Industry Profile for the Canadian plastic products industry

Introduction

Although the first plastics date back more than a century, the real advent of petrochemical-based polymers occurred during the 1930s, with rapid innovation taking place during the Second World War and the immediate post-war period. By the 1960s, all of the key commodity resins and a large number of engineering resins were developed, and the machinery infrastructure was sufficiently established to allow the commercial plastic products industry to enter its high-growth phase. Advances in recent decades have focused on modifying the basic polymer groups to meet specific needs as well as on the development of new, higher-performance engineering resins.

Plastics are used by virtually every end-use segment of the economy. The unique attributes of plastics (including processability, light weight and corrosion resistance) have led to the creation of new products, and plastics have also displaced paper, glass and metal from traditional applications. Although there is a wide range of plastic products, three major product lines dominate: 34 percent of shipments are packaging, 26 percent are construction products, and 18 percent are automotive components (Figure 1).

Figure 1: End-use Markets (percent of total)

Figure 1: End-use Markets (percent of total) (the link to the long description is located below the image)
Description of Figure 1
Figure 1: End-use Markets
(percent of total)
Product Lines Percentage
Source: Innovation, Science and Economic Development Canada estimates
Packaging 39
Construction 33
Automotive 14
Other 14
Source: Innovation, Science and Economic Development Canada estimates

Canada produces about 2 percent of the total world volume of plastic products, based on its proportion of world resin consumption. Canadian and worldwide demand for plastic products are expected to continue growing faster than the economy as a whole, although not as rapidly as in the past.

In many cases, the use of plastics in place of other materials has a significant positive effect on sustainable development. At the same time, environmental concerns have the potential to restrict growth of this industry. Solid waste management, challenges to the use of polyvinyl chloride (PVC), and possible links between plastics and endocrine disruptors are the issues of greatest current concern.

Size and structure of the Industry

In 2010 about 2422 establishments in Canada had as their principal activity the processing of synthetic resins into plastic products. This generated shipments valued at $17.6 billion and employed 76 3507 people. For more detailed information, see the Statistics for the Plastics Industry on the Statistics page. Following a decline in output caused by the recession, the industry showed good growth in 2010.

The plastics processing industry is characterized by a large number of small and medium-sized enterprises (SMEs) that are almost all Canadian-owned and a few large firms, an estimated 60 percent of which are Canadian-owned. Overall, it is estimated this industry is 95 percent Canadian-owned. A listing of Major Firms is shown below.

In addition to being produced by companies within the defined plastic products industry, plastics production is a secondary activity of firms in other industry groups (for example, plastic toys and furniture) and for internal consumption (such as plastic bottles made in-house by a shampoo manufacturer). This broader view is useful for some purposes, but the analysis in this report focuses on the Statistics Canada definition of the industry.

Although two of the major markets for plastic products — the motor vehicle industry and construction — are both cyclical, the plastic products industry itself is much less so. The rising general demand for plastics as a substitute for other materials mutes the cyclical effects.

Trade

In 2010, exports totalled $6.7 billion and imports were valued at $7.6 billion. Canadian exports of plastic products have grown from 18 percent of total shipments in 1990 to 38 percent in 2010 (Figure 2). Imports of plastic products have also increased significantly during this period and by 2010 accounted for 41 percent of total domestic consumption.

Trade is heavily skewed toward the United States, which accounted for 92 percent of exports and 72 percent of imports in 2010. For many products, this will always be the case, because transportation costs limit their export to more distant markets. However, in cases where a comparative technological advantage exists, diversification of the export base is possible. The industry's export orientation is much stronger in Canada than in the United States. Canadian firms can exploit this exporting knowledge to capture larger shares of U.S.and other foreign markets.

