The industry has taken positive steps to transform itself with a new strategic direction. Promising bio-refinery products derived from wood and pulping byproducts are being developed.
Driven by strong markets, previously idled kraft mills are being re-invented as dissolving pulp mills.
The new millennium has not been kind to the Canadian forest products industry. Ten years ago, with the Canadian dollar valued at about two-thirds of the US Dollar, times were good and new production capacity was being added. In 2003, what could go wrong? Since then, the industry has faced a perfect storm of challenges and obstacles including lower-cost competition, the collapse of the US home construction industry, the recent lingering and unpredictable recession, and the alarming decline of the newsprint market, once a mainstay of the Canadian paper export industry. To add insult to injury the Canadian dollar, which is bolstered by oil prices and Canada's safe-haven investment image, has risen to parity with the USD. With many of these difficulties not about to change in the near future, the Canadian industry faces some formidable challenges.
Some changes in thinking were needed with a refocusing on natural advantages, including the wood and fiber resources that Canada has in abundance. That change in thinking and strategic direction is happening now as companies are looking at new, innovative ways to increase revenue and profitability and the member companies of the Forest Products Association of Canada (FPAC) have charted a dynamic strategy for the future through Vision2020. That plan includes some aggressive goals for increasing revenue, reducing environmental footprint and recruiting new employees by 2020.
Roadmap for the future
The roadmap created by members of FPAC is coupled with a strong collaboration with other industrial partners, FP Innovations, Canada's national forest products research organization, and university researchers. With some welcomed encouragement and financial support from Canadian governments, the industry is now looking at new revenue streams provided by bio-refinery products derived from wood constituents, pulping residual chemical byproducts and innovative ways to utilize wood fiber. In fact, some new, potentially profitable projects are in progress. In addition, some companies are making significant new investments in specialty and dissolving pulp production and previously shuttered pulp mills are being brought back to life. All in all, it seems the industry is coming out of the woods with a renewed direction and vigor.
Statistics are sourced from Natural Resources Canada and Statistics Canada.
Canadian forest product exports totaled $26.4 billion in 2011. Source: FPAC
FPAC represents the majority of Canadian producers of forest products. Its nineteen company members are responsible for 66% of the certified forest lands in Canada. In fact, third-party certification of member companies' sustainable forest practices is a condition of membership in the Association.
What are the planks in the FPAC Vision 2020 platform announced in May, 2012? Basically, there are three aspirational goals:
• Generate an extra 20 billion Canadian dollars in revenue from new innovations and increasing worldwide markets for new and existing products.
• Reduce the industry's environmental footprint by a further 35%.
• Renew the workforce with at least 60,000 new recruits including women, Aboriginal people and new Canadians.
More value from every tree
These goals are indeed lofty and obviously required some careful thought and planning over the past few years. Catherine Cobden, Executive Vice President of FPAC, described how the confident Vision2020 goals were agreed to and set by the industry group. "In 2009 the industry was in a deep dark place and desperate to understand the options available and the pathways to make ourselves more profitable in the future. At this time the industry members, in collaboration with several provincial governments, FPInnovations and Natural Resources Canada, got together to assess how emerging technologies could be part of the industry's future." This was the beginning of what was called the Bio-Pathways project. The objective was to look at the economic, environmental and social potential of extracting more value from every tree.
She continues, "We looked at 36 technologies that might impact the industry. These included bio-fuel, biochemical products, gasification, pyrolysis and sophisticated lumber products like cross-laminated timer (CLT). We concluded there was a tremendous opportunity to adopt these technologies in existing pulp mills and sawmills. Specific to pulp mills, there was a huge potential become bio-refineries. The Bio-Pathways team saw it as a win-win situation - economically and in terms of job creation - to combine existing mill processes with new technology."
FPAC and partners Natural Resources Canada and FPInnovations assembled a high caliber economic team, lead by a banking executive, to develop economic models which would measure the effects of these new technologies on the existing industry infrastructure. "The projections foresaw a tremendous improvement in return on capital by integrating this new technology into the existing industry – from the existing 9 to 10% Return on Capital Employed to 20 to 25%. As we saw the pieces coming together we gained a renewed sense of confidence in our own future," adds Cobden.
The race is on
Although the overall goals are aggressive, the FPAC members feel they are achievable based on this renewed sense of confidence. The CEOs of FPAC members collectively made the decision so the goals have some clout behind them.
