33-250-XIE

Nicole Charron

Introduction

The Plastic Products Industries increased their contribution to the overall Canadian economy as calculated by the gross domestic product (GDP) by 1.6% in 1996. This compares to a 1.1% increase for the overall manufacturing sector. Over the past 10 years, the plastic products industries experienced slight drops and huge increases in their contribution to the GDP.

In 1996 the shipment values of the Plastic Products Industries ranked as the 12^th largest group among the 22 major manufacturing groups and accounted for 2% of all manufacturing shipments. This major group includes a variety of products such as containers, foam, rug underlay, pipes, film, and bags. The main activity consists of transforming synthetic resins into plastic products.

The 1997 Monthly Survey of Manufacturing reported good results for both the Plastic Products Industries and other industries involved in the production of plastics. The Plastic Products Industries (Major Group 16) experienced a 6.2% increase in the value of shipments. In comparison, other related industries such as Plastic & Synthetic Resin had a 13.7% increase. This article will look at factors that contributed to the strong performance of the Plastic Industries and at other related industries that are not part of the plastic industry but produce commodities with a high level of plastic content.      

Plastic Industry Products

According to the Annual Survey of Manufactures, shipments from the Plastic Industry reached $9.1 billion in 1996, a 10.6% increase compared to 2.5% for the overall manufacturing sector. The Plastic Products Industry has experienced increases for the past five consecutive years.

This remarkable increase in shipments contrasts with the Industrial Product Price Index (IPPI) which experienced a 1.5% drop in 1996 (as opposed to a record 11.7% increase in 1995). Prices in the manufacturing sector as a whole increased by 0.4% in 1996. Expressed in constant dollars, the value of shipments for the Plastic Industries increased by 12.4%, the fifth increase since 1991 (Chart 1: Value of manufacturing shipments).

In current dollars, four out of the five industries which comprise this major group, reported higher shipments in 1996. Shipments from the Plastic Film and Sheeting Industry showed the only percentage decrease (-13.4%), a sharp contrast with the 28% increase reported a year earlier. The Plastic Bag Industry experienced the smallest increase (5.4%), as opposed to a double-digit raise in 1995. The Foamed and Expanded Plastic Products Industry had a 15.8% increase in the value of shipments.

In terms of the distribution based on the value of shipments, the Other Plastic Products Industry increased its share to 60.6% of the major group total. The dominance of this industry has grown steadily since 1990, when the percentage share of shipments was 53.9%. It contributed to the good results of the major group with a 16.8% increase in shipments, the largest among all plastic industries. It is also the only industry that experienced a price increase.

The Camford Chemical Report reported for the first quarter of 1998 that:

Resin markets weakened in the first quarter and producers are bracing themselves for a difficult year. Much of the industry's woes can be attributed to soft prices caused by the start-up of new capacity. The recent General Motors' strike will also have an adverse impact on certain resin markets in the short term. (1)

The 1996 provincial distribution showed that the production of plastic and plastic products has remained in the traditional centres of Ontario and Québec with 56.3% and 25.1%, respectively, of total shipments.

The industrial capacity utilization rate for the Plastic Products Industries behaved quite differently from the overall manufacturing sector. During the first quarter of 1998, the capacity utilization rate for plastic industries was 79.6%, well below the rate of 86.2% for all manufacturing industries. At 79.6%, the Plastic Products Industry had the third lowest capacity utilization rate (after Tobacco Products Industries and Other Manufacturing Industries).

The capacity utilization rate for the Plastic Products Industry has not always been low. Between 1979 and 1991 the industrial capacity utilization rate for the Plastic Products Industries remained above the rate for all manufacturing industries. Despite its lacklustre performance, plastic remains one of the 22 industry groups in manufacturing that raised their rates in the first quarter of 1998. Plastic Industries capacity utilization rate for 1997 was 79.6%, up from 78.4% a year earlier. Since the 1990 recession, they have invariably had lower capacity utilization rates than the Canadian manufacturing sector as a whole (Chart 2: Capacity utilization rates).

Due to the fact that these establishments are far from working at full capacity, there has been a decrease in investment in 1997, but investment intentions in 1998 were higher than in 1996. Investment rose by 16.9% in 1996 to reach $457.6 billion.

