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Wood Starvation More Likely in Future if Allocation Cutbacks Continue

In a forest industry environment where nearly all Crown land is allocated, both sawmill owners and pulp and paper companies are finding it increasingly difficult to predict the future of the fibre sup...

April 1, 2005  By Pulp & Paper Canada

In a forest industry environment where nearly all Crown land is allocated, both sawmill owners and pulp and paper companies are finding it increasingly difficult to predict the future of the fibre supply when governments seem more willing to reduce the forest resource and rearrange how the resource is allocated.

Furthermore, without access to new fibre supply sources, there is no incentive to invest in greater efficiency and productivity to increase capacity. What would be the point of increasing capacity if there is no additional fibre available to benefit from it?

The Alberta-Pacific Forest Industries (Al-Pac) pulp mill near Athabasca, AB, has found one way to increase its fibre supply over the long term. Built in 1993, within 10 years the mill managed to raise its capacity by 15% from 1650 to 1950 air-dried tonnes per day. Limited by the annual allowable cut granted to it by the provincial government and with limited access to private wood, Al-Pac came up with the innovative concept of planting faster growing hybrid hardwood on poor quality farmland as one way to meet its longer term needs. Planting hybrids is also positive for the environment. The mill will become carbon neutral regarding its impact on the environment by 2008.


Bowater Forest Products vice-president of human resources and public affairs, Georges Cabana, warns not to underestimate the industry’s ability to find new ways to maintain consistent production, even when faced with potential fibre shortages.

“The Canadian pulp and paper industry is quite resilient,” he says. “It’s one of the oldest pulp and paper industries in the world. Even today it is competing and is the largest exporter of forest products in the world.”

Bowater is also doing its part for the environment while maintaining production capacity by re-processing recycled paper and newsprint in some of its facilities. It owns three pulp and paper mills in Quebec, one in Ontario, one in New Brunswick, and one in Nova Scotia.

“The industry is always evolving,” Cabana says. “Take, for example, our mill in Gatineau, QC, which celebrated its 75th anniversary in 2003. When this mill started, there was no recycling whatsoever. Today, 50% of the mill’s fibre requirement comes from recycled newsprint.”

Re-processing recycled paper and newsprint as well as harvesting faster growing hybrids have helped fill fibre supply gaps for some mills. However, fibre allocation reductions by governments bowing to pressure for greater conservation in a fully allocated fibre environment has the potential to severely curtail production in some regions, even forcing closures in some cases.

For example, the 1999 Ontario Forest Accord provided for the expansion of Ontario’s system of parks and protected spaces to 12% of Crown land.

“If we decide to make a big push in terms of conservation, and we carry on reducing the wood allocation, then everyone will starve for wood,” says Cabana. “There’s no doubt about that. You’re going to see equipment supply closures, pulp and paper mill closures, sawmill closures, and in turn, the fibre costs will go through the roof.”

A major reduction in fibre allocation may be imminent in Quebec, Canada’s second largest forest product manufacturing province. The 20% reduction in wood allocation recommended by the Coulombe Commission has many of Quebec’s major forestry companies troubled.

“We believe that it is too high a reduction and we are certainly worried about the decisions that the government will make or is considering now following the issuance of that report,” says Cabana.

How the government intends to implement this recommendation is still unknown, and lobbying efforts for a phased-in reduction continue.

“Plainly put, we’ve asked the Commission to help us make the forest regime evolve and that we are currently not looking for a revolution,” says Cabana. “We are faced with many challenges, and a substantial reduction in wood allocation will create all sorts of problems on all sides of the business.”

An across the board 20% reduction would have a severe economic impact on specific regions, such as on smaller sawmills in the lower St. Lawrence region. However, the impact would be less severe if the government phased in the reduction, as recommended by companies like Bowater.

Fibre allocation in Canada’s largest forest product manufacturing province has recently undergone many changes. In an effort to inject new life into its struggling forest industry, British Columbia introduced its forest revitalization plan in 2003. As part of its forestry revitalization plan, the government reallocated 20% of long-term timber licenses, claiming the old system made it difficult for new operators, with fresh ideas and creativity, to enter the industry.

