Canada's plastics industry faces tough conditions after registering the lowest two-year growth rate in more than a decade.
The value of plastics processing shipments for the first nine months of 2004 was only 5.2 percent ahead of the previous year, estimated Faris Shammas, outgoing vice president of business and economics for the Canadian Plastics Industry Association in Mississauga, Ontario. Although the increase was slightly ahead of the 2003 rate, it was far behind the nearly 10 percent annual growth rate for processed plastics for most years since 1992.
A stronger Canadian dollar and high resin and energy costs restricted growth last year and will continue to be challenges in 2005. Other concerns include rising electricity costs, higher insurance premiums and time and money spent dealing with environmental, health and safety issues, an industrywide survey shows, Shammas said in a recent telephone interview.
The plastics sector uncharacteristically lagged manufacturing overall. For the first 10 months of 2004, total factory shipments in Canada were up 8 percent, according to federal agency Statistics Canada.
Canada's economy will grow about 3.2 percent in 2005, according to the Conference Board of Canada. That rate is at the optimistic end of a range that goes as low as 2.5 percent from some economists. By contrast, economists surveyed by the Wall Street Journal forecast an average growth rate in the U.S. economy of 3.6 percent in 2005.
The Conference Board predicts the fastest-growing regions in Canada will be Alberta and Ontario, at 3.4 percent for each. Alberta's growth will be heavily weighted to oil and gas production. Ontario, however, is the country's major manufacturing base and its biggest producer and consumer of plastic products.
Some economists predict the stronger Canadian dollar will be a drag on exports. The Canadian dollar value has risen about 35 percent vs. the U.S. dollar in the past two years. It ended 2004 at about 83 U.S. cents after starting the year at about 75 U.S. cents. Canadian Finance Minister Ralph Goodale said the strong dollar poses the greatest threat to Canada's economy.
TD Bank Financial Group expects Canada's dollar to rise to 85 U.S. cents this year. TD expects imports of machinery and consumer goods to enjoy a boon from the currency effect.
Despite the strong dollar and difficult business conditions, Canada's manufacturers are upbeat about their prospects in 2005, according to a survey by the Canadian Manufacturers and Exporters Association. Survey respondents cite improved productivity, investing in new technologies and entering new markets among their strategies to meet market demands. Skills training, faster response to customer needs and supply-chain management also were named as key to competing. Of the 834 firms in the survey, 38 percent expect their exports to rise in 2005 and 62 percent anticipate their overall sales will grow, reports the Ottawa, Ontario-based association.
Canada's auto parts firms are less optimistic. The high Canadian dollar has hurt parts makers, some of which have lost contracts, according to the Automotive Parts Manufacturers Association of Canada. The currency climb has made some firms uncompetitive and has hurt profitability, the Toronto-based association noted in December.