TORONTO — Canada's plastics industry will grow in 1998 but probably at a smaller rate than the strong performance of last year, industry executives predict.
Canadian processors shipped C$20.5 billion (US$14.4 billion) worth of goods in 1997, about 5.5 percent more than in the previous year, estimated Faris Shammas, Ontario region executive director for the Canadian Plastics Industry Association.
Auto parts were among the strongest sectors last year, Shammas estimated. Preliminary data indicate dollar value of shipments increased about 16 percent. Other strong processing sectors included film and sheet, up about 15 percent; bags with an 11 percent increase; pipe, up 8 percent; and foam and expanded products, which grew nearly 9 percent. Total plastics employment overall increased 9.9 percent.
Shammas expects further expansion this year as exports continue at a healthy clip. Canada's dollar weakened in late 1997 and its low value vs. the U.S. dollar helps Canadian processors compete in the United States, their largest export market.
Canada's domestic market will grow, Shammas said, but forecasters scaled back expectations late last year when interest rates began to rise. In the fall, economists were predicting as much as a 3.5 percent increase in Canada's gross national product in 1998. But by year-end, most pundits revised growth forecasts to 2.5 to 3 percent. Canada's dollar slipped in December to about 70 cents in U.S. currency and the Bank of Canada hiked interest rates to prop up the dollar. It started off the year at about 73 cents in U.S. currency.
One obvious cloud on the horizon is widespread devaluation of Asian currencies.
``There will be more product competition from Asia [in Canada's market] and exports to Asia will be more difficult,'' Shammas said.
Still, most signs are good as the plastics sector begins a new year. Canadian consumer confidence is high, businesses are creating new jobs, and inflation and interest rates are relatively low.
Custom injection molder Mitchell Plastics Ltd. expects sales will grow 15 percent this year. Mitchell President Murray Ariss said his firm's 1997 sales were fairly strong, but he complained that profit margins are slim. He described custom molders working to a new economic model in which everyone is busy and revenues are high, but it's still a buyer's market.
``It's hard to get the margins of five to 10 years ago,'' Ariss said.
The Kitchener, Ontario, molder does a lot of auto-part molding, supplemented by business machine components and other custom jobs. Ariss said Mitchell added five presses last year to boost the company total to 35.
A West Coast custom injection molder agreed that the market is competitive and profit margins are slim.
``A lot of small molders still buy business'' by bidding unrealistically low on jobs, noted Greg Howard, president of Columbia Plastics Ltd. of Surrey, British Columbia.
Howard predicts his firm will have a strong 1998 and won't be much affected by devalued Asian currencies. He claims distance is ``a real impediment'' when molded-part customers consider moving their business to Asia. Jobs requiring assembly, however, are more at risk to relocating there.
Columbia focuses on specialty molding such as electronic packaging and can avoid some of the bidding wars, Howard said.
Auto-parts molder Falcon Plastics Inc. of London, Ontario, did well last year and anticipates another good year in 1998, said Fred Doelle, vice president of sales.
``We picked up healthy contracts for 1998 to 2003 and have expanded our facility and molding capacity,'' Doelle explained. Its forte is robotic molding of seat belt components.
John Emmerson, owner of polyethylene film extruder and converter Poly Cello Ltd., said he is bullish for 1998 because the economy is strong and ``we are a viable player.'' The Amherst, Nova Scotia, processor expects to extrude 10 percent more resin this year.
Poly Cello exports to U.S. markets and believes demand will be stronger south of the border.
Specialty resin producer and film extruder AT Plastics Inc. is ``fairly optimistic'' about 1998, according to Jim Donaghy, vice president of finance.
``Our market segments are strong,'' Donaghy claimed. AT Plastics makes ethylene vinyl acetate copolymers and a range of films for industrial and agricultural uses. It sells a small portion of its EVA resins in Asia for sport shoe soles, but Donaghy doesn't expect the region's currency troubles will impact his firm much because most of the shoes are exported back to strong markets in North America.