Canada's Major Papermaking Provinces Or Paper Mills Are Closing Down, And China's $2 Billion Imported Pulp Is Hanging!

Canada's major papermaking provinces or paper mills are closing down, and China's $2 billion imported pulp is hanging!
Time:2025-03-06 Source:Global Printing and Packaging Industry

Abstract:
Of British Columbia's many exports, there is probably no more vulnerable to U.S. protectionism than lumber. British Columbia's timber producers have long been highly dependent on the U.S. market and have already paid billions of dollars in anti-dumping and countervailing duties. More worryingly, the amount of tariffs is expected to increase further this year, and even face additional tariffs of up to 25%.
Keyword: Canada Paper

Of British Columbia's many exports, there is probably no more vulnerable to U.S. protectionism than lumber. British Columbia's timber producers have long been highly dependent on the U.S. market and have already paid billions of dollars in anti-dumping and countervailing duties. More worryingly, the amount of tariffs is expected to increase further this year, and even face additional tariffs of up to 25%.

The second largest forest product in British Columbia is pulp and paper. Compared to wood, the situation for pulp and paper is relatively optimistic. This is mainly due to the fact that the pulp and paper market is more diversified, less affected by the U.S. market, and is not currently affected by anti-dumping duties.

Thankfully, according to an analysis by the ERA Forest Products Research Institute, there is actually a lack of effective alternatives to Canadian pulp and paper in the United States. This means that producers in British Columbia have the ability to smoothly pass on 100% of the cost of tariffs to their U.S. customers without disproportionately impacting themselves.

However, this does not mean that British Columbia's pulp and paper industry can rest easy and emerge from an existential crisis altogether. In fact, the industry faces threats more internally than externally. "Our biggest challenge comes from ourselves," said Joe Nemes, general manager of the British Columbia Pulp and Paper Alliance, "and the supply of fiber feedstock is more serious than the tariff issue." "

In recent years, pulp and paper mills in British Columbia at Mackenzie and Powell River have closed, casting a shadow over the local industry. Currently, there are only 11 pulp mills and four paper mills left in British Columbia, and these mills are often built on the basis of pulp mills. These factories are often the most important economic pillars for many small communities, and if they fail, the blow to the local economy would be devastating.

According to the British Columbia Pulp and Paper Alliance, a typical pulp mill typically directly supports 350 well-paying jobs, generating up to $100 million in direct and indirect wage income annually. "The economic impact is catastrophic, as these small communities are often completely dependent on these pulp mills to keep their economies running," Nemes said.

Pulp and paper is British Columbia's fourth-largest export commodity, after timber, metallurgical coal and copper, with annual exports totaling about $4 billion. Like all other industries in Canada, the pulp and paper industry is currently at risk of potential tariffs, even though the U.S. market accounts for only 15% of British Columbia's pulp exports.

In contrast, up to 75% of the lumber exported by British Columbia goes to the United States. However, according to Statistics British Columbia's 2024 data, 60% of British Columbia's total pulp exports of $3.3 billion, or $2 billion, went to China. Only 15%, or $472 million, was exported to the United States. The remaining 25% is sold to ASEAN countries (about $300 million), Japan ($158 million), India ($137 million), South Korea ($111 million) and the European Union ($26 million).

Of the paper produced in British Columbia, Canadian paper exports are more dependent on the U.S. market than pulp exports. In 2022, the U.S. market accounted for 72% of British Columbia's total paper exports, totaling $613 million, of which $443 million came from the United States. However, according to an analysis by ERA Forest Products Research, it is much more difficult for the United States to find alternative sources of Canadian pulp and paper than for wood. The company predicts that if the tariffs are eventually implemented, these costs will be passed on directly to buyers, including large facial tissue and toilet paper producers in the United States.

"In the short, medium and long term, the huge investments and long cycles required to build new pulp capacity will prevent the U.S. from finding alternative sources of supply domestically," ERA's analysis predicts, "so suppliers (primarily Canadian suppliers) should be able to pass on 100% of the cost of tariffs to customers, but this will undoubtedly increase costs for domestic facial tissue, paper and packaging producers and end consumers."

Canada accounts for about 74% of U.S. cork pulp imports, ERA said. This means that pulp producers in British Columbia have a more diverse range of options in the export market than the national average in Canada. "We have a lot of options in the international market, and we have the ability to pass on tariffs. However, there are few alternative options for timber exports in the U.S. market, so we will not be able to pass on tariffs," said Kevin Mason, managing director of ERA Forest Products Research.

"A significant advantage of British Columbia over the rest of Canada is that we have more opportunities to pivot to the Asian market given our strategic location. If a factory is located in eastern Canada, it is actually very difficult for it to start turning to the Chinese market because the shipping costs will be very high. British Columbia, on the other hand, is strategically positioned to expand into the Asian market. "

While British Columbia's pulp industry may not be as directly affected by U.S. trade policies as the lumber industry, it can still be indirectly affected due to its close ties to the sawmill industry. Nemes points out that about 50 percent of the cost of pulp production comes from fiber feedstocks, and about 65 to 70 percent of these fiber feedstocks come from wood chips produced during the sawmill production process. The remainder comes from pulp logs, which in turn depend heavily on the amount of timber harvested to supply sawmills. "When you do timber harvesting, about 10 to 30 percent of the wood is classified as pulp," Nemes explains.

Therefore, when a sawmill is closed, the pulp mill loses not only the source of wood chips produced by the sawmill, but also the pulp logs that are normally obtained from the lumberyards that feed the sawmill. "If the timber industry catches a cold, we in the pulp industry get the flu," Nemes uses a figurative metaphor to illustrate the close relationship between the two. As the continued closure of sawmills in British Columbia has led to a dwindling supply of lumber, some pulp mills in British Columbia have had to rely increasingly on imports of pulp logs from Alberta, Washington and Oregon to sustain production.

"They [pulp mills] simply don't have access to economically viable fibre feedstocks, which is a waste of resources, because we are literally surrounded by these resources, and yet they all end up in ashes," he lamented. "In most cases, people go into the forest to harvest and take away only the good timber that is used for sawing, leaving all the pulp, treetops, branches, etc., in their place, and then burning them in a fire. Every year, more than 3 million cubic meters of timber are burned in vain. If we can sort and utilize pulp wood effectively, we can save at least half of these resources. "

Nemes also mentioned that some of the policies pursued by the NDP government over the past few years have actually led to a sharp halving of annual timber production in British Columbia, from about 60 million to 70 million cubic meters per year to 32 million cubic meters in 2024. "The good news, though, is that they now have a brand new minister, Minister Ravi Parma, who is actively working to address this issue," Nemes said. As promised during the campaign, Premier David Yoon has instructed the new Forestry Minister, Ravi Parma, to increase timber harvesting to 45 million cubic hectares per year.

Nemes believes the move will go some way towards alleviating some of the toughest challenges facing British Columbia's forestry sector right now. "He has a heavy burden on his shoulders," Nemes commented, "but I believe he is taking this issue seriously and trying to accelerate the pace to make these fibre raw materials available as quickly as possible." "