Figure 2: Trade (percentages)

Figure 2: Trade (percentages) (the link to the long description is located below the image)
Description of Figure 2
Figure 2: Trade (percentages)
Year Imports as Percentage of Domestic Market Exports as Percentage of Shipment Trade Balance as Percentage of Shipments
Source: Statistics Canada
2000 40.3 47.7 12.3
2001 40.1 47.1 11.7
2002 42.0 49.7 13.2
2003 38.4 46.9 13.9
2004 38.2 46.4 13.3
2005 37.0 44.5 11.9
2006 37.8 44.0  9.8
2007 37.4 41.5  6.6
2008 40.5 40.7  0.4
2009 41.4 38.6 -4.8
2010 41.2 38.4 -4.7
Source: Statistics Canada

In the area of tariffs and international trade agreements, duties on resins of U.S. origin were phased out by 1993, and duties on plastic products were phased out by 1998. This contributed to a more competitive cost structure in Canada. Under the NAFTA, tariffs between Canada and Mexico were eliminated in 2003.

Relationship to synthetic resin industry

Synthetic resin represents the most significant input to the plastics processing industry. Resin costs typically account for 30 to 50 percent of the final value of a plastic product. Growth in the Canadian plastics industry was fuelled by a dramatic increase in the domestic capacity for producing synthetic resins beginning in the late 1970s. This increase was a response to the first oil crisis, and decisions made by multinational enterprises to invest in downstream production using secure, western Canadian oil and gas as a feedstock. During that period, tariffs into the U.S. for resins were typically 10 to 12 percent, compared with rates of 3 to 5 percent for plastic products. As multinational enterprises built world-scale resin capacity in Canada, there was an incentive for them to support expansion of the Canadian customer base as a means for selling as much resin as possible domestically to avoid export tariffs. Multinational resin companies also became integrated downstream into plastics processing as a means for indirectly exporting their resin, in the form of products, and thus receiving preferred tariff treatment.

Fluctuations in resin prices have a strong impact on the plastics industry (Figure 3). During times of rising resin prices, plastics processors are not always able to pass increases along immediately, creating significant pressure on profit margins. During periods of resin price declines, the price for plastic products has tended to be less affected. Overall the plastics industry has been less cyclical than the resin industry.

Figure 3: Annual Price Changes (percentages)

Figure 3: Annual Price Changes (percentages) (the link to the long description is located below the image)
Description of Figure 3
Figure 3: Annual Price Changes (percentages)
Year Plastic Products Synthetic Resins
Source: Statistics Canada
1980 15.0 14.5
1981  7.0 7.3
1982  4.5 -0.1
1983  3.1  4.2
1984  4.5  4.7
1985  2.2 -2.3
1986  4.2  1.4
1987  3.6  7.2
1988 10.4 20.9
1989  3.5 -5.7
1990 -1.2 -9.9
1991 -1.3 -7.9
1992  2.0 -0.5
1993 -0.1  1.8
1994  3.7 10.1
1995  8.3 15.5
1996 -1.4 -6.2
1997 -0.1  1.6
1998 -0.2 -7.0
1999  0.7  1.2
2000  5.3  8.6
2001  0.9 -1.1
2002 -0.9 -1.8
2003  1.3  3.0
2004  1.5  2.0
2005  5.2  6.7
2006  3.2 -0.1
2007 -2.0 -4.4
2008  2.9  6.7
2009  1.7 -4.9
2010  1.6  2.7
Source: Statistics Canada

Regional distribution

Over the past 10 years, the regional distribution of the industry has not changed substantially. In 2009, 47 percent of all establishments were located in Ontario, 25 percent in Quebec, 14 percent in the Prairie provinces, 11 percent in British Columbia, and 3 percent in the Atlantic provinces (Figure 4). More detailed provincial statistics are shown below in Table 1.

Figure 4: Regional Distribution of Establishments (percent of total)

Figure 4: Regional Distribution of Establishments (percent of total) (the link to the long description is located below the image)
Description of Figure 4
Figure 4: Regional Distribution of Establishments (percent of total)
Province/Region Percent of Total
Source: Statistics Canada
Atlantic  3.5
Quebec 25.0
Ontario 46.6
Prairies 13.6
British Columbia 11.3
Source: Statistics Canada

Canada–U.S. comparisons

Gross Margins

Figure 5 shows gross margins (defined as value added minus production salaries divided by shipments, and used as a proxy measure for profitability) for the plastic products industries in Canada and the United States.

Figure 5: Comparison of Gross Margins, Canada and U.S.

