Industry Profile

With over 2,600 companies employing 82,000 workers, Canadas $24,279 billion in shipments plastics industry is a sophisticated, multi-faceted sector encompassing plastic products manufacturing, machinery, moulds, and resins.[1]

Plastic Products

Sector and Business Environment

Industry Size and Structure

In 2016 over 2600 establishments in Canada had as their principal activity the processing of synthetic resins into plastic products, generating shipments valued at $24.3 billion and employed 82 thousand people.  Recovery from a decline in output caused by the 2008-09 recession was been slower than expected, but the industry has maintained its growth pattern through 2016 and now contributes $8.3 billion to Canada’s GDP, representing 2% of global production of plastic products based on resin consumption. Three sectors represent 85% of demand: construction (34%), packaging (35%) and automotive (16%).

Industry concentration and key players

The plastics industry is pan-Canadian, though the majority of establishments and output are concentrated in three provinces: Ontario (46% /55%), Quebec (25%/25%), and British Columbia (11%/ output for BC not available). The sector is dominated by small and medium sized firms; 86% of businesses in the sector have fewer than 100 employees, and 99.5% have fewer than 500 employees.  Key firms in the sector in Canada include Magna International, Winpak Ltd and ABC Group Inc.

Business/economic trends and challenges affecting sector competitiveness

The industry has recovered from the recession and with consistent improvements in automotive sales there are parts of the industry that are doing well. Packaging and construction are stable areas with growth demonstrated in the packaging industry despite the reductions in amount of packaging used. Offshore competition is experience their own issues with labour costs and shipping costs that are impacting their ability to penetrate North American markets.  

Access to skilled labour is a primary concern for the industry and will continue to impact its ability to compete. With a very limited supply of young workers entering the system, due to diminished enrolment in existing programs and other programs being dropped or combined in a more generalist curriculum as well as the cyclical nature of some parts of the industry, there is a gap in skilled workers available to replace those who are reaching retirement age.

Maintaining price competitiveness is also a challenge for the industry.  Fluctuating prices of inputs (resin and electricity) are impacting profitability, and the appreciating dollar has eliminated a pricing advantage and is forcing manufacturers to adapt.

NAFTA Context

The Canadian plastics sector is intricately tied with the NAFTA market, with 93 percent of domestic exports going to the United States.  For this reason, the sector relies extensively on NAFTA, which has resulted in a common market for goods and services that has led to shared ownership and investment in businesses and enterprises in the plastics sector, and has allowed for common business standards and tax treatment.   In the area of tariffs and international trade agreements, duties on resins of U.S. origin were phased out by 1993, and duties on plastic products were phased out by 1998.  This contributed to a more competitive cost structure in Canada.

NAFTA has enabled a secure and reliable transport corridor for goods. Programs such as The Free and Secure Trade (FAST) program (a joint Canada–United States initiative involving the Canada Border Services Agency and the United States Customs and Border Protection (CBP) have resulted from provisions in NAFTA that allow for the efficient movement of pre-approved eligible goods across the border quickly while verifying trade compliance.  The result of such border initiatives has, over decades, led to one of the most integrated economies in the world, wherein supply chains form an intricate web of interdependent enterprises.

The economic benefits, including direct, indirect and induced, are difficult to quantify precisely, owing to the inter-connected nature of our markets. Canadian industry has generally benefitted from the opportunities and advantages presented by access to larger markets and greater product demand in close proximity to our production.

Level of Integration with US, Mexico and Value Chain Impacts

There is an extremely high level of integration between supply chain members in the North American plastics market, and the impact of any major changes to NAFTA is likely to be significant.

For example, IPEX is an Ontario-headquartered manufacturer of primarily plastic pipe for municipal water projects whose value chain is heavily integrated with the U.S. market.   About 95 percent of IPEX’s raw materials come from chemical plants in Texas and Louisiana.  They also import semi-manufactured pipe from their U.S.  subsidiary for further processing in Canada.  IPEX sells its finished pipe products in the U.S., Canada, and other countries.  Any trade barriers would significantly disrupt the value chain of manufacturers such as IPEX.

Anticipated Impact of a General Increase in US Protectionism

As referenced above, Canada and the U.S. are part of a highly integrated North American plastics market.   Many Canadian plastics producers buy their raw materials from the U.S. and sell finished plastics products to American and Canadian companies. With 93 percent of Canada’s plastics exports going to the U.S., a potential renegotiation of NAFTA may have a significant impact on Canadian producers.   However, the two industries are so integrated that anything that would prevent the flow of raw materials or manufactured products would impact the U.S. plastics industry as well.  The U.S. is also a significant plastic products supplier to Canada and only ran a modest $1.4 billion CDN$ trade deficit in 2015 out of 17.2 billion CDN$ in bilateral trade, meaning protectionist measures in this sector would also be disadvantageous for American firms.

[1] Source: Statistics Canada, March 2017