thousands of 2002 constant Canadian dollars)

Figure 6: Comparison of Average Salaries, Canada and U.S. (in thousands of 2002 constant Canadian dollars) (the link to the long description is located below the image)
Description of Figure 6
Figure 6: Comparison of Average Salaries, Canada and U.S. (in thousands of 2002 constant Canadian dollars)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000 66.2 87.6
2001 61.9 91.0
2002 61.2 88.5
2003 61.6 79.5
2004 64.5 77.0
2005 66.5 73.1
2006 68.0 68.8
2007 65.3 58.3
2008 66.4 57.5
2009 65.8 63.5

Figure 7: Comparison of Shipments per Employee, Canada and U.S. (in thousands of 2002 constant Canadian dollars)

Comparison of Shipments per Employee, Canada and U.S. (in thousands of 2002 constant Canadian dollars) (the link to the long description is located below the image)
Description of Figure 7
Figure 7: Comparison of Shipments per Employee, Canada and U.S. (in thousands of 2002 constant Canadian dollars)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000   928.9 1,075.0
2001   884.7 1,138.1
2002   961.7 1,069.6
2003   952.9   980.7
2004 1,174.8 1,046.7
2005 1,315.3 1,006.4
2006 1,391.3 1,016.5
2007 1,436.3   816.5
2008 1,292.6   764.6
2009 1,085.5   755.0

Gross margins — defined as (value added production wages and salaries)/shipments — are used as a crude measure of profitability for the resin industry in the two countries in Figure 8. Whereas Canada lagged the United States during the early 1990s, by 2002 the gap had been closed, but it has reappeared in recent years.

Figure 8: Comparison of Gross Margins, Canada and U.S. (percentages)

Figure 8: Comparison of Gross Margins, Canada and U.S. (percentages) (the link to the long description is located below the image)
Description of Figure 8
Figure 8: Comparison of Gross Margins, Canada and U.S. (percentages)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000 27.5 31.6
2001 23.0 28.7
2002 31.2 31.4
2003 25.1 31.9
2004 24.4 35.2
2005 20.0 34.5
2006 15.2 35.2
2007 16.0 30.7
2008 15.8 23.3
2009 23.8 35.0

Prospects for the Future

The outlook for the Canadian resin industry must be viewed in two distinct parts.

Through the 1990s, companies invested heavily in new resin capacity in Alberta due to a feedstock price advantage compared to other North American locations. Prospects for renewed investment in Alberta will depend on the future stability of natural gas prices and the availability of sufficient volumes of natural gas, possibly resulting from development of the northern gas reserves from Alaska and the Mackenzie Delta. Another option being explored is to use byproduct streams from the upgrading of oil sands as feedstock to support new investment in resin capacity.

The situation is different in Ontario and Quebec. Plants in these provinces are well located with respect to proximity to large markets. However, most suffer from the fact that these plants were built prior to the FTA, and were designed to satisfy Canadian demand and do not approach world-scale capacity, which presents a competitive obstacle. These plants have developed strategies of supplying niche products to compensate for their lack of economies of scale.


Major Firms
Company Head Office Location Resins Location of Plant
Polymer abbreviations used in this table:
  • ABS = acrylonitrile butadiene styrene
  • EVA = ethylene vinyl acetate
  • MF = melamine formaldehyde
  • PA = polyamide
  • PE = polyethylene
  • PF = phenol formaldehyde
  • PS = polystyrene
  • PU = polyurethane
  • PVC = polyvinyl chloride
  • UF = urea formaldehyde
  • UP = unsaturated polyester
Alpha/Owens Corning U.S. UP Guelph, Ontario
Arclin Canada UF, PF, MF North Bay, Ontario
Thunder Bay, Ontario
Kamloops, B.C.
Sainte-Thérèse, Quebec
Dow Chemical U.S. PE, PS, PE Fort Saskatchewan, Alberta
Hexion Specialty Chemical U.S. UF, PF Edmonton, Alberta
Laval, Quebec
North Bay, Ontario
Imperial Oil U.S. PE Sarnia, Ontario
NOVA Chemicals Canada PE, PS Joffre, Alberta
Corunna, Ontario
Sarnia, Ontario
Nylene U.S. PA Arnprior, Ontario
Oxy Vinyls U.S. PVC Niagara Falls, Ontario
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