Forecast for Canadian Chemical Industry Tops $1 Billion in 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--Over the past several years plant owners in the Chemical Processing Industry (CPI) of Canada have struggled with demand woes and a global recession. The effect of these struggles has been obvious with the annual value of CPI construction kickoffs in Canada barely exceeding $250 million in recent years. As global demand has begun to show signs of strengthening, so has the outlook for total CPI spending in Canada this year, currently forecast to reach a potential of $1.2 billion.

The dramatic increase in planned spending for 2012 is contingent on a number of large projects becoming a reality, several of which have been postponed numerous times in recent years. Canadian Fertilizers Limited (Medicine Hat, Alberta) has considered expanding its urea capacity since 2009. The project to add another unit at the Medicine Hat plant would nearly double the plant's capacity at the cost of more than $300 million. This project has been delayed many times, and currently the next window for a potential construction start is late 2012. Last year, Cytec Industries Incorporated (NYSE:CYT) (West Paterson, New Jersey) began evaluating the expansion of phosphine and related derivatives produced in their Niagara Falls, Ontario, plant with an estimated price tag of $125 million. Pending approval early this year, this project to increase production, purification and R&D efforts could begin construction by the fourth quarter of 2012. There are 14 major CPI projects valued at more than $20 million each planned to begin construction in Canada this year.

An overwhelming majority of the activity planned for this year will take place in Ontario and Alberta, provinces that are home to the largest number of CPI plants in Canada. Nearly $500 million in total capital and maintenance spending is planned in the regions this year from a total of 65 individual projects.

The increase in maintenance activity is expected to reach $230 million from 68 planned turnarounds identified and reported for 2012, up from just $115 million in 2011. As operating rates continue to increase, so does the number of capital and maintenance project opportunities.

For years, Canadian CPI producers counted on their low-cost natural gas and feedstock advantages to provide momentum for growth and competitiveness in a global chemical market. With increases in demand from domestic and international markets alike, these producers are positioned well to capitalize on the overall market's forward direction.

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