Notwithstanding this change in how timber licenses are allocated, the vice-president of Pope & Talbot’s pulp division, Angel Diez, says high lumber prices are currently maintaining a steady flow of wood chips to its pulp mills on the BC coast and in the central interior. It owns the Harmac Pulp Operations mill in Nanaimo, BC, and Mackenzie Pulp Operations mill in the interior.

Mother Nature has stepped in to assist BC’s central interior pulp and paper industry, as the Mountain Pine beetle epidemic has resulted in a short term, overabundance of wood chips in that area. While there are plenty of chips, pulp and paper mills accepting chips from beetle kill areas have concerns about how drier fibre from older infested stands will impact on pulp quality. (see sidebar 1)

Furthermore, this aggressive approach to bring the pine beetle infestation under control could lead to a severe chip shortage in the future. Diez says the long term future of the fibre supply for BC’s coastal mills seems to be facing a similar fate.

“If you are on the coast, you have to worry,” says Diez. “Every study shows that there is not enough fibre to support all the pulp mills on BC’s coast.”

Unfavourable political decisions by Canada’s major trading partner is also having a major impact on consistent fibre supply. The American softwood lumber tariff has resulted in a number of industry casualties as demonstrated by the number of mill closures in British Columbia. Other mills have temporarily curtailed production. Because the pulp and paper industry is so dependent on consistent chip flow from sawmills, this invariably has a negative trickle down effect on pulp and paper production.

To a certain extent, Cabana says vertically integrated companies like Bowater face less risk of fibre supply disruption because they have better control of their chip supply. Pulp and paper companies that rely on a consistent wood chip supply from agreements with neighboring sawmills are more susceptible to fibre supply issues and disruptions in production, particularly in cases like the softwood lumber dispute.

The higher cost of fuel is another pressure point on fibre supply for pulp and paper companies, because it costs more to transport whole logs to sawmills and wood chips to pulp and paper mills. Many truckers are now adding a fuel surcharge to their invoices or are attempting to negotiate a better transportation rate to take fuel costs into consideration. However, given the competition that Canadian pulp and paper mills face from other regions of the globe, the industry has little room to maneuvre to help contractors cope with increasing fuel costs.

“We are not competing in a vacuum here,” says Cabana. “Everybody tries to transfer the cost to their neighbor, but we are competing on a global basis, with little ability to transfer these higher costs to our customers.”

The higher cost of fuel particularly in the trucking industry has forced many pulp and paper mills to curtail purchase of chips beyond certain distances or look at other transportation options such as rail transportation where available.

Some companies, like Daishowa-Marubeni International (DMI) at its Peace River, Alberta pulp mill, have adopted in-the-woods chipping. Th
is practice has the potential to reduce fuel consumption costs because chips are a lot lighter to transport from the bush than whole logs.

Cabana agrees that one way the pulp and paper sector can assure itself of more consistent fibre flow in future is to continue to invest in research and development regarding the potential use of less valuable wood species.

Bc Central Interior Drowning in Wood Chips Due to Mountain Pine Beetle Infestation

While pulp and paper mills in other Canadian regions worry about starving for wood, the Mountain Pine beetle infestation has created a wood chip glut in the central interior of British Columbia.

“We’re now selling about 100,000 tonnes of wood chips per year,” says Cariboo Pulp and Paper Company mill manager, Brian Grantham. “We’re finding it difficult to sell because there isn’t a huge market for it. We know that there are pulp and paper mills out there that would dearly love to have the chips, but of course the freight factor becomes an issue.”

The Quesnel, BC-based pulp mill produces 330,000 tonnes of bleached kraft pulp per year, and is owned 50-50 by Daishowa-Marubeni International and West Fraser Timber.

The mill consumes up to 70% Lodgepole pine chips, with the remainder being Interior Douglas fir and spruce.

The infected zone for Mountain Pine beetle includes the areas surrounding Quesnel, Williams Lake, Prince George, Burns Lake and 100 Mile House.

A major effort is underway to harvest green timber that has just suffered a pine beetle infestation as a means of controlling the outbreak. The provincial government has increased annual allowable cuts for area forest companies, resulting in the region’s sawmills investing in new equipment and putting on extra shifts to deal with the increased fibre flow.

The expiry of the softwood lumber agreement has also eliminated restrictions on the amount of softwood that local sawmills can ship to the United States. So this is also encouraging them to invest in more production capacity, resulting in greater chip production.

