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A Snapshot of Canada's Plastics Industry

Canada is the prime investment location for plastics manufacturing companies serving the North American Market. Here's why.

• Canada has the lowest production costs for the plastics sector amongst g-7 countries.
• Canada is the second-largest exporter of moulds and seventh-largest exporter of machinery and auxiliary equipment, which are crucial to the competitive manufacturing of plastic products.
• Is home to over 2,600 plastic related companies.
• Provides employment to a skilled workforce of 125,000 people.
• Ninety per cent of industry exports go to the United States.

Source: Industry Canada http://investincanada.gc.ca/en/

The Canadian plastics industry is a critical part of the, but is now under serious threat.

• The USA and other importers are purchasing from low-cost exporters from emerging markets such as China and Mexico. These foreign companies have access to cheap labour and low-cost raw materials.
• While internationals competition is increasing, Canadian companies are also facing spiking energy costs and high resin profits that are crippling profits. A class-action suit is now pending that alleges extensive resin price fixing in the Canadian industry and illegal kickbacks to Tier-1 manufacturers.
• Many reputable Tier-2 companies in Canada have been forced to close their doors due to the relentless pressure from OEM and Tier-1 companies for unsustainable cost reductions ("givebacks").
• Even with cost reduction demands, some as much as 30 per cent, Canadian Tier-2 companies are still being required to spend their own money on research and development while they see their operating profit shrink to untenable levels. Most of the benefits of the innovations made from R&D are passed up the supply chain.

The Canadian Plastic Moulding Alliance is working to educate the public and government about the industry and the jeopardy facing Canada's efficient Tier-2.

Canada is a prime investment location for plastics manufacturing companies serving the North American automotive market.  The industry is also a major contributor to Canada’s economy. 

·         Canada’s automotive plastics producers shipped product worth $4.32 billion in 2005.  

·        2.23 billion, more than half of Canada’s automotive plastics production, was exported in 2005.

·        Imports for the industry in 2005 were a modest $209 million.

·        The Canadian automotive plastics industry provides employment to a skilled workforce of 18,368 people. (2003 data) 

·        Canada has 157 automotive plastics plant locations. (2003 data)

Source: Industry Canada, March 2005.

The Canadian automotive plastics industry is a critical part of the economy, but it is now facing intense pressures.

·     The USA and other importers are purchasing from low-cost exporters from emerging markets such as China and Mexico. These foreign companies have access to cheap labour and low-cost raw materials. 

·     While international competition is increasing, Canadian companies are also facing spiking energy costs and high resin pricing that are crippling profits. A class-action suit is now pending that alleges extensive resin price fixing in the Canadian industry and illegal kickbacks to Tier-1 manufacturers.

·     Many reputable Tier-2 companies in Canada have been forced to close their doors due to relentless economic pressure from Tier-1 companies for unsustainable cost reductions (“givebacks”).   

·     Even with cost reduction demands of as much as 30 per cent in some cases, Canadian Tier-2 companies are still being required to spend their own money on research and development while they see their operating profit shrink to untenable levels.

Industry Sector Statistics

Automotive plastics parts shipments have recently broken out of a long plateau:

Source: “The Ontario Automotive Parts Industry,” Susan Fitzgibbon and John Holmes, ISRN Annual Meeting, April 30, 2003. Updated February 2006  for 2003 

Automotive plastics processors face sharply escalating costs for materials:

 Automotive plastics processors face sharply escalating costs for materials:  

Source: CANSIM as of March 2006  

Automotive Plastics Processors are Undergoing Significant Attrition:

Source: “The Ontario Automotive Parts Industry,” Susan Fitzgibbon and John Holmes

The ten-year trend shown here has not abated.  The number of small processors continues to decline.

Automotive Plastic Parts are Becoming a Commodity:

Source: “The Ontario Automotive Parts Industry,” Susan Fitzgibbon and John Holmes, ISRN Annual                         Meeting, April 30, 2003.

Price pressures have stripped automotive plastic parts of differentiating, value-added features. They have become commoditized

Links

Canadian Plastics Magazine www.canplastics.com

Plastics in Canada www.plasticsinCanada.com

Plastics News www.plasticsnews.com

Canadian Centre for Automotive Materials and Manufacturing www.camm.queensu.ca

Auto21, research for the Canadian Automotive industry www.auto21.ca

Export Development Canada information http://www.edc.ca/prodserv/ckb/industry_pnp_e.htm

Industry Canada, motor vehicle plastic parts statistics www.strategis.ic.gc.ca search under “plastics.”

Sotos LLP, the lead counsel in Axiom Plastics Inc. v. E.I. Dupont Canada Company www.sotosllp.com

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