Canadian Pulp and Paper Association
The Canadian economy posted an exceptionally strong performance in 2000. GDP growth reached 4.7 percent and unemployment slipped below 7 percent. Meanwhile, inflation at the consumer level remained well within the target range of the Bank of Canada at 2.4 percent. The pace of growth is set to fall to 2.5 percent in 2001. Domestic demand should remain quite buoyant, but the slowdown of the United States will impact the manufacturing sector. Most affected will be exports of autos and telecommunications equipment.
2001 (f) |
2000 |
1999 | |
(%) | |||
Real GDP growth |
2.5 |
4.7 |
4.5 |
Inflation (CPI) |
2.4 |
2.7 |
1.7 |
Unemployment |
6.7 |
6.8 |
7.6 |
f: forecast
The Canadian pulp and paper industry posted another record year in 2000, shipping 31.6 million tonnes of product. That is an increase of 2.1 percent over the previous year.
Strong economic conditions in North America and Europe resulted in volume increases of 10 percent and 3 percent in the first and second quarters, respectively. These gains more than offset the weakness in the fourth quarter of the year when a slowing United States economy contributed to a 4.8 percent decline in overall shipments.
The regional breakdown shows that shipments to the domestic market fell 1 percent, due mostly to increased imports of woodfree papers and paperboard. On the other hand, shipments to the United States rose nearly 4 percent, and exports to overseas customers grew 1 percent.
Demand in Western Europe contributed to most of the growth in overseas sales, largely offsetting the 2 percent drop in shipments to Asia.
Capacity to manufacture pulp and paper in Canada rose 1.9 percent in 2000, to 33.5 million tonnes. The increase came from incremental additions and the start-up of a new machine in Quebec. As a result, the industry's overall operating rate (measured as shipments as a percent of capacity) was left unchanged at 94 percent.
Similar operating rates were posted by the industries in the United States and Western Europe. As a result, pricing for most products improved last year. It is estimated that the average US dollar product price (weighted by shipments) increased nearly 16 percent. The average value of the Canadian dollar was unchanged at 67.3¢; therefore, the average product price in Canadian dollars rose by a similar amount.
The increase in volumes shipped, combined with the improvement in pricing led to a significant jump in earnings. Preliminary estimates put net earnings from pulp and paper operations at approximately $2.6 billion, up from $750 million in 1999. For those producers with integrated operations, however, the improvement was at least partially offset by weaker earnings from solid wood products.
The economic slowdown in the United States that began late last year will, at the very least, continue well into the second quarter of this year. The impact on Canada may not be as great as it would have been in the past, but it is already being felt in a number of key sectors of the domestic economy. Therefore, it is likely to see a very weak first half in North America, a market which still accounts for two-thirds of Canadian pulp and paper shipments.
Western Europe should post economic growth this year of about 3 percent, while in Japan growth will remain sluggish at only 2 percent, or so. In the rest of Asia, there will be a slight slowing in GDP growth after a strong year in 2000.
Based on this macroeconomic outlook and expected market developments (e.g. capacity additions, stock movements, etc.), it is projected that Canadian shipments of pulp, paper and paperboard will decline by 0.3 percent in 2001.
Change | |||||
(%) | |||||
2001f |
2000 |
1999 |
2001/2000 |
2000/1999 | |
Newsprint |
9 260 |
9 285 |
9 175 |
-0.3 |
+1.2 |
Printing and writing |
6 440 |
6 330 |
5 680 |
+1.7 |
+11.4 |
Packaging |
4 415 |
4 465 |
4 625 |
-1.1 |
-3.5 |
Other |
635 |
635 |
645 |
0.0 |
-1.6 |
Pulp exports |
10 710 |
10 850 |
10 800 |
-1.3 |
+0.5 |
Total |
31 460 |
31 565 |
30 925 |
-0.3 |
+2.1 |
as a % of capacity |
92 |
94 |
94 |
||
f: forecast
Source: Pulp and Paper
Products Council
Domestic shipments are expected to decrease 1 percent due to a slowing economy and further growth in imports. Shipments to the United States will be flat, the result of a projected decline in exports of pulp offsetting an increase in deliveries of communication papers. A recovery in market pulp shipments to Asia will help support overseas exports in the second half of the year. However, for the year, those exports will be down about 1 percent.
There are no new mills or machines planned or under construction in Canada. Still, manufacturing capacity is expected to rise by 1.5 percent in 2001, due mostly to debottlenecking, speed-ups, and other optimization projects. Consequently, the average operating rate in the industry (shipments as a percent of capacity) will decline by two points to 92 percent.
Newsprint was by far the strongest sector in 2000. World demand continued to edge higher, rising by close to 3 percent. Meanwhile, machine shutdowns and conversions in North America and Europe kept world capacity flat year-over-year. As a result, the newsprint industry shipped at full capacity last year on a global basis.
At Canadian mills, the average operating rate jumped five points to 97 percent. However, because machine shutdowns and grade switches cut industry capacity by 370 000 tonnes, the increase in shipments was kept to only 1.2 percent.
In the United States market, newsprint consumption remained surprisingly strong throughout most of the year, rising 1.2 percent overall and 0.8 percent at dailies. This growth was supported by good gains in ad lineage (1.9 percent through 11 months) and increased use of newsprint by commercial printers.
