Canada's plastics processors are in for another rough ride in 2009, if economic indicators can be believed.
``We're at the point right now, where by any measure, economic conditions are as uncertain as at any time in the past 50 years or longer,'' said Bill Empey, an economist at Prism Economics and Analysis, which prepared an economic report for the Canadian Plastics Industry Association of Mississauga, Ontario.
``It's likely economic conditions will continue to deteriorate well into 2009,'' Empey said by telephone. ``Conditions won't improve till late in the year or in 2010.''
The performance in 2009 will follow a poor showing in 2008. Prism, of Toronto, estimates that plastics shipments fell to about C$17 billion (US$16 billion) in 2008, down 14 percent from 2007 and well off its peak of C$21.5 billion in 2005, based on Statistics Canada data.
Automotive was an especially poor sector in 2008, evidenced by major processor and mold shop closures. But packaging and construction also showed declines, the Prism report noted. Shipments of resins and machinery trended down as well.
Weak domestic demand — along with slowdown in the U.S., Canada's major export destination — was behind the drop in processing and other shipments.
Any benefits processors had last year in currency exchange and energy costs were more than eroded by what was happening in their major markets. Canada's gross domestic product fell 3.5 percent in the fourth quarter of 2008 and is slated to fall another half percentage point in 2009, according to a forecast by the Conference Board of Canada, in Ottawa, Ontario.
Housing starts, at 172,000 in November, were down 18.8 percent from a year earlier, and were the lowest in five years, said Scotiabank and the Bank of Montreal. The industrial capacity utilization rate in the second quarter was 76.7 percent, compared with 83.3 percent a year earlier.
One economist predicts Canada could get out of recession faster than the U.S. Scotiabank chief economist Warren Jestin predicts Canada will recover in 2010, ahead of the U.S. because the Canadian industry hasn't retrenched as badly.
The U.S. market will strongly influence Canada's recovery. Processors could be helped in 2009 by a weaker Canadian dollar vs. its U.S. counterpart. The Conference Board predicts a Canadian dollar will be worth, on average, 0.834 of a U.S. dollar in 2009, down from a 2008 average of 0.938.
On the downside for Canadian processors, China has overtaken Canada as the largest source of U.S. imported plastics, and Mexico has outmuscled Canada as the major recipient of U.S. plastic exports.