Searching for the perfect formula for profitability? Canada has all the key ingredients, as global leaders in the chemicals industry already know. Nine of the top 10 chemical companies in the world have production facilities in Canada to take advantage of its dynamic business environment, low tax rates and business costs, skilled workforce and ready reserves of competitively-priced feedstock. Large and efficient extracting plants, modern ethylene crackers and some of the world's largest derivative plants that enable Canada to achieve economies of scale are further enticements for investment.
The Canadian chemical industry is one of the largest manufacturing sectors in the country - the third largest manufacturing exporter in the country - employing 78,000 workers at almost 3,000 firms. With northern natural gas pipelines and off-shore resource development in the offing, the sector's future promises even greater rewards for savvy investors who get in on the ground floor.
When a country has as much to offer as Canada, it's impossible to pinpoint a single reason to invest in one of the most dynamic economies in the world. Canada boasts multiple advantages and unparalleled potential - a place where businesses can achieve excellence on a global scale.
Raw Material Supply
Canada offers strong raw material supplies of organic chemicals derived from natural gas, refined petroleum products, or biological matter, and also strong supplies of inorganic chemicals obtained by processing minerals such as salt, limestone, sulphur, potash, phosphate rock, and metals. Some of the major outputs of the segment include sulphuric acid, phosphoric acid, nitric acid, sodium hydroxide, chlorine and sodium chlorate.
Energy Supply and Infrastructure
Canada possesses large and secure supplies of crude oil, natural gas, electricity, uranium, propane, butane, coal, refined petroleum fuels, biomass, and other renewable energy sources.
Chemical investors in Canada can take advantage of a substantial investment in existing infrastructure. Some of the main elements of this infrastructure are:
- Chemical sector industrial parks that are ready for use;
- Pipelines from Western Canada to U.S. and Eastern Canada (natural gas, crude oil, propane, butane);
- Large underground salt caverns to store large quantities of petrochemicals and raw materials in Edmonton, Alberta, and Sarnia, Ontario;
- Extensive and reliable railways and roadways; and
- Ports on the Great Lakes, and all coasts.
R&D Environment
Chemical investors can take advantage of Canada's generous R&D environment, which includes a more favourable R&D tax treatment than that of the U.S. and almost every other OECD country. Canada has an ample supply of well-qualified researchers and positive R&D collaboration between universities, government laboratories and the industrial community, which is reflected in Canada's internationally competitive environment for patenting and licensing new technology.
The Canadian affiliate of one major multinational chemical company, which has already discovered these R&D advantages, calculates that $1 of research in the U.S. costs only 50¢ when carried out in Canada.
Government-industry Collaboration
Canada's chemical industry and governments typically work closely to achieve common goals. This includes growing the chemical industry in a sustainable, socially responsible and environmentally sound manner. This collaborative approach works well at all orders of government (Federal, Provincial, Municipal) and is applied to achieve progress across a variety of policy fields including but not limited to: taxation, trade, environment, workplace health and safety, transportation and other social issues. This approach streamlines the government's decision-making process, reduces potential for costly litigation and minimizes the risks of costly regulations.
Low Taxes and Incentives
Canada's chemical industry enjoys attractive corporate tax rates. Canada has the lowest payroll taxes among the G7 countries and by 2010 Canadian-based firms are expected to average a corporate tax advantage of more than 4.5 percentage points over U.S. based firms.
- Federal government's tax rate is being reduced to 15% by 2012;
- Quebec's investment tax credit (minimum of 5%) for manufacturing and resource-based industries;
- Ontario retroactive elimination of the capital tax, back to January 1, 2007 for manufacturing and processing industries;
- Federal and Ontario governments and industry are working to extend the accelerated capital cost allowance (50% and 50% over two years) for manufacturing and processing equipment past 2014; and
- Ontario is considering potential removal of retail sales taxes on inputs and lowering the corporate income tax rate for manufacturing.
Weather
While Canadian plants are challenged in the winter months with snow and very occasional ice storms, Canadian plants have the advantage versus their U.S. Gulf Coast competitors of not having to cope with hurricanes and occasional flooding.
The colder climate can also be an advantage for certain chemical processes. For example, some chemical producers enjoy 10% to 15% greater throughput capability in the winter months as a result of lower ambient temperatures. This can be the case at facilities employing refrigeration, air and/or gas compression processes.
Competitive Clusters
Canada's chemicals industry is concentrated in three regions of the country - Ontario, Québec and Alberta - each with distinct strengths and advantages. Central Canada is the largest chemical producer, leading petroleum-refining region, hub of the nation's plastics industry and home to seven of the 10 largest chemical companies, while Western Canada is the site of the largest petrochemical manufacturing cluster in the country. These hubs (Sarnia, Toronto, Montreal and Edmonton) are supported by a strong research infrastructure that nurtures innovation and the world's best-educated population.
Canada Has Much To Offer:
- Chemicals shipments worth CAD-$50.6 billion in 2008, with exports of CAD$32 billion, including pharmaceuticals - 76% to the U.S.
- Chemicals exports more than doubled in the last decade
- R&D expenditures in the sector were CAD-$197 million in 2007
- Canada is a nation of intelligent, educated workers, ranking #1 in the OECD in higher education achievement.
- The Economic Intelligence Unit has rated Canada the #1 place to do business in the G7 for the next five years.
- Canada is better placed than many countries to weather the global financial turbulence and worldwide recession.
- Canada offers businesses low tax rates, boasting the lowest payroll taxes among the G7 countries.
- Canada's NAFTA advantage gives investors access to more than 443 million consumers and a combined GDP of more than $15.4 trillion.
- Take advantage of Canada's strategic location as the crossroads between the North American marketplace and the booming economies of Asia.
- Canada has sophisticated infrastructure and a highly developed transportation network.
