West Fraser invests in the future as Canadian softwood lumber producers face a tough year

By Tony Kryzanowski

In a moment of great irony, it turns out that the world’s pivot toward more earth-friendly alternatives like wood-based packaging and away from plastic packaging will actually help maintain a minimum of 270 forest industry jobs in Alberta—a province that is a major supplier of fossil fuel-based petrochemicals to the plastic industry.

West Fraser Timber has announced a major product shift at its iconic Hinton Pulp operation in Alberta, which has produced pulp since 1956 and is one of the first forest industry manufacturing facilities built in the province. It will be shifting production from Northern Bleached Kraft Pulp (NBKP) to Unbleached Kraft Pulp (UKP), while reducing production from two lines to one line.

There will be job losses as a result of this pivot as staff levels will drop from 345 to 270. But it could have had a much worse impact on this community situated on the east side of the Rocky Mountains, and which has depended on forest industry jobs for over 75 years.

West Fraser says it expects to mitigate the impact on employees through natural attrition, retirements and by offering employment opportunities at other West Fraser operations (of which there are many in Alberta).

Not only is this good news for Hinton Pulp workers, but also for logging contractors supplying wood fibre to West Fraser’s Hinton operations, which includes a large softwood lumber mill.

“We remain strongly committed to the community of Hinton, the future of the plant, and to our neighbouring lumber operation, Hinton Wood Products,” says Ray Ferris, West Fraser President and CEO.

Speaking about demand, UKP is commonly used as cardboard packaging, grocery bags, fibre-cement bags and specialty wood products. According to pulp industry analyst Brian McClay, 80 per cent of packaging in e-commerce is paper.

West Fraser adds that since late-2021, the mill has undertaken several product trials and received positive initial customer feedback as to the quality and strength of the pulp produced.

And staff can feel pretty darn good about what this change will mean for the environment, especially in this area so close to Jasper National Park.

According to West Fraser, transitioning to a single UKP line will result in a 35 per cent greenhouse gas (GHG) emissions reduction, or the equivalent of taking 19,900 cars off the road, reduce water use, air emissions and waste generation by 25 per cent, and eliminate chlorine dioxide emissions.

Likely many attending the recent Alberta Forest Products Association (AFPA) conference at Jasper Park Lodge drove past this pulp mill in Hinton and soon discovered at this year’s event that expected gains in the pulp industry are probably the only really good news facing Canada’s forest sector heading into 2023.

“I wouldn’t want you to come out of this presentation feeling positive,” said Paul Jannke, representing forest industry consultants, FEA Partners, in his annual state-of-the-industry speech that is typically very well attended at the conference. While he made the statement in jest, the economic numbers he presented showed rather dramatically that the days of record prices for Canadian softwood lumber and booming consumption are over, thanks to rising interest rates in Canada and the U.S. aimed at curbing inflation.

Because of escalating interest rates, the cost of borrowing to buy a home has nearly doubled, with a payment of $1,200 per month increasing to about $2,000 per month. This has had a chilling impact on the residential real estate market, although it won’t be as catastrophic as the cratering that occurred during the housing crisis in 2008.

Jannke expects home construction in the United States to drop from 1.6 million units in 2021 to 1.3 million units in 2023. He predicted a three per cent decline in lumber consumption for the rest of 2022 and seven per cent in 2023. Oriented strandboard (OSB) consumption, because it is used primarily in home building construction, is also expected to drop between 10 to 13 per cent going forward.

The immediate future looks particularly dire for B.C.’s softwood lumber industry as Jannke indicated that B.C. sawmills are losing money with lumber prices at $500 (U.S.) per 1000 board feet, which he predicts will be the average price in the short term. As a consequence, he expects quicker decisions on sawmill curtailments because of greater ownership concentration within the industry and more aggressive action on permanent mill closures as a consequence of the unavailability of economical fibre to support some mills.

Eastern Canada will also struggle with economical fibre availability as companies travel further and further afield to supply their mills. As has become obvious to everyone, the only area experiencing excess fibre supply is the U.S. South, explaining the current migration of Canadian-based forest company investment into that region.

So the message going forward? Prepare for rough waters in 2023, which could fuel even more industry mergers and
takeovers in Canada.

Logging and Sawmilling Journal

November/December 2022

On the Cover:
The last several years have been busy for B.C.’s Lizzie Bay Logging. In that time, in addition to diligently carrying out active logging activities during COVID, the company has become joint owner of a custom sawmilling business, acquired a towboating company, launched a concrete company—and started a tree services business. Read all about the company’s successful diversification beginning on page 12 of this issue. (Cover photo courtesy of Lizzie Bay Logging)

Filling the need for fallers
There’s a shortage of certified fallers in B.C.—but fallers in training like Melie de Jonge are helping to fill that need, with the help of veteran faller—and certified instructor—Richard Butler.

Playing defense in forestry game
Veteran B.C. logger Clint Carlson is playing defense to weather today’s skewed business environment in the forest industry.

Successful diversification
B.C.’s Lizzie Bay Logging is still very focused on logging, but is also finding success in diversifying its business.

Solid formula for sawmill survival
Strong faith, no debt and diversification have all helped Mardis Forest Products survive in turbulent times.

Pivoting to pre-finished products
Ontario’s Muskoka Timber Mills has made a successful market pivot to custom, pre-finished wood products, rebuilding after a devastating mill fire.

Tapping into an under-utilized fibre resource
A Haida-owned company in B.C. is working with under-utilized fibre, harvested sustainably, along with a custom sawmill operation, to produce value added wood products.

Included in this edition of The Edge, Canada’s leading publication on research in the forest industry, is a story from the Canadian Wood Fibre Centre (CWFC).

The Last Word
Tony Kryzanowski notes that West Fraser Timber is investing in the future as Canadian softwood lumber producers face a tough year ahead, after some pretty flush times during COVID.


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