Forestry Week 2016: Vancouver, BC

Demand for tissue and specialty paper globally offset that for printing and writing papers from 2004 to 2015, said the Pulp and Paper Products Council (PPPC), which represents North American newsprint producers, at the group’s annual meeting, this week in Vancouver, BC.

Mixed prices and demand for commodities, as well as currency volatility continues to affect the performance of the global forest, paper and packaging industry, Kevin Bromley, PwC Partner Wednesday at that group’s annual meeting in Vancouver, BC.

Forestry Week 2016: Vancouver, BC

Pulp and Paper Products Council: Paper

Growth of tissue demand has increased about 3.3 per cent per year for the past 15 years and will likely rise 3.5 per cent in 2016 said PPPC analyst Emanuele Bona. Average growth of 3.1 per cent equals approximately 5.5 million tonnes of production per year.

Sixty-five per cent of total growth is in Asia.

There has been an approximately 2.5 per cent growth in North American tissue capacity in 2016.

China demand is expected to rise 6.4 per cent per year to 2018, which remains “more or less similar to past trends,” said Bona.

Qualifying that PPPC only covers wood-based production in China, Bona noted that there will also be increasing tissue capacity in China. Actually capacity is rising faster than demand, as China tries to export there is a “widening gap between capacity and demand.”

World demand will contract by 6.5 million tonnes, at an average of about 1.5 per cent a year, said Bona.



Global consumption of softwood pulp increased by 240,000 tonnes in 1Q 2016, detailed PPPC’s Arnaud Franco, while operating rates have risen about 2 per cent.

“This is mostly benefitting eucalyptus producers,” Franco said. “Due to price changes, there has been a lot of tropical grade switching between dissolving pulp and hardwood.”

PwC Forestry, Paper, and Packaging

Despite muted growth, the building product sector fundamentals remain optimistic, with steadily improving US housing starts up 6 per cent in 4Q 2015 compared to the annualized starts in December 2014.

“What we saw in 2015 is the markets starting to stabilize. If we look ahead, the US housing market continues to improve, which has resulted in stronger lumber prices in the first quarter of 2016,” said Kevin Bromley, Partner and PwC Canadian Forest, Paper and Packaging Leader. “Pulp and paper have remained stable in the first quarter of 2016, although significant new global production is coming online later in the year.” “We are keeping a close eye on the softwood lumber negotiations between US and Canada. This could have a significant impact on the Canadian forest industry.”

Screen Shot 2016-05-06 at 3.08.32 PM

CEO Panel

As always the CEO panel, the final session of Forestry Week, was the most interesting.

Catalyst Paper CEO Joe Nemeth said his company will be “laying off hundreds of people in Canada and the US in coming years as Catalyst moves out of printing and writing paper and into growing grades such as pack- aging, specialty, and tissue.”

James Gorman, VP West Fraser explained, “provided we work within social license, government policy won’t lurch.” While Mike Harkies, VP at Tolko Industries said,

“Softwood lumber disputes are geared to improve profitability on the backs of the US consumer. It’s possible the next softwood lumber agreement won’t be until 2019 or 2020,” said Harkies to the chagrin of the room.