Employment in the Plastic Group followed the increase in shipments with a 2.3% growth in 1996, an increase for the fourth consecutive year. The increase was concentrated in the production workforce, which expanded by 2.7%. The number of other workers, which include administrative and sales personnel was down 3.1%. The Plastic Products Industry is characterised by a majority of small and medium size enterprises with less than 100 employees. Industries with less than 100 employees account for 51% of shipments, 52% of material inputs, 54% of production employment and 88% of establishments. Establishments with 20-100 employees have a larger share of these results (Chart 3: Share of shipments by employee size group).

In 1996, wages and salaries in the Plastic Industries totalled $1,775.5 million, up 4.0%. For the past 10 years, salaries and wages have been increasing on an annual basis with the exception of 1991, a period of recession at the beginning of this decade. Of the salaries and wages amount, $1,280.8 million was paid as wages to production or related workers. During the past 10 years, the amount paid in wages has doubled and salaries increased by 88%. Despite rises in wages and in production employment in the past four years, the Plastic Industries wages remain low, compared to other manufacturing industries. The average hourly rate of $13.00 for the Plastic Products Industries ranks among the lowest and remains below the $16.38 of the overall manufacturing sector in 1996.

Other Industries-Expanded Plastic Sector

Plastic is used mostly in the wrapping and packaging industry, construction industry, automotive industry and other markets. In addition, the Plastic Parts and Accessories for Motor Vehicles Industry (SIC 3256) includes establishments engaged in making plastic parts for motor vehicles and the Plastic and Synthetic Resin Industry (SIC 3731) includes establishments that transform resins into plastic products.

In order to provide a better understanding of the plastic sector, the above two industries were combined with results from the Plastic Products Industries (Major Group 16) and were referred to as the "expanded plastic sector" (Chart 4: Value of manufacturing shipments).

Some plastic products such as toys, luggage, footwear and other goods with plastic content are classified under the industry that represent their respective commodity and are not included in the plastic industries. In addition, plastics in a captive production such as bottles and other plastic containers used to package products made by the manufacturer are not always included in the Plastic Products Industries.

Imports and exports gap narrows (see International Trade)

In 1997, the production of unsaturated polyester resin in metric tonnes, experienced an increase of 16.5%, the strongest growth among the resins. The key markets for resin are similar to that of plastic; they include the construction, marine, corrosion and transportation sectors (2). Main outputs include other articles of plastic and siding for building exterior of polymers of vinyl chlorides. Both outputs are produced by the Other Plastic Products Industry (SIC 1699).

Exports have experienced double-digit increases for the past five consecutive years. In 1996, there was a 13% jump. At approximately $2.9 billion, exports for the Plastic Products Industries are less than the $3.6 billion reported as imports.

Imports also rose, albeit more slowly than exports, up 4.4% from 1995. In terms of volume, the Other Plastic Products Industry (SIC 1699) dominated the plastic group with 57% of imports. The Plastic Film and Sheeting Industry (SIC1631) faced stiff competition with imports that closely match the level of shipments (Chart 5: Trade Surplus).

With respect to the expanded plastic sector, the Plastic and Synthetic Resin Industry (SIC 3731) dominates all industries with imports of approximately $3.6 billion and exports of $ 3.1 billion. Most plastic industries reported a trade deficit with the exception of the Plastic Parts and Accessories for Motor Vehicles Industry (SIC 3256) and the Plastic Bag Industry (SIC 1691).

The increase in demand can be attributed to increased exports thanks to a weak dollar but also to substitution. For example, using plastics instead of other products can reduce weight and, therefore, transport costs.

Conclusion

Plastic products are found in a variety of places. The Annual Survey of Manufactures accounts for the direct use of products of the Plastic Products Industries. The expanded plastic sector provides a more complete picture of commodities made in plastic.

At the industry level, establishments dedicated to the manufacturing of plastic products are characterised by many medium -sized firms with between 20 and 100 employees. In 1996, these establishments faced a decrease in prices but benefited from an increase in exports. Results from the Monthly Survey of Manufacturing reveal an increase in shipments for 1997 and for the first half of 1998, an increase of 4.9%.