Figure 5: Comparison of Gross Margins between Canada and the U.S. (the link to the long description is located below the image)
Description of Figure 5
Figure 5: Comparison of Gross Margins, Canada and U.S. (percentages)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000 33.3 38.7
2001 33.0 38.4
2002 33.6 41.1
2003 32.8 39.9
2004 31.7 39.2
2005 31.5 38.8
2006 32.0 38.9
2007 31.9 39.7
2008 30.0 36.0
2009 31.5 38.8
Source: Statistics Canada and U.S. Department of Commerce

Labour Productivity

Until recently, salary levels in the United States have generally been higher than those in Canada (Figure 6). Productivity as measured by shipments per employee have generally been lower in Canada than in the United States (Figure 7).

Figure 6: Comparison of Average Salaries, Canada and U.S.

Figure 6: Comparison between Canada and U.S. Average Salaries (the link to the long description is located below the image)
Description of Figure 6
Figure 6: Comparison of Average Plastic Products Industry Salaries, Canada and U.S.
(thousands of constant 2002 Canadian dollars)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000 36.8 46.9
2001 36.8 48.1
2002 36.9 50.4
2003 37.4 45.7
2004 38.1 43.5
2005 39.1 40.5
2006 39.1 37.8
2007 39.3 35.0
2008 38.2 34.6
2009 38.6 37.9
Source: Statistics Canada and U.S. Department of Commerce

Figure 7: Comparison of Shipments per Employee, Canada and U.S.

Figure 7: Comparison of Canada and U.S. Shipments per Employee (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.
(thousands of constant 2002 Canadian dollars)
Year Canada U.S.
Source: Statistics Canada and U.S. Department of Commerce
2000 178.6 242.0
2001 182.1 251.9
2002 184.8 276.5
2003 185.7 255.4
2004 204.1 252.4
2005 204.8 232.0
2006 202.2 219.4
2007 210.3 206.5
2008 195.4 210.8
2009 191.7 222.9
Source: Statistics Canada and U.S. Department of Commerce

Technology

In addition to their own proprietary product and process technologies, plastics processors benefit from the innovations made in machinery, moulds and synthetic resins. These supplier industries have undergone rationalization on a North American basis following implementation of the Canada–U.S. Free Trade Agreement (FTA) and no longer provide the same degree of technical service as they once did. This has slowed diffusion of technology from suppliers, mostly to the detriment of the SMEs, which characterize the Canadian industry. Furthermore, these smaller firms have not collectively cultivated the financial resources to make longer-term investments in areas such as research and development (R&D) and, as a result, few have established a competitive advantage through product differentiation.

Compared with all manufacturing, the plastic products industry's rate of R&D spending is low compared to the all-manufacturing average (Figure 8).

Figure 8: R&D as a Percentage of Shipments

Figure 8: R&D as a Percentage of Shipments (the link to the long description is located below the image)
>Description of Figure 8
Figure8: R&D as Percentage of Shipments
Year Plastics All Manufacturing
Source: Statistics Canada
2000 0.403 1.508
2001 0.447 1.691
2002 0.472 1.482
2003 0.605 1.509
2004 0.617 1.418
2005 0.619 1.407
2006 0.735 1.479
2007 0.626 1.403
2008 0.580 1.241
2009 0.757 1.481
2010 0.712 1.292
Source: Statistics Canada and U.S. Department of Commerce

One of the fundamental changes following the implementation of the FTA has been an accelerated rate of technological change. This is taking place at the same time as the increasing need for processors to invest more in R&D just to be able to compete in the larger market against U.S. firms, which have had higher rates of capital investment and productivity. Resin suppliers too have had to adjust to the FTA, leading to a reduction in technical support for the smaller companies typical of the Canadian processing industry. The investment data and the R&D expenditure data taken together raise a concern that the Canadian industry needs to adapt more innovative investment practices in order to compete in the longer-term.

Technology Centres

Since the industry is characterized by a large number of SMEs, there is a need for collective initiatives to foster greater use of technology as a means for enhancing competitiveness. Government support in the area of R&D was provided to many of these organizations during their start-up phase. The organizations discussed in the following paragraphs all play a role with respect to developing and diffusing technology to the Canadian plastics industry.

Within the federal government, the main R&D thrust related to the plastics industry is from the National Research Council. The Industrial Materials Institute has the largest group dedicated to plastics. Other significant research efforts are conducted by the Institute for Chemical Process and Environmental Technology and the Institute for Research in Construction.

