CCPA--strong exports offset manufacturing decline.

Strong export sales are offsetting a diminishing domestic demand for basic chemicals and resins, according to the Canadian Chemical Producers' Associafion's (CCPA) 2007 year-end business survey of its members. A dramatic 50 percent decline in sales to Canadian customers may signal fundamental changes to North American manufacturing with production shifting to offshore locations, primarily Asia.

In contrast to the Canadian market, export sales were up by 13 percent in 2007 to $20 billion and now represent over 80 percent of total industry sales. Sales to U.S. markets were down by three percent. They account for only about two-thirds of the industry's business outside of Canada, while exports to offshore markets were up 66 percent.

Despite weaker sales, operating profits before interest, taxes and special write-offs 2007 were $2.0 billion, up 18 percent from 2006 and virtually at the peak set in 2005. Profits have been particularly strong in Canada's gas-based petrochemical sector. Canada's chemical producers continue to be profitable. Their operating profit ratio remains significantly higher than its U.S. counterpart, averaging 7.3 percent since 1999 (vs. 4.6 percent in the U.S. over that period). The Canadian manufacturing sector continues to weather a perfect storm so far. The high dollar and its rapid appreciation in value impacted on both Canadian chemical production costs and the costs for key chemical industry customers in Canada. High energy costs including electricity in Ontario and high oil prices have also had a negative impact on Canadian manufacturing, particularly to the segment of the chemical industry that upgrades fossil fuels into value added products.

Canadian Chemical Producers' Association