Canadian Synthetic Resins Industry

• Introduction
• Structure and Performance of the Industry
• Trade
• Technology
• Environmental Challenges
• Canada-U.S. Comparison
• Prospects for the Future
• Principal Statistics
• Polymer Abbreviations
• Major Firms

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 - Data table

see Polymer Abbreviations

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.

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Structure and Performance of the Industry

The driving force behind the growth in the synthetic resins industry over the past 20 years, has been the rapid worldwide growth in the plastic products industry. Consumption of plastics has grown at about twice the rate of the overall Canadian economy, primarily because of their ability to replace competing materials in a wide range of applications.

The Canadian synthetic resins industry had shipments of $10.6 billion in 2006, and employed about 7180 people at 103 establishments. See Principal statistics for more information. See Principal statistics for more information.

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. NOVA Chemicals and Pétromont are the largest producers with headquarters located in Canada.

The Canadian industry is concentrated in three provinces - Alberta, Ontario and Quebec. Figure 2 shows the geographic distribution based on number of establishments in 2005. 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 - Data table

Figure 3, comparing growth in the resin industry, all manufacturing and the overall economy, shows strong growth in the resin industry during the 1990s and the first part of this decade..

Figure 3 - Data table

The synthetic resins industry is capital- and technology-intensive, resulting in high levels of output per employee compared to manufacturing overall (Figure 4).

Figure 4 - Data table

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 5).

Figure 5 - Data table

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Trade

Trends in trade orientation are shown in Figure 6. In 2006, exports totalled $7.2 billion and imports were valued at $6.6 billion. Canadian exports of synthetic resins have grown dramatically, from 38 percent of total shipments in 1990 to 68 percent in 2006. Imports of resins have also increased significantly during this period and by 2006 accounted for 66 percent of total domestic consumption. Trade with the United States predominates with 89 percent of exports going there and 88 percent of imports originating there in 2006. 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 6 - Data table

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 (GATT). Canadian Most Favoured Nation (MFN) 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.

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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.

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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 (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.

Global Warming

At the December 1997 Kyoto conference, Canada agreed to reduce its emissions of greenhouse gases by 6 percent based on 1990 levels, by 2008-2012. The plans for achieving these targets have not yet been developed, but the industrial chemical sector, including resins, is concerned that this has the potential to significantly reduce its international competitiveness since the United States and developing countries have not made similar commitments to reduce emissions.

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Canada-U.S. Comparison

Average salaries in the United States (converted to constant Canadian dollars) have consistently been higher than those in Canada (Figure 7). The level of output per employee has also been higher in the United States until very recently (Figure 8). The recent rise in Canadian output per employee reflects the impact of major new capacity additions that have occurred.

Figure 7 - Data table

Figure 8 - Data table

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 9. 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 9 - Data table

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Prospects for the Future

Industry projections are for 5-7 percent real average annual world-wide growth in consumption of synthetic resins over the next five years. Growth in North America is projected to be lower, perhaps 3-4 percent, but still ahead of growth in the overall economy. It had been expected that Asia Pacific would see the highest rate of growth, but it remains to be seen what impact the present currency crises in that part of the world will have on these projections.

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. Increases in natural gas prices, and hence in resin feedstock prices, has diminshed this comparative advantage. 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 and around Sarnia, Kingston and Montreal are extremely 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.

For further information, please contact: 

John Margeson
Industry Canada
Resource Processing Industries Branch
235 Queen Street
Ottawa ON K1A 0H5
Tel.: 613-954-3016
Fax: 613-952-8988

Polymer Abbreviations

PE = polyethylene
PP = polypropylene
PS = polystyrene
PVC = polyvinyl chloride
PA = polyamide
PET = polyethylene terephthalate
ABS = acrylonitrile butadiene styrene
UP = unsaturated polyester
UF = urea formaldehyde
PF = phenol formaldehyde
MF = melamine formaldehyde
EVA = ethylene vinyl acetate
PU = polyurethane
PPT = polypropylene terephthalate

Major Firms

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