On a provincial level, two provincial research organizations have programs supporting the plastics industry: the Alberta Research Council and the Centre de Recherche Industrielle de Québec. In Ontario, there is a provincial Centre of Excellence called Centre for Materials and Manufacturing which brings university researchers and companies with technical needs together. Plastics is one of its areas of focus.

In addition, a number of universities have faculty members or research groups that are active on plastics projects. These include the universities of British Columbia, Alberta, Calgary, Western Ontario, Waterloo, Toronto, McMaster, Queen's, Ottawa, McGill, the École Polytechnique, Laval, Concordia and Moncton. The research programs conducted within the universities are often co-funded by industry and National Sciences and Engineering Research Council of Canada.

Human resources

The plastic products industry is relatively labour intensive, and is not heavily unionized (perhaps 10 to 15 percent). There are shortages of process engineers, set-up people, mould and die makers and maintenance personnel. A recent study projects that without corrective action, this imbalance will worsen. Throughout the industry, a large number of low-skill machine operators lack basic skills in polymer science, computers, communications and mathematics, all of which are becoming increasingly important, yet certain segments of the industry appear to have minimal commitment to training. The industry has a high turnover in staff.

Skills Upgrading

The observed productivity gap between Canada and the United States has direct implications for human resources development. As companies move toward a stronger emphasis on technology, there is a parallel need to upgrade the skill level of the work force to utilize new technology effectively.

While certain segments of the plastic products industry have made attempts to upgrade their emphasis on human resources management, the industry as a whole appears to be trailing behind other industries in the area of training. While it formerly lagged its U.S. competitors, the Canadian industry has increased its investment in machinery and equipment substantially over the last number of years in response mainly to the introduction of new plastics manufacturing and processing technology, and increased competition. This increased expenditure on equipment and machinery will undoubtedly fuel the need for greater emphasis on education and training. Although the plastic products industry has been making some progress in these areas, consensus opinion is that the momentum must be maintained and expanded as the industry continues to raise its level of technological sophistication.

Employment and Social Development Canada and the Canadian plastics industry are jointly supporting the Canadian Plastics Sector Council which has as its mandate to address training and skills issues in the industry.

Sustainable development

Environmental Benefits

Using plastics in place of other materials not only reduces costs and improves product performance, but also makes a positive contribution to sustainable development in many areas, as illustrated in the following examples.

Automotive Parts
Plastics are being used in ever-increasing automotive applications ranging from body panels to under-hood manifolds and cushioned instrument panels. When plastics displace metal parts, vehicle weight is lowered, and the resulting improved fuel economy conserves petroleum and reduces emissions of exhaust gases that contribute to both the climate change and ground level ozone problems.

Packaging
Plastics can deliver the desired packaging performance in forms that are lighter and less bulky than glass, metal and paper. This decreases the weight and volume of the final packaged product, conserving energy during their shipping. Plastics have also been key in the development of tamper-resistant packaging for food and medical products.

Construction
Vinyl windows and doors do not need to be painted, reducing emissions of paint solvents. Foamed plastic insulation improves the thermal efficiency of buildings, decreasing the amount of energy consumed for heating and cooling.

Challenges

The main piece of federal environmental legislation pertaining to the plastic products industry is the Canadian Environmental Protection Act (CEPA), which provides the federal government with the authority to address pollution problems on land, in water and throughout all layers of the atmosphere. The provisions of CEPA that are of greatest importance to the plastic products industry are those dealing with volatile organic compounds (VOCs), chlorofluorocarbons (CFCs), solid waste and substances identified as toxic through CEPA assessment.

The plastics industry is facing a number of environmentally related pressures that have the potential to restrict growth of this industry. Solid waste management as well as challenges to the use of PVC and possible links between plastics and endocrine disruptors are the issues of greatest current concern.

Solid Waste

Solid waste reduction was first focussed on packaging, although it is expanding to other areas, including automotive components and construction products. Industry met the targets of the National Packaging Protocol for reducing the amount of packaging waste going to landfill — ahead of target.

A preferred course of action is to encourage higher recycled resin content in new products. Other measures are also lowering plastics disposal rates, such as reducing the amount of material used to form articles (thinner-walled packaging), and reusing containers.

