Features Research & Innovation
The Future of the Global Forest and Paper Industry 2005

The Global Forest and Paper Summit, held in Vancouver at the beginning of June, brought together over 500 industry leaders to hear PricewaterhouseCoopers “Deliver the Bottom Line”, followed by “Vision 2015”, as seen by senior representatives of the forest and paper’s sector’s major stakeholders: producers, customers, civil society groups, policy makers and financiers.

While the news was much better for the sawmilling sector, many of the participants from the pulp and paper side explored issues and outlined strategies to help improve the economic opportunities of their industry.

Some of the points raised covered a wide range of topics:

Craig Campbell, Leader, Performance Improvement, Global Forest & Paper Practice, PcW:

Campbell spoke of the challenges facing the industry, pointing out that it was easy to get into but difficult to exit. Although he focused much of his talk on the sawmilling sector, he gave the final numbers for the forestry industry as a whole. According to PcW, the return on capital employed (ROCE), a key measure of performance in this capital-intensive industry, edged up to an average of 5.5% in 2004, from 4.2% in 2003. While this was still short of the target, some of the individual companies held the top spots in the global industry.

Richard Nilsson, Financial Analyst, Enskilda Securities:

Demand was not the problem for the industry, said Nilsson, blaming price erosion through 2004 which had declined an average of 6%.

H.C. Bowen Smith, Senior Advisor, Greenhill and Co.

Saying that the industry is parasitic, Smith listed some of the current challenges to the industry: intense competition and the development of alternative media, currency difficulties and environmental liabilities. Leading paper companies should be investing in the Asian market, said Smith, pointing out that China now sets the price for pulp and recycled fibre.

Steve Rogel, Chairman, President and CEO of Weyerhaeuse:

In answer to a question about the value to a forest products company of owning private forest lands, Weyerhaeuser Chairman Steve Rogel noted that his company had spent considerable research effort in understanding how to grow their forests with wood and fibre properties best suited to the local mill. They grow fibres that give the best end-products, which are less energy-intensive and have fewer unwanted bi-products for example. He regarded this as an important strategic advantage that Weyerhaeuser derived from long-term ownership of timber-lands.

Rogel also stated that the forest industry is part of the environmental solution, noting that wood locks up greenhouse gas-producing carbon.

John Weaver, Chairman & CEO, Abitibi-Consolidated:

Weaver emphasized several key points: the industry had to look how it can renew itself, the industry had to stay focussed on cost reduction and the industry had to adapt to a changing market.

Avrim Lazar, President & CEO, Forest Products Association of Canada

While warning that the new players in the pulp and paper field are “ambitious”. Lazar maintained that, in the traditional 10-year cycle, we are not at midpoint. However, his vision for what was coming in the future included “intermediate and long-term forces [that] are very positive.”

Pierre Gorse, Director, Carrefour:

With 11,000 stores and 430,000 employees, Carrefour is the world’s second biggest retailer. Pierre Gorse described the elements of his company’s sustainability policy for paper procurement in a session on the Future of Paper in Communications. A drive to lower basis weight, lower wood fibre consumption and 100% forest certification for virgin fibre sources were the three main elements of their policy for paper used in advertising. The same approach is used for packaging grades. For advertising papers, this policy had resulted in a move away from lightweight coateds to SC and other uncoated high-bright mechanical papers for advertising, with a generally higher recycled content, and lower net cost. Paper was still the preferred medium for conveying detailed information about their product offerings to consumers.

Tzeporah Berman, Environmental Advocate:

Speaking for the over-100 protesters outside the conference, Berman called on the participants of the conference to collaborate with environmental organizations to identify and endangered forest.

“We have one of the biggest opportunities to get it right,” she pleaded, asking for meaningful change on the ground.

David Refkin, Director of Sustainable Development, Time Inc:

Representing the largest magazine publisher in the world, Refkin had people listening as he expounded on the importance of sustainable development and improving the industry’s “carbon footprint”. The US publisher buys 650,000 tonnes of paper annually and does an annual review of its suppliers, evaluating them on a scale of sustainability targets.

“Our strategy has been to reward leaders, encourage laggards and, for those who have egregious practices: No business,” Refkin explained.

Recovered fibre should be seen as part of the answer to global fibre shortage … not as a competitor to virgin fibre, he added.

NEW RESEARCH CLUSTER TO BOOST BC FOREST SECTOR

A new collaborative forest-research effort will harness the research and innovation capabilities present in British Columbia, to improve the competitiveness of the forest industry and to increase the economic and social value of Canada’s forests.

Known as Forest Research Opportunity BC, this partnership will bring together the governments of Canada and British Columbia, as well as BC universities and industry. It will focus on delivering results that meet industry and public policy needs in areas such as sustainable forest management and forest products, climate change, energy supply and the mountain pine beetle infestation.

“British Columbia has rich resources in its forest, industry, universities and world-class forest-products research institutes,” said the Honourable R. John Efford, Minister of Natural Resources Canada. “Forest Research Opportunity BC will better coordinate the activities of everyone involved in the BC forest-research community and help spur more robust business development and breakthrough technology.”

“Through this collaboration, we will advance the technology efforts in this sector and provide the BC industry with a competitive advantage, which will lead to the better use of our forest resources and wealth coming into the province,” said the Honourable David L. Emerson, Minister of Industry and Co-Senior Minister for BC.

The executive director of Forest Opportunity BC is Dr Alan Potter, most recently vice-president of Technology and Environment for Nexfor. “This is an exciting mission,” said Dr Potter. ‘It is an opportunity to harness some of the considerable research and technical talent available in BC, and focus it on this important sector.”

Information gathered by Anya Orzechowska and Andrew Garner