The oversupply situation is expected to last between 10 to 15 years in the battle to bring the Mountain Pine beetle infestation under control.

“We do have a concern, of course, that the annual allowable cut will have to decrease quite a bit once areas affected by the Mountain Pine beetle are cleaned up,” says Grantham. “We’ll have to really think hard about how we fibre up this mill and other mills in the area.”

The availability of more wood chips has not been a boon for the Cariboo Pulp and Paper mill, as it was running at capacity prior to the Mountain Pine beetle outbreak about two years ago. The mill was operating with a balance between fibre supply and plant capacity prior to the extra chips coming on stream.

While the pulp mill is currently processing chips from green fibre, it has a concern about fibre strength once it begins processing chips from drier logs. These are logs left standing longer after a beetle infestation. The company is supporting research being conducted by Paprican to find out what the minimum amount of moisture content the mill can accept before it starts to see an impact on pulp strength.

Fibre Transportation Issues

by Andy Blatchford

Northern Quebec’s roads provide many white-knuckle moments for drivers battling the treacherous conditions of La Belle Province’s harsh winters. Blanketed with ice and snow, highways become dangerously slick routes for truckers trying to keep their vehicles on the safest path.

The first signs of the end-of-winter thaw are welcomed by most Quebecers, but for those in the hauling business, provincial law makes the spring equinox period one of the biggest challenges, including Quebec’s fibre carriers in the pulp and paper industry.

With railroads providing the only alternative to transporting fibre from northern regions of the province, trucking, semi-trailers and b-trains to be more specific, is the most flexible and by far the most popular method used in Quebec.

But as winter comes to an end, Transport Quebec says water accumulation and a repetitive freeze and thaw cycle leaves the province’s roads vulnerable to heavy vehicles. The Transport Quebec website describes the pavement as 40% more fragile in the spring than any other time of year, with an overloaded truck inflicting between five and eight times the damage.

To protect the road infrastructure, Transport Quebec created “operation thaw” — a period in effect each year from mid-March to May, depending on location within the province — when load limits are lowered and Quebec’s highways are monitored by about 200 inspectors. From 1991 to 1998, over 1.4 million vehicles were weighed during “operation thaw” and 22,000 were found to be overloaded.

Rgis Rehel, Director General of Cascades Transport, says the restrictions of the spring thaw period “are unique to Quebec” and sometimes force the company to “double the number of deliveries” within the province.

But the challenges of “operation thaw” on pulp fibre transportation don’t all come from within Quebec’s borders. Jacques Bgin, assistant manager of forest management at the Quebec Forest Industry Council says, “in Ontario, (trucks) can carry about 10 % more weight. They have an advantage if they go directly to the (United States) or stay within (their province).”

Bgin sees the rising price of fibre transportation in Quebec as another obstacle to carriers in the pulp and paper industry. He says some logging operations are heading further north, because previously logged forests aren’t ready to be cut just yet, and the added distance is raising costs. “We’re not at regeneration yet. The cost of transporting supply is very expensive. Some mills just can’t make it (because) their (hauling) costs are extremely high,” Bgin explained.

To ease transportation expenses, Domtar’s manager of external communications, Richard Descarries, says “we try and maintain the equivalent distance so we don’t hike our costs.” He estimates “an average of 200 km” for each fibre delivery in Quebec with “the odd ones being 500 km and 1000 km.”

But for Abitibi-Consolidated, travelling long distances to get pulp isn’t always necessary as “the fibre basket is regenerated” in some of their regions, says Denis Leclerc, director of corporate affairs. “In Mauricie, the places we (previously) harvested are becoming mature, so now (forests are) becoming closer to the mill,” he says. Forests around the mills have had time to come back as, “the pulp mills have been there for 100 years,” Leclerc explained.

As an alternative to trucking, railroads are used when the circumstances are right. “Whenever possible, we use rail,” says Rehel, who adds that Cascades will only transport recycled fibre (which makes up about 99% of their supply) by train when it’s financially feasible and time allows for it. He says because railroads have limited access, “rail increases the delay between production and delivery.” It becomes “more of a logistic challenge,” he explains.

Bgin says rail transportation is still “fairly expensive”, but mills will usually take advantage “whenever there is a train available for the job.”

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