Atlantic Forestry May 2023

Paper in transition

by David Palmer

After Post Media acquired Brunswick News a year ago, it wasn’t long before they cut back from six papers a week to five. Then in February, the company announced that it would reduce printing and delivery to three days a week, effective this spring. The handwriting had been on the wall for a while. I know almost nobody who still gets a newspaper. When Brian McClay, a speaker at the recent Forest NB annual general meeting, asked the 150 or so delegates in the room who still reads the newspaper, only a sprinkling of hands went up. 

In the letter informing readers about the cutbacks, Brunswick News said it was “a difficult decision, driven by sudden and steep increases in the cost of paper, ink, distribution, and related costs.” Well, the paper under discussion is newsprint – and the way readership is falling, it may soon go the way of the dodo bird.

I remember David Oxley, former VP of woodlands for J.D. Irving, Limited (JDI), once saying that newsprint is a sunset industry. That was about 25 years ago. Around the same time, several big paper CEOs were coming to the same conclusion, and one by one they started shutting down their newsprint lines, or converting them to other paper types.

But if demand has tanked, how come the price is suddenly so high? Well, as time went by and papermakers adjusted their product mix, supply and demand returned to balance, and prices settled at stable levels. That all changed in 2021 and 2022, as supply chains tightened and paper scarcities developed.

“The last two years have been a real shock,” said McClay, a Montreal-based industry analyst. “Unplanned downtime was a big driver. A lot of pulp in Europe goes by barge – but they had their warmest summer in 500 years, and the rivers were too low for freight to move.”

After the conference, McClay was on his way to Shanghai, where the market is plummeting. “China is the gorilla in the room,” he said. “There is a lot of demand, but also a lot of risk. China is in real tough shape economically…. The country also makes pulp, and will run mills full-out when prices are high and shut them down when prices are low.”

The four bright spots in this market are dissolving pulp, container and boxboard for packaging, tissue, and northern bleached softwood kraft (NBSK), all of which are produced in the Maritimes.

• Dissolving pulp, which is used to make the plastic-free textile called rayon, is produced by AV Group mills in Nackawic and Atholville, N.B. According to McClay, it has a very bright future, with a forecasted growth rate of eight percent per year.

• Paper packaging is also benefiting from the trend away from plastic. One example is JDI’s Lake Utopia Paper mill, which makes a high-performance corrugated product. Next time Amazon drops you a package, take a careful look at the container it comes in. If it’s paper, you are looking at the future; if it’s plastic, it’s going the way of the Great auk.

• Tissue is made from a blend of pulp grades; you need just the right combination of short-fibre hardwood pulp for softness, and long-fibre softwood pulp for strength. That mix is made by Irving Pulp and Paper in Saint John, N.B., and by Woodland Pulp, just across the border in Maine.

• NBSK is the best and highest-value pulp in the world, and Canada’s ace up the sleeve. It’s in for a bumpy adjustment as prices settle back from record levels to an “inflation-adjusted bottom,” according to McClay. But after that bit of turbulence, the future should be rosy, with a long-term annual growth rate of one to two percent. Globally, there is very little room for new NBSK capacity, as those northern spruce and fir forests are already spoken for. “Since the Russia-Ukraine war virtually closed the Finnish border, there isn’t a stick of wood left in Scandinavia,” said McClay. “China has looked at building a new plant in the southeast U.S.A., but was overwhelmed by the bureaucracy, so that just leaves Russia – but who would invest there?”

NORTHERN PULP TRANSFORMATION

That could explain the fact that Paper Excellence (PE) is determined to re-open its Northern Pulp mill in Nova Scotia. Headquartered in Vancouver, but with roots in Indonesia, PE has made the news with a string of acquisitions, becoming Canada’s largest paper producer. The company acquired Catalyst Paper in 2019, Domtar in 2021, and Resolute Forest Products in March 2023. PE is trying hard to shake off allegations that it has ties to China, and to Asia Pulp and Paper. CEO Jackson Wijaya has been asked to appear before a Commons Committee to answer questions in that regard.

Meanwhile, Northern Pulp’s Dale Paterson was at the Canadian Woodlands Forum Spring Meeting in Moncton, chatting about the company’s transformation plans for the mill, which was forced to close in January 2021 when the Nova Scotia government refused to extend its permit to discharge treated effluent into Boat Harbour. Since then, the company has conceived and designed a new world-class treatment facility and mill upgrades that will purportedly transform the operation into one of the cleanest, most environmentally focused and community-based mills in the world – at a projected cost of $350 million.

After receiving the Class II Environmental Assessment Terms of Reference from the province a year ago, Northern Pulp is halfway to completion of the process by March 2024. Following that, the province has six months to respond. If all goes well, the company can start construction in 2025, with an expected completion date of 2027.

The mill’s two main environmental issues are effluent and odour. Wastewater from the tertiary-level treatment plant, theoretically almost clean enough to drink, will be piped out into Pictou Harbour. The Department of Fisheries and Oceans has declined to intervene – but that doesn’t mean lobster fishers will stay on the sidelines.

As for the smell, which curls nostrils just across the bay in the tourist-oriented town of Pictou, Paterson said leaking emissions from the decades-old plant will be captured, redirected, and burned in the recovery boiler. This will not only virtually eliminate the acrid sulphur stench (which is emblematic of bleached kraft mills), but also increase boiler efficiency and reduce the amount of carbon dioxide released into the atmosphere.

With pulp and paper prices backing off 2022’s historic highs, it’s hard to say where fibre prices will settle this summer. Severe pulp wood shortages last winter provoked some new approaches to fibre sourcing for two Maine companies. Woodland Pulp, in Baileyville (near Calais), bought two boatloads of chips from Great Northern Timber in Sheet Harbour, N.S., which were delivered to Eastport and trucked up to the mill from there. Similarly, Nine Dragons Paper bought a boatload of chips that was delivered to Searsport.

Nine Dragons is a new player in this part of the world, with five plants in the U.S., including Rumford (formerly Catalyst, and before that Mead Paper) and Old Town, Maine. The company was established in 1995 in Dongguan City, China, by Zhang Yin, who is now one of the country’s richest women. Known in China as the Queen of Trash, she embraced a business model that depended on a steady supply of recycled paper rolling in from all over the world. She built an empire that made Nine Dragons China’s largest producer of container board, with 20,000 employees. Although residents of Old Town were happy to hear that somebody (anybody!) was reviving the 130-year-old mill, which was so badly neglected that its roof was falling in, they were astonished to see that the first people on the ground were not technicians or engineers, but feng shui specialists who went over the site with a fine-tooth comb to ensure that all signs were auspicious for a successful business. Apparently, it got the all-clear, and the company is now working towards startup.