In 2001, the United States consumption will likely decline in the first two quarters, but should end the year roughly unchanged compared to 2000 if the United States economy does begin to pick up in the second half. However, even if the United States consumption is more negative then predicted, the North American industry should be able to continue shipping at or near full capacity. North American supply is expected to decline for a second year in a row as planned shutdowns and conversions take effect. Moreover, offshore demand will remain strong, allowing mills to increase their exports if the tonnage is available.
Therefore, it is projected that the operating rate at Canadian mills will remain at 97 percent in 2001, which is very close to full capacity. Shipments, however, are expected to decline 0.3 percent due to a slight drop in capacity.
Growth in North American demand for printing and writing papers began to slow mid-year, mainly due to weaker consumption of uncoated woodfree papers, the largest segment of the North American market. This was particularly true of demand for business forms, which fell 14 percent. Demand for mechanical printing papers used for magazines, catalogues, flyers and other advertising material, remained quite strong. Since 70 percent of Canadian capacity is comprised of coated and uncoated mechanical papers, the industry performed very well in 2000, in spite of North American printing and writing demand having grown only 1 percent, or so. Overall, Canadian shipments grew by 12 percent, exceeding the impressive 10 percent gain the industry posted in 1999. The average operating rate increased three points to 96 percent.
North American demand for woodfree papers will remain sluggish through the first half of 2001. Demand for the uncoated grades will be particularly weak. Growth in demand for mechanical grades should remain positive. This will benefit Canadian mills, as will the shutdown of nearly 1 million tonnes of woodfree papers capacity in the United States this year.
Overall, Canadian shipments of printing and writing papers should increase 1.7 percent this year. Capacity is expected to increase a little over 3 percent, so the average operating rate will decline to 94 percent, down 2 points.
The packaging industry was the first to feel the effects of a slowing United States economy as manufacturing output began to falter, well ahead of the technology and services sectors which were driving GDP growth in the first half of the year. As a result, Canadian shipments of packaging papers and boards began declining in the second quarter of 2000. They ended the year down 3.4 percent. This led to a three-point drop in the average operating rate to 93 percent.
All packaging grades posted lower shipments for the year: kraft paper -1 percent; boxboard -4 percent; linerboard -4 percent; and corrugated medium -3 percent.
It is expected that for 2001, a weak first half will result in a small decline in shipments of about 1 percent for the year as a whole.
The market pulp industry in Canada experienced a strong start to 2000, shipping at over 100 percent of capacity in the first quarter. The second quarter was also quite strong, although shipments to Asia were hurt by competition from Russian pulp in the Chinese market.
World pulp demand began to weaken mid-year. The Asian paper industry took downtime to deal with excess paper stocks. Then paper demand in the United States began to soften. Destocking by consumers in North America, Europe and Asia followed, which further depressed demand, particularly in the fourth quarter. Most affected were the chemical paper grades.
Overall, world market pulp demand fell 2 percent compared to 1999, which had been a record year. Demand for the chemical grades declined 3 percent. Demand for the high yield pulps (CTMP and mechanical pulps) held up well, rising 10 percent.
In 2001, Canadian market pulp shipments to the North American market will likely decline due to production cuts in the United States printing and writing sector and the permanent shutdown of some non-integrated operations in the United States. However, shipments to Europe should be up again this year since paper demand in that region remains quite healthy. As well, the absence of further destocking by customers in Asia, coupled with their need for softwood pulp, should mean shipments to Asia will begin to recover later this year. However, it is expected that for the year as a whole, pulp exports will be down another 1.3 percent. The average operating rate is expected to slip two points to 90 percent.
AREA |
Total forest area |
417 million ha |
OWNERSHIP |
Federal |
1% |
PRODUCTS |
Pulp and paper |
30 million tonnes |
Federal endangered species legislation
The Species at Risk Act (Bill C-5) is the third attempt to draft and pass federal endangered species legislation in the past eight years. It is expected to become law in the second half of 2001. Ensuring national protection for species in a federal state with an even distribution of powers between the federal and provincial governments is not simple: in Canada, land and habitat are under the jurisdiction of a mix of federal, territorial, and provincial governments. Jurisdiction over species is also allocated to the different governments depending on species location and type (e.g. fish, migratory birds, transboundary species, ungulates, etc.). The federal and provincial/territorial governments have signed an Accord to pass and implement legislation within all jurisdictions to ensure protection for species at risk throughout Canada.
The Canadian forest industry is fully supportive of certification and continues to move forward steadily on registrations. For large enterprises in particular, certification simply represents good business practice in moving towards sustainable forestry and communicating progress to the public and customers.
However, given the diversity of forest and social conditions around the world, it is logical to accept the existence of several certification systems to reflect that diversity and to provide freedom of choice in the marketplace. Canada is a world trader and therefore fully supports the development of an international mutual recognition framework to assess substantive equivalency among various systems. Customers need this. Detailed information can be obtained from: www.cppa.org/cgi-bin/view_pdf.cgi/ER_E2000.PDF
As of 27 February 2001, the total net area (avoid double counting where an area is registered to more than one standard) registered in Canada was 39 million ha covering an allowable annual cut of more than 50 million m3 of wood. Summary of areas registered by certification scheme:
| ISO 14 001 | 39.0 million ha |
| CSA Z 809 | 4.2 million ha |
| SFI | 3.9 million ha |
| FSC |
0.03 million ha |