Chemical Industry Association of Canada Expects Rebound in Chemical Industry in 2H 2023 Despite Challenges in 2023

David Cherech, Manager of Business, Economic, and Transportation Policy at the Chemistry Industry Association of Canada (CIAC), recently stated that existing data shows that Canadian industrial chemical producers have had a difficult year, but the organization still expects a rebound in the Canadian chemical industry in the second half of 2023.

According to CIAC data, Canadian industrial chemical shipments fell by 6.7% year-on-year in the first four months of 2023. Among them, the resin and synthetic rubber industry was the weakest, with a production decline of 12.4%, while basic chemicals declined by 3.4%. Among the sub-markets of basic chemicals, petrochemicals were the weakest, with a shipment decline of 4.9%, followed by industrial gases, which declined by 2.3%, inorganic chemicals, which declined by 2.1%, and organic chemicals, which declined by 1%. CIAC stated that these figures contrast sharply with the growth in 2022. In 2022, the total value of Canadian industrial chemical shipments was CAD 34.2 billion, an increase of 11.2% over 2021 and 15.9% over 2018. The shipment volume of basic chemicals increased by 23% year-on-year to CAD 23.3 billion.

In the outlook for 2023 released by CIAC in February, it was pointed out that continued inflation and rising interest rates in the second half of 2022 have been affecting demand, leading downstream manufacturers to focus on reducing inventory, and new production capacity will squeeze the pricing of polymers and organic chemicals in 2023. Therefore, CIAC made a prediction in February that production in 2023 would grow by 2% to 7%. However, given the poor performance as of April, CIAC has lowered its forecast growth rate for 2023 to 0% to 5%. Cherech commented on this, saying, "As far as current predictions are concerned, the growth rate data is not very good, but I think it is still too early to draw conclusions."

Cherech stated that there are four favorable factors for the growth of the Canadian industrial chemical industry in 2023. First, there is potential demand, as the current number of homes under construction in North America has reached a new record. Second, new production capacity is gradually increasing, and regardless of chemical pricing, these new production capacities will support basic growth. Third, Canada's export orientation can rely on the very strong US economy and the increasingly strong demand in Latin America, and the improvement of export infrastructure will also help Canada expand exports. Fourth, Canada's energy advantage, as the current natural gas price is far lower than it was 20 years ago, and although prices have risen after the Russia-Ukraine conflict began, the downward trend has been restored.

CIAC also predicts that CO2 reduction will drive Canada to build more capital investment projects. Cherech stated that in the past two years, more than 20 industrial chemical projects have been announced, although many projects are related to battery materials, over two-thirds of the projects involve decarbonizing or expanding low-carbon production capacity of existing production capacities. This is also a breakthrough for the rebound of the Canadian chemical industry.