Industry Outlook

These are unsettled times for the Canadian forest products industry. The industry is currently suffering through one of the deepest economic downturns in several generations.

The housing crisis south of the border has sent the Canadian wood products industry, whose largest market is the United States, into a tailspin. US housing starts are 75% below their 2006 peak of 2.2 million units and as a result, lumber demand and prices are at historical lows. Sharp declines in demand and prices for most forest products has forced hundreds of Canadian sawmill and factory closures and thousands of job losses. Even the largest and most efficient mills have reported significant losses.

The Canadian forest products industry has been making positive contributions to the rural and regional economies in Canada for generations, and despite the current market challenges it will do the same well into the future. That will require transformation and change. The long-term fundamentals for the industry are strong. The North American housing industry will rebound. As populations and affluence grow globally so will demand for forest products. At the same time, demand for land for food and biofuel production will result in shrinking supplies of forest fibre. These trends will support prices in the long-term and are positive for countries like Canada who have large supplies of sustainably managed fibre. While traditional forest commodities will continue to make significant contributions to the country’s economic well-being the industry is making significant investments in research and development to diversify its product lines and improve its long-term profitability. The development of a renewable bioeconomy presents interesting opportunities in terms of sector transformation. This promising class of value-added products includes things like renewable fuels, fertilizers and bioplastics. Their development and commercialization has the potential to make positive contributions to the economy and to positively affect the environment by reducing greenhouse gas emissions.

The forest products industry is not just another industrial sector. The industry occupies a significant portion of Canada’s forest resource and must carry the responsibilities of the stewardship of this resource. The industry has embraced that responsibility and made great strides in terms of environmental stewardship. The products we produce are very attractive from a sustainability standpoint; in fact their second to none. As an industry we are promoting our environmental record as a way to differentiate our products from our competitors and using it to secure a competitive advantage.

The continued health and development of a successful and diverse forest products sector requires that federal policies recognize, on the one hand, the global environment in which the industry operates, and on the other, the domestic requirements for a healthy and vigorous industry. We believe that Canada’s forestry, trade, transportation and competition policies must reflect the requirements arising from the unique characteristics of this sector and its importance to the Canadian economy, from coast to coast.

Leveraging Innovation

Practising sustainable forestry and putting the industry on solid financial footing will leverage Canada’s considerable, proven innovation capacity. Four national research institutes—Paprican, Feric, Forintek, and the Canadian Wood Fibre Centre, all leaders in their industry niche—have been merged under the FPInnovations banner to form the world’s largest private, not-for-profit forestry research initiative and to develop new products, processes, and technologies to exploit Canada’s unique fibre attributes.

One of the more promising concepts under development entails nanocrystalline cellulose fibres, which can be used to produce eitherimproved pulp and paper products or to make a wide range of other products, such as high-strength textiles, adhesives, food and cosmetic additives, advanced composite materials, and reinforced polymers. Commercialization of nanocrystalline fibres is within sight and could provide Canadian pulp mills with an entry into the promising field of bio-refineries and an opportunity to diversify their revenue streams. To learn more visit FPInnovations.