Needed: the next “pulp and paper” industry

Instead of going straight to the comments, thought i’d post my response to Jay’s comment regarding my last post in a fresh new post.

Yes, pulp and paper – as in “pulp+paper” is a dying industry because the market is no longer growing partly due to our tech habits which not necessarily a bad thing…

Those who own the logging rights will still be there… the trees aren’t going anywhere (or let’s hope not – and let’s use this renewable wisely) – but the end product has to change. The capital investment is already there – a sunk cost for most.

Half of the log is energy – the other half is proving to work well with the nano industry making nanocrystalline cellulose which could be our “new plastic” and a biodegradable new building block material. All I mean, is that there are options with the end product.  It’s in the vested interest of all of the players along the chain to keep these mills open – not just as “pulp+paper” mills.

This can be done with much of the same capital investments – their recovery boilers have been making bio energy for over 50 years… the technology is around 70% efficient (natural gas at 80%) – the technology is there.

And if some investments are written off in this case, just remember that the worse case is that they are ALL written off.  Also, by changing their end product focus they would also keep much of the same producer/supplier network  – giving some hope to these dying communities.  Making this shift will take time, energy.. and money of course. Black liquor is a tricky substance, NCC isn’t ready yet etc. But remember…

Canada will always have trees and those green things will come in handy again once, ah, our tar sands wear out. But once these mills shut down, they’re gone – along with the network and skill that supports it.

We’ll be hitting ourselves if we lose this sector.

Here’s hoping.

Some views on the pulp and paper boondoggle

Wrote this as I waited to get on to the ferry at Turku and didn’t have a chance to go online til now… Was going to be “Why the silence on the p&p boondoggle” , but the “silence” broke the first page of G&M yesterday.

Oh, well, better late than never…

Do Canadians understand the extent of the problem in the forest industry?  Enough about the car bailout, the pulp and paper industry has a right to complain and stick out their hand for government funding.

I usually take the anti bailout stance – what fails, fails. Done. Let the market determine. GM et al. didn’t do their job keeping up with the time etc.

But what’s happening in the pulp and paper industry is unnerving and it’s pathetic at how little lip service they’re getting. I was happy to see that it was in the Globe on Friday. But it still didn’t get down to the point.

WHY THE PULP AND PAPER INDUSTRY?

As someone who cares about the environment, people (i.e. new readers) may wonder why I support this industry seeing as though they have often wrecked havoc on our forests, polluted our air, etc. But, I see a different view on the pulp and paper industry. I, for one, don’t see it as a sunset industry. If they changed their vision to being a biomass industry they might just get themselves out of tunnel vision. They’re not about pulp products and paper products… they could be about energy. They could be about new biodegradable plastic, they could be…. (Read my views on it here.) – and this here requires us to invest heavily in R&D.

Black liquor is not a known word in the popular lexicon. But this green fuel (about half the log in the paper process) is one of the original biofuels made from waste product.  I believe it’s the fifth biggest fuel in the world. (sorry no links on this – sitting beside an expert on it though right now;)

WHAT’S HAPPENING?

The U.S. is subsidizing companies to promote greener fuels for transportation (i.e. blending biofuels with fossil fuels). Sounds good enough. But this also worked the other way around. Pulp and paper companies were then allowed to add fossil fuels to their original green fuels (black liquor) to get hold of the subsidy. Talk about a boondoggle….(that’s a good Bloomberg article)

What does this do to Canadian pulp and paper companies? Essentially destroys them. The p&p companies in the US are getting subsidized to the point of $250 000/day (for a 1000 ton mill a day). Let’s put this into perspective. International Paper got $330 million after taxes in Q1 of 2009… that would have been enough to keep the mills afloat in this downturn. Looking from an international paper company perspective, which company would be shut down – one in Canada or one in US?  The Canadian one of course,  the one with no subsidy. Who was looking out for these mills in Canada that just shut down? The managers operating mills in Canada are kind of muzzled since their sister mills are reaping in the benefits over the border (meaning Corporate of course won’t make a stink).

This subsidy has devastated one of the largest export industries in Canada. Mills are shutting down right left and centre, leaving billions of dollars in investments idle, useful infrastructure in limbo, and productive/knowledgeable workers (not only mill workers, but the entire network and community that surrounds it – what about the contract workers without pensions?) – in the dust. Once shut down, it’s hard to get these mills and these people back up again.

It’s frustrating.  Canada is resource rich on a renewable fuel (i.e. we have plenty of trees) As Harper pours billions of dollars into the oil and gas industry (clearly a limited time only investment), we’re letting a possible answer to our energy crisis slip between our fingers because we think it’s a sunset industry.

Enough silence. Time to get mad.

The Chinese Hummer

I was just about to post something yesterday when I saw that GM was letting go of its Hummer. It would be good riddance. I hate those things – they were meant for the army, not for city roads.

But now, I see it’s moving over to China as the Hummer is the ultimate status symbol for the middle class.

How scary is this?

I know that China is about to take centre stage in the global economy and although that’s worrisome for us, I’m worried for their own sake.  If this is the direction they’re taking their wealth, I don’t think they’ll be in the limelight for too long before their own collapse.  They’re in a little different position that us..  over 1 billion people living our lifestyles and idolizing the Hummer? Just wait. It won’t be long.