Plastics boom a boon to Alberta

Demand has exploded during pandemic

CALGARY • Fears of coronavirus contagion and depressed commodity prices have gutted much of Alberta’s economy, but there is one sector experiencing a surge: the province’s petrochemical sector, which produces a range of plastic inputs used in medical devices and packaging of everyday goods.

“Demand so far has been steady. While we have seen some cancelled orders, we are experiencing increased demand for many grades of polyethylene to meet the needs of essential businesses, especially food packaging, e-commerce and medical packaging,” NOVA Chemicals Corp.’s senior vice-president John Thayer said in an emailed statement to the Financial Post.

Thayer said the Calgary-based company, which is owned by UAE’s sovereign wealth fund Mubadala Investment Company, is operating its facilities in Canada at full capacity.

Nova and competitor Dow Inc. operate ethane-cracking petrochemical plants in Alberta that produce polyethylene, which is a plastic product used to make a range of products ranging from plastic wrap and packaging to medical devices. Key plastic ingredients are natural gas and chemicals derived from natural gas processing and crude oil refining.

Plastic packaging had been the target of multiple levels of government across Canada prior to the coronavirus pandemic.

In 2019, Prime Minister Justin Trudeau said the government would move to ban single-use plastics such as shopping bags, cutlery and straws to curb the proliferation of waste in landfills and oceans.

Now, in the middle of a public health crisis, the demand for plastic packaging has exploded. In Alberta’s oilpatch, ethane crackers used to make polyethylene film are among the only facilities that are busier today than before the pandemic knocked out global oil demand and led to hundreds of thousands of barrels of oil being shut in.

“The demand for plastic packaging has never been higher than it is right now,” said Bob Masterson, president and CEO of the Chemistry Industry Association of Canada, noting that the evidence of the huge demand for the industry’s products is plain at any grocery store in the country.

Some grocery stores that had previously banned or started charging for plastic bags have eased those policies as workers are concerned about handling reusable grocery bags. Acrylic plastic shields have been installed at tills to separate cashiers from shoppers, both of whom are wearing plastic gloves and masks in increasing numbers.

Plastic is being wrapped around items that had previously never been packaged.

“For the first time in my life, my eggplant was wrapped in plastic,” Masterson said of his most recent trip to the grocery store.

Masterson said the current crisis has led to “an absolute boom in the demand for packaging,” as grocery stores and consumers are wrapping food in plastic to prevent surface contamination of foods from the coronavirus.

At the same time, border closures and threats of U.S. bans on important medical equipment has exposed underinvestment in the Canadian petrochemical sector.

“I think it has shown some vulnerabilities in Canada’s supply chain,” Masterson said, noting that Shell Canada Ltd.’s Sarnia plant is the only producer of isopropyl alcohol in Canada, used to make alcohol-based cleaning products such as hand sanitizers.

Shell president and CEO Michael Crothers said in a March 31 release the company would donate 125,000 litres of isopropyl alcohol, which is “approximately enough to create nearly one million 12-oz. bottles of hand sanitizer for use in hospitals and medical facilities.”

In Alberta, successive governments have implemented incentives designed to attract more petrochemical investment in an effort to diversify the province’s economy and build out the supply chain for hydrocarbon production.

An incentive program introduced by former NDP premier Rachel Notley resulted in both Inter Pipeline Corp. and Pembina Pipeline Corp. spending $8.5 billion combined on under-construction polypropylene facilities, which will turn the province’s abundance of propane into plastic pellets used in a range of consumer goods.

Whether the coronavirus and fears about contagion has permanently altered consumer attitudes toward plastic is another question.

NOVA Chemical’s Thayer said it’s difficult to predict whether consumer behaviour will change beyond the end of the pandemic and how that will affect demand for plastic packaging.

“One trend that may have a long lasting impact is a shift to more products delivered through e-commerce channels,” Thayer said, adding the company’s products are “well positioned” to serve that market. “We believe that there has been a shift in consumer behaviour that will not change back after this pandemic.”

Demand for other types of plastic packaging, analysts say, can be expected to decline once the coronavirus pandemic eventually fades.

“Many companies and governments have made decisions on single-use plastics over the past couple of years based on very important reasons and these reasons remain quite relevant,” said Sylvain Charlebois, a professor at Dalhousie University and senior director at the Agri-Food Analytics Lab.

Demand for plastic packaging is currently extremely high and could climb as additional business reopen and service workers such as barbers and retailers begin using masks and gloves and more disinfectant in their workplaces.

Last week, Charlebois’ team published a report that said 30 per cent of Canadian consumers are wearing masks when they go to the grocery store, while 23 per cent are using gloves.

“Right now, people are thinking more about survival than the environment but that’s going to change,” he said.

In fact, the coronavirus pandemic is having an inflationary effect on food prices, which could provide an economic opportunity for companies to accelerate their shift away from plastic packaging,

Charlebois said higher food prices will provide enough cash to enable companies to rethink their packaging options over the longer term, when most companies believe there will be a continued shift away from plastic packaging.

“I don’t think the will to get rid of plastics is going to go away. Maybe it got forgotten for a while because of our fears with COVID-19 but I don’t think it’ll disappear,” Charlebois said.

In Alberta, there is continued hope that the petrochemical industry will lead to additional economic diversification and build up the value chain in the oil and gas industry.

“Suddenly, everybody is paying a lot more attention to the chemistry sector,” CIAC’s Masterson said, adding that he expects some proposed projects in Alberta and in Canada could help lead to a recovery in the province’s energy sector.

PEOPLE ARE THINKING MORE ABOUT SURVIVAL THAN THE ENVIRONMENT, BUT THAT’S

GOING TO CHANGE.