In addition to having a strong game plan, Cobden believes good timing is a key element in the transformation to a bio-refinery industry, "The race is on globally. If you want to transform the pulp industry to a bio-refinery industry you want to do it ahead of the curve not in the middle of the pack. When you have been a commodity industry it is a major culture shift, but we are trying to make that shift," she says.
Future export goals are encouraged by what has already been accomplished in growing new export markets. She cites expanding forest industry exports to Asia as an example. "The US market will always be important to Canada, but we recognized we needed some shock-proofing. Over the past ten years we have been working with Canadian governments to develop trade channels to China. It is exciting to see how much growth has been happening." Forest products, including lumber, pulp and paper, are now Canada's number one export to China. Canada currently supplies a third of the market for Chinese imports of market pulp.
The further reduction in environmental footprint is an extension of what has already been accomplished. "We decided we had to do more by digging deeper," says Cobden. FPAC members have twelve different parameters to work with and they will implement their individual plans based on local objectives.
Cobden is particularly enthusiastic about increasing employment opportunities. "Part of Vision2020's objectives was to tell the world we will be hiring. We need more foresters, engineers, trades people and laborers, "she says. She is particularly interested in tapping the potential of women who make up about 50% of the population of pulp and paper mill towns. More utilization of native people who live in the forested area is also high on the agenda.
Attracting more skilled people to the forest products industry won't be easy as there is stiff competition from more glamorous high-tech industries and the oil and gas industry in Canada. Public relations messages about the changing industry and the lifestyle advantages of forest industry towns will have to be compelling.
The Pulp and Paper Technical Association of Canada (PAPTAC) is also doing its important part to improve and adapt the technical proficiency of its membership which has been rebuilt to over 3,000 members. In a recent interview on the Paper Advance web portal, Greg Hay, Executive Director of PAPTAC, says, "Our role is to constantly adapt to the needs of our members and therefore to provide tools that are relevant to an industry in evolution. The bio economy can generate a source of profit and diversification while being the basis of a sustainable model for the industry. We believe that the needs for programs and training in this direction are going to continue to grow in the future."
Industry scale through partnerships
Although Canada has many advantages in the world trade of wood-fiber products there is one area where it has a drawback and that is the scale of its forest products companies. Cobden elaborates, "The scale of our companies is small compared to world standards. Scale matters when talking about innovations that involve risk."
FPAC has a solution, however. "One way that I believe in is the establishment of business partnerships, for instance partnering with a chemical company to create scale in a different way. We have therefore created our Biopathways Partnership Network which we call a dating service for companies in different fields. We now have over 200 companies in that network which covers the gamut of the automotive industry, chemicals, and aerospace sectors; it's a huge agenda," explains Cobden.
Government funding where needed
FPAC has a very specific view on government funding. Cobden expands on that: "We are not interested in long-term subsidies or handouts. Where we see government funding has a role is in funding of demonstration projects for new technologies on a commercial scale. We think there is a good public policy basis for this. The investment capital for world-first demonstration projects is really challenging. Government support is what we need the most."
The forest product industry in Canada has a brand new strategic direction thanks to FPAC and its partners, but a lot has been happening just recently to support that new way of thinking. In fact, the transformation process is already underway and has been at least partially implemented.
In 2009, the Canadian Government introduced a Green Transformation Program to help the industry to improve its sustainability by investing in new green technologies which would improve the environmental performance of the industry, open up new revenue streams from the production and sale of renewable energy, while reducing costs through energy efficiency improvements. The uptake by the industry resulted in the investment of $1 billion until the program conclusion in March, 2012. Ninety-eight projects were approved with a median value of $4.1 million. Some projects involved the conversion of fossil fuel boilers to biomass, upgrading of recovery boilers and the installation of turbine generators for producing renewable electricity. The extra electrical generating capacity from mills across Canada is expected to be 200 MW.
The results of the four-year program reported recently by the Canadian Forest Service are impressive. The total value of the bottom-line benefits is estimated to be $278 million. Just a sampling of the actual results and projected results from projects still underway includes an extra $149 million in revenue from the sale of renewable electricity to the grid and $70 million savings from lower fuel and energy use. The report also lists reductions in water and air pollutant levels, lower fresh water consumption, waste heat reductions and lower landfill loads.
