THE last Word

A recovering pulp sector is good news for solid wood producers—and loggers

By Tony Kryzanowski

There are definite signs that the worst is over for the pulp side of the Canadian pulp and paper sector. It may also be time to rebrand it as the ‘cellulose’ branch of the forest industry because, let’s face it, digital media is kicking the legs out from consumption of certain types of paper in North America.

But pulp, or cellulose, well, that’s another matter entirely.

Why the solid wood industry should take note of what’s happening in the pulp sector is because of the close integration between sawmills and pulp mills. Many sawmills would not survive if they did not have a market for their chips, so what happens in the pulp sector really matters to all of forestry.

The evidence of a silver lining in the pulp industry is in the large number of acquisitions and new players arriving, particularly in Western Canada, as well as how several pulp producers are refocusing their marketing on sales to more non-paper customers.

For example, Alberta-Pacific Forest Industries (Al-Pac), located near Boyle, Alberta, has increased its sales to the tissue sector from 10 per cent to 33 per cent, according to Geoff Clarke, Program Leader for Bioproduct Development.

On the acquisitions side of the ledger, here are some of the recent highlights.

In British Columbia, Paper Excellence was notified in February that the Canadian Competition Bureau has no issues with the company’s desire to purchase Richmond-based Catalyst Paper, which owns manufacturing facilities in Crofton, Port Alberni and Powell River, as well as a distribution centre in Surrey.

Now here is a company that has come a long way in the Canadian pulp sector in a very short period of time, stating in its press release on the Catalyst purchase that “Paper Excellence has evolved from a new entrant in the value-added natural resources (pulp) industry less than a decade ago to being among one of Canada’s larger pulp producers.”

In Alberta, Mercer International Inc has purchased the Canadian assets of Daishowa-Marubeni International (DMI) for $465 million. DMI was owned by Marubeni Corporation, Nippon Paper Industries Co Ltd, and Daishowa North America Corp. It owned a bleached kraft pulp mill in Peace River and a 50 per cent interest in the Cariboo Pulp and Paper Company, a joint venture that operates a bleached kraft pulp mill in Quesnel, B.C.

The disappearance of the DMI name marks a sad end to an important chapter in the establishment and growth of Alberta’s pulp industry, as it, along with Al-Pac, was a huge player in the expansion of the industry in the province several decades ago. But times are changing. Mercer is no stranger to the Canadian pulp industry, given its ownership of the Celgar mill in Castlegar, B.C.

In Saskatchewan, Paper Excellence could be making huge headlines soon, but it’s not clear on which side of the column. The company purchased the massive Prince Albert pulp mill from Domtar in 2011, but has not operated the mill because of a non-compete clause in the sales agreement. That clause expires in March 2021, which has local union leaders wistfully speculating that it is only a matter of time before the pulp mill re-opens.

There are discussions about adding green power production at the Prince Albert pulp mill in addition to pulp production. For its part, Paper Excellence says that it is still evaluating whether re-opening the pulp mill makes sense. If it does, there will be dancing in the streets by the more than 185 staff who have recall rights to possible future jobs at the pulp mill—but also at sawmills east of Prince Albert, who would then have a market for their chips a lot closer to home.

Paper Excellence is already a major player in the province’s pulp industry, with a plant in Meadow Lake.

Perhaps the most intriguing good news story of all is the saga of the kraft pulp and paper mill in The Pas, Manitoba. The mill produces heavy kraft paper used in such applications as cement bags, sugar, seeds, and potatoes, producing about 164,000 tonnes of kraft paper annually.

Two years ago, a decidedly mysterious White Knight buyer purchased the kraft pulp and paper mill mere weeks before it was slated to close, as it was deemed financially unsustainable by the previous owner.

The closure would have meant unemployment for 330 workers and loss of an annual payroll of about $37 million to the community, with the town’s mayor stating that it would impact about a third of the town’s population of 5,500 residents.

But the mill was purchased by a previously unknown player in Canada’s pulp and paper market, Canadian Kraft Paper Industries Limited (CKPI), in partnership with Swampy Creek Holdings, a local First Nations business. CKPI is a branch of a much larger conglomerate called American Industrial Acquisition Corp (AIAC).

Since 2016, it has invested over $20 million into the mill.

Recently, CKPI was awarded the Turnaround of the Year Award for a midsize company by the Turnaround Management Association. In 18 months, the mill went from multi-million dollar losses in 2016 to a profitable 2017, to record profitability in 2018.

So maybe the Canadian pulp industry wasn’t dying after all—maybe it just needed some new blood, new focus, and new ideas.