The pulp and paper industry in British Columbia, Canada is facing an existential crisis

According to David Elstone of Spar Tree Group, by the end of the year, British Columbia, Canada, will have lost 58 per cent of its Paper capacity and 13 per cent of its pulp mill capacity after Paper Excellence closed its Crofton mill indefinitely.

"With only 16 pulp or paper mills in total in British Columbia and 25 per cent of those already or about to be cut, there is no denying that the industry is in crisis." "He wrote.

Joe Nemeth, project manager for the British Columbia Pulp and Paper Alliance, warned that there is now such a severe fiber supply shortage that two or three pulp mills could close by Christmas if not addressed immediately.

"In addition to the plants that have already closed, you will see another two or three pulp mills that will close in the next 90 to 120 days," Nemeth said.

Nemeth said pulp mills typically require a 45-day buffering of wood chips and logs.

"A large group of factories have reduced production time to five days or less," he said.

Pulp and paper mills are a major employer and mainstay of the economy in many British Columbia communities. They typically employ 400 people or more, and pulp mill workers are well paid, with many earning six figures. So when pulp mills close, it can be devastating for communities.

The Crofton Paper Mill will close indefinitely by the end of the year, which will be the third Paper Excellence pulp or paper mill to close in two years.

In December 2021, Paper Excellence announced that its paper mill in Powell River would temporarily shrink indefinitely. In 2020, its pulp mill in Mackenzie was scaled back indefinitely before closing permanently in 2021.

West Fraser Timber Co. Ltd. recently announced that its Cariboo pulp and paper mill in Quesnel will cease production for 16 days.

Elstone warned that Canfor's Taloy pulp mill could have a "fragile future." The plant, owned by Canfor Pulp Products, has been downsizing since earlier this year, largely due to rail shipping problems, and Canfor now says it may not be able to restart the plant until next spring.

Pulp mills are major contributors to the forest economy. Pulp and paper was valued at $3.9 billion in 2021, making it British Columbia's fourth largest export. According to the British Columbia Pulp and Paper Alliance, pulp and paper account for 20 per cent of the GDP of British Columbia's forestry sector and 34 per cent of the total value of forest product exports.

While the declining paper market is partly to blame for the closure of paper mills in British Columbia, the same cannot be said for pulp mills and the pulp market. Nemeth said pulp prices were now about 25 per cent higher than the long-term average. "Today, if you can produce pulp, you are making money," he said.

But pulp mill operators in British Columbia are dealing with supply chain issues related to rail capacity and fiber supply shortages.

Nemeth said there was a shortage of about 4 million cubic meters of fiber supply, mainly due to sawmill closures and cutbacks.

Sawmills have a symbiotic relationship with pulp and paper mills. They need each other, and the dwindling supply of lumber in British Columbia has led to the permanent closure of many sawmills over the past decade. The closure of these sawmills is now having the expected ripple effect on pulp and paper mills. When the pulp mill closes, it also has an impact on the remaining sawmills.

"On average, it takes three to four sawmills to supply enough wood chips for one pulp mill. So if two or three pulp mills go out of business, they will affect 10 sawmills. If 10 sawmills go out of business, they will also affect two or three pulp mills."

Over the past two decades, infestations of mountain pine and spruce beetles and forest fires have wiped out large amounts of timber and reduced the annual allowable harvest (AAC).

In the long term, AAC is expected to decline from 61.6 million cubic meters to 51 million cubic meters by 2030. The New Democratic Party government's old and new growth protection strategies will also remove a large portion of AAC.

Last year, two forestry analysts, Jim Girvan and Rob Schuetz, predicted that as many as 10 sawmills and three pulp and paper mills could go out of business if all the forest policies being considered by the British Columbia government were implemented - including the old growth delay and new reindeer habitat protection laws.

So far, no large sawmills have closed since the report, Girvan said, but large sawmills have eliminated shift work, which is tantamount to shutting down sawmills. Girvan said shifts have been eliminated at the Fraser Lake plant, Williams Lake and Quesnel plywood plants. These cuts come at a time when lumber prices are still quite high. Now that lumber prices have fallen, more cuts may be coming.

When sawmills close or reduce production, pulp mills lose an important input - sawmill waste, which helps explain why so much of the reduction is now occurring at pulp and paper mills in British Columbia.