New bio-processes being tested
The adoption of new technologies with the potential to diversify industry products and increase revenue streams from the conventional pulping process is already in the news. In early 2012, CelluForce, a joint venture between Domtar and FPInnovations, started up its 1 tonne/per day nano-crystalline cellulose (NCC) plant as the first commercial scale demonstration facility in the world. The feedstock is Domtar bleached kraft pulp from the adjacent mill in Windsor, Québec. NCC is a highly-refined specialty chemical derived from wood pulp. It is therefore aimed at high value-added products. CelluForce has signed up 30 collaborators from other industries who will evaluate how it can be incorporated in their products.
At the Resolute Forest Products kraft pulp mill in Thunder Bay, Ontario a pre-commercial demonstration 100 kg/day lignin extraction plant is now operating. The project is a partnership between Resolute, FPInnovations, CRIBE (Centre for Research and Innovation in the Bio Economy) and Natural Resources Canada. The potential for lignin-based products is huge and includes non-petroleum substitutes for resins, fuels, rubber additives, and pharmaceuticals. The plant's lignin product is now being provided to potential end users and to research groups, including the local Lakehead University.
In another bio-refining project, Alberta-Pacific Forest Industries will diversify its product offering by extracting and purifying bio-methanol from its pulping process. The mill expects to sell the highly purified product to external users and to use some of the plant output in the mill's chlorine dioxide generation plant. The federal government's Investments in Forest Industry Transformation (IFIT) program is a significant contributor to the financing of the project.
In addition, specialty pulp producer Tembec has introduced a new biocomposite which uses a patented process that reconfigures cellulose fibers into a three-dimensional matrix. Combining this matrix with an eco-thermoset resin containing lignin creates a three-dimensional, lightweight structural biocomposite. Some applications include railway ties, lamp posts, bridge components and other construction and transportation uses.
Transformation by market demand
While bio-refinery products have a lot of promise, they may take some time to develop the full market potential. However, the dissolving and specialty pulp sector of the Canadian industry, which is driven by a strong market demand, is now going full steam ahead with significant capital investments being made. Many previously closed pulp mills have been and are being brought back to life.
The first off the mark was Fortress Paper in Thurso Québec which is now operating a dissolving pulp mill rebuilt from a previously closed kraft mil. The company has recently announced plans to re-open a mothballed NBSK pulp mill at Lebel sur Quévilllon in northern Québec. With a $220 million investment the mill will produce 250,000 tpy of dissolving pulp
India's Aditya Birla Group recently purchased and has restarted the Terrace Bay NBSK pulp mill in Ontario and will convert it to a 280,000 tpy dissolving pulp mill by 2016. More than $250 million will be invested. The company has two other dissolving pulp mills operating in eastern Canada with a combined capacity of 300,000 tpy. They supply viscose staple fiber plants in India, Thailand, Indonesia and China.
India's Aditya Birla Group recently purchased and restarted the Terrace Bay kraft pulp mill in Ontario and will convert it to a 280,000 tpy dissolving pulp mill by 2016.
Paper Excellence has purchased the Prince Albert Pulp kraft pulp mill in Saskatchewan, which has been closed for 5 years, to convert it into a dissolving pulp mill with a capacity of 350,000 tpy. The investment will be $200 million.
In early 2012, Tembec announced that it would invest $310 million in two phases into its Temiscaming, Québec specialty cellulose mill to increase its annual production of green electricity, reduce sulphur dioxide emissions, and increase its production capacity. It represents the largest investment in pulp and paper in Canada within the last 15 years and it is the largest investment ever made in one facility by Tembec. The company's specialty cellulose is a component of products in the pharmaceuticals, food, cosmetics, personal care, construction and electronics industries, among others.
Needless to say, residents of these small northern towns are delighted by these investments and revitalization projects.
Mojo is back
What will the Canadian forest products industry look like in 2020? There may be a few surprises but the goals are in place for some significant changes. Catherine Cobden concludes "We don't believe the industry will look like it does today. It will be totally transformed," And with a renewed sense of confidence in the industry it will be interesting getting there, for sure. "The forest industry has its mojo back," she quips.
This article was published in IPW Magazine, based in Frankfurt, Germany, in the December, 2012 issue. It is re-published with the permission of IPW.