Recovery of the energy content of plastics is another element for consideration in an integrated waste management strategy. Some streams of waste plastic (and other materials) cannot be recycled except at prohibitive cost. In these cases, there may be benefits to recovering its potential energy via well-controlled combustion.

Another option being developed is to use pyrolysis — the conversion of post-consumer plastics to high-value-added petrochemicals — as an additional component of this integrated strategy.

Polyvinyl Chloride

All industrial chlorine-based activity is under attack from environmental groups. For the plastics industry, the product under most scrutiny is PVC, for which an estimated one-third of industrial chlorine was used in 1998.

Much of the debate about the life cycle impact of PVC on the environment is occurring in the absence of conclusive scientific evidence. Industry and government have expressed an intent to cooperate in addressing these knowledge gaps. The Canadian Plastics Industry Association's Vinyl Council has developed an Environmental Management Program that addresses life cycle concerns regarding PVC.

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

The chemical species under scrutiny include acknowledged substances of concern like DDT, PCBs and dioxin. 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.

The issue of endocrine disruptors has only begun to gain prominence over the past few years. Environmental groups are using it as another component of their strategy to attack certain classes of chemicals, particularly those based on chlorine. Industry is mobilizing to defend its interests by supporting scientific research to establish which chemicals are truly of concern. Despite the efforts of industry, some jurisdictions, particularly in Scandanavia, are responding to public pressure and are imposing regulations in response to this issue.

New Substances Notification

As part of the "cradle to grave" management approach to toxic substances, regulations under CEPA 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.

Volatile Organic Compounds

Volatile organic compounds (VOCs) react in the presence of sunlight to form ground-level ozone, a major component of urban smog. In 1988, at the request of the Canadian Council of Ministers of the Environment (CCME), a three-phase plan was developed to manage VOC releases. While plastics production produced only 0.8 percent of total VOC emissions in 1985, projected growth led to reduction targets and plans for the four subsectors that produce 60 percent of this industry's emissions.

Ozone-depleting Chemicals

The use of certain ozone-depleting chemicals — chlorofluorocarbons (CFCs) — is being reduced and eventually banned under the 1987 Montreal Protocol, an international accord to protect the stratospheric ozone layer that shields the earth from dangerous levels of ultraviolet radiation. The plastic products industry has switched from CFCs used as blowing agents to make foam to more costly hydrochlorofluorocarbons (HCFCs). HCFCs themselves are only a temporary solution, and the industry will switch again to even more environmentally friendly chemicals when the technology is developed.

Prospects for the future

More companies need to become exporters, and those that already export need to become more aggressive in expanding their foreign markets. The market that offers the biggest potential for both new and established exporters is still the United States. Off-shore market development is a strategy that companies are using to take advantage of faster-growing developing markets, and to reduce their dependence on economic cycles within North America. Established exporters are more likely to be in a position to expand into offshore markets, particularly with products that possess a technological advantage. For many products, high transportation costs preclude direct export to distant markets. In these cases, companies should seek joint venture, acquisition or alliance opportunities so that Canadian companies can extend their reach by exporting and exchanging technology.

Major firms

Major Canadian Firms Owned by U.S. and European Multinational Firms
Company Head Office Location Location of Plants
ABC Group Canada Rexdale, Ontario
19 other plants
Amcor Australia Mississauga, Ontario
5 other plants
Camoplast Canada Sherbrooke, Quebec
Canadian General-Tower Canada Cambridge, Ontario
Decoma International Canada Concord, Ontario
12 other plants
Domco Belgium Farnham, Quebec
IPEX Belgium Don Mills, Ontario
10 other plants
Intertape Polymer Group Canada Truro, Nova Scotia
Edmunston, New Brunswick
Montréal, Quebec
IPL Canada St-Damien, Quebec
4 other plants
Jim Pattison Group Canada Vancouver, British Columbia
9 other plants
Kautex Textron Germany Windsor, Ontario
Royal Group Technologies United States Woodbridge, Ontario
40 other plants
Winpak Finland Winnipeg, Manitoba
7 other plants
Woodbridge Foam Canada Woodbridge, Ontario
14 other plants
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