Canadian Pulp and Paper industry: a problem is just an opportunity in disguise

Fabulous read in the ROB magazine. Yakabuski’s article “It Ain’t Pretty” on the state of the Canadian pulp and paper industry is bang on.

I’m a pulp and paper girl (born and raised in Thunder Bay and my dad’s in the industry). I know all too well about the problems facing the industry. I even did a paper on it last year for one of my classes, and interestingly enough,Yakabuski and I came up with the same conclusion: the industry’s failure isn’t so much a market-based (even with our extraordinarily high dollar), it’s not even a demand-based failure (paper consumption is up, but not newsprint- our main product) -IT’S VISION FAILURE.

I didn’t just like the article because it talked so much about Finland’s strength in the industry (although, have to say that it was really cool when Jyväskylä was mentioned!). I liked it because the pulp and paper industry is vital to the Canadian economy and we don’t at all give it enough respect for what it represents. People tend to forget that forest products are still our biggest net export and give more jobs than any other resource or manufactured good, including oil, gas and autos – and it represents approx 70% of our country’s total positive trade balance.

Lots of good points covered in the 6 page article:

  • Canada dominates the industry in terms of natural resources, market proximity, educated workforce
  • YET, Canada fails to see the prospects of “what could be” of the industry
  • Finland is leading the way in every aspect of the game
    • R&D, education, technology, (it’s the hub of p&p)
  • Canada and Finland’s market situation is actually quite similar
    • what we complain about here (i.e. high dollar etc.) is really the same for them
  • the difference lies in our complacency, lack of R&D and lack of vision.
  • forest industry has a lot of potential
    • bioenergy (a topic that is quite fascinating and I can actually have talks with my dad about black liquor and combined heat and power etc. now! – I’ve said before, I’m quite the nerd)
    • new inventions for paper (i.e. paper with RFID tags in them, nanotech paper etc.)

As for another part, that was just briefly touched on in the article: Finland is also the world leader in producing bioenergy and biomass combustion technologies. Actually, 20% of their primary energy is derived from wood fuels. Their goal is to constantly increase that number too to be more energy self-sufficient.

So it’s not just about the p&p companies – government needs to open their eyes too. I think they’re blinded by oil and gas and they forgot that our country was blessed with a lot more “renewable” types of energy. I’m not calling for an all-out harvesting party either. Trees are renewable though and there are proper ways to clear-cut. Also, there’s a lot of waste involved in the forest industry that can be put to good use – i.e. producing energy and heat with scraps.

Hopefully the people at the top (both government officials and corporate executives) get shaken up by his article and change their tune. A problem is just an opportunity in disguise…there is hope for our industry.


7 thoughts on “Canadian Pulp and Paper industry: a problem is just an opportunity in disguise

  1. What a great eye opener.

    Want to do a radio interview?

    Mark Tannahill

    ps…..they just put in a new phone system at the station this weekend, and I haven’t initialized my voicemail yet…and probably won’t tomorrow since I’m buried in 55 centimeters of snow in Lappe right now. Were you here for the blizzard of 96? Another Colorado low just spanked us.

  2. Jay Godse says:

    This is an interesting article. Everything I have read point to ownership and property rights as being the key issue.

    In general, when people feel that they own property, and that their property rights will be stable in the long run, they will do their best to improve the long-term viability of that asset.

    For the Finlanders, the forest seems to be owned directly by the people, and they have a long-term interest in preserving and enhancing the value of that asset. That explains the fact that they are willing to spend R&D dollars to improve the value of what comes from their asset.

    In Canada, we have no direct ownership. The government owns it, and any benefit or liability accrues to the big black hole of the government coffers. Nobody feels a direct benefit from owning the asset. So…what’s left? The government leases the resource rights to big companies. Their vested interest are not in preserving the long-term value of the asset. The government folks are interested in maximizing medium-term royalty revenues (because that triggers executive bonuses), and the logging companies are interested in getting the best return on their royalty investment. With no ownership, workers are interested only in the short and medium term income cash flows. Since far fewer people benefit in the long-term value of the forest asset as a result of direct personal investment, relatively less R&D is done…hence our situation. The situation in Canada is known as “The Tragedy of the Commons”.

    Property rights always ensure preservation and enhancement of assets. Lack of property rights lead to people maximizing short-term and medium term interests on any rents they pay for any temporary rights to use an asset, and this is usually to the detriment of the long-term value of the asset. What’s worse is that it makes perfect sense; if I invest in the asset and I am not there to reap any of the reward, then why bother?

    Property rights explain why home owners keep their places in better condition than renters. It explains why so much infrastructure in communist countries deteriorated, and when they were given some private property rights back, they did very well. It explains why company employees of failing companies bail out while owners often keep working for no salary (or don’t cash their paycheques). It explains why sales people with commissions tied to the top line are happy to sell products at no margin or even losses, because their commission (personal short term gain) far exceeds what they gain in the long term at a successful company.

    If Canada wants better R&D pending, the property must be owned by folks who benefit directly and personally from investing directly and personally in R&D.

    Oy vey! I should live so long!

    Cheers, Jay

  3. […] one goes well with my other post on Canada’s pulp and paper situation. Way to go Norway:) Norwegian paper manufacturer Norske Skog announces it will, in […]

  4. […] to be a trend here. There’s no question about the resources, we’re a very rich country indeed (re: pulp and paper). However, when it comes time to using those resources in an efficient and sustainable way, we let […]

  5. […] biofuels are also wood waste! There is some definite eco-efficiency logic behind taking the leftovers of the pulp and paper industry waste and converting that into energy (blogged about this before) […]

  6. […] yes, I’m a pulp and paper girl, but I’m still for a sustainable forest industry… and that doesn’t appear to be […]

  7. […] back to a post from last Dec., I wrote Canadian Pulp & Paper industry: a problem is just an opportunity in disguise. the […]

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