Growing up in the Ottawa Valley, Derek Nighbor witnessed firsthand how integral the forestry sector is to small, rural communities across Canada.
Today, as the President and CEO of the Forest Products Association of Canada (FPAC) visits many of the 200 communities that depend on the industry for their livelihood, there’s one constant – the challenge of change.
The forestry sector has changed dramatically. It’s not our grandfather’s industry anymore. It’s a leading-edge, innovative sector.
“The forestry sector has changed dramatically. It’s not our grandfather’s industry anymore,” Nighbor says. “It’s a leading-edge, innovative sector.”
Nighbor and FPAC’s member companies are striving to ensure that message of how innovation is transforming the industry doesn’t get lost with recent attention focused on the trade dispute with the U.S. concerning softwood lumber.
While this is the fifth time over a 35-year period the two countries are clashing over lumber tariffs, this version provides the added unique circumstance of the softwood lumber agreement expiring at the same time as a potential NAFTA renegotiation.
The Government of Canada announced an $867-million plan to support forest sector workers and communities, called the Softwood Lumber Action Plan, that will:
- Expand supports to help affected workers upgrade their skills and transition to new opportunities;
- Assist viable forestry companies with commercial financing and risk management solutions;
- Support efforts to expand overseas markets and promote the diversification of Canadian wood products; and,
- Promote innovation in the sector.
According to the Natural Resources Canada website, “The federal government will vigorously defend the interests of the Canadian softwood lumber industry, including through litigation at World Trade Organization and the North American Free Trade Agreement. We have prevailed in the past and we will do so again.”
“Yes, the softwood issue could impact the industry quite significantly, but this is not a surprise, the industry has been here before – it’s been a 35-year battle. We’ve been right every time previously and we believe we have an even stronger case this time around,” Nighbor says. “But we have to keep our eyes on the ball and not allow softwood to distract government and industry on the progress we have made and will continue to make in terms of innovation.”
But we have to keep our eyes on the ball and not allow softwood to distract government and industry on the progress we have made and will continue to make in terms of innovation.
Innovation transforming sector
Necessity is driving innovation in forestry. The ascent of the electronic age has structurally changed the sector as the global demand for newsprint and other paper products has declined drastically. Add in a volatile Canadian dollar and increased global competition and it starts to paint a picture of an industry in decline before the onset of the Great Recession.
However, the collapse of the housing market in the U.S. – the main market for Canadian lumber – which ultimately led to the recession, had a major impact on the forest products industry with GDP, employment and capital investment all recording double-digit declines during the 18-month downturn.
While the sector hasn’t recovered to pre-recession levels, it has gone from surviving to thriving by finding new and innovative uses for different parts of a tree.
“Today’s forest products sector is driven by finding value for every part of the tree which ultimately reduces waste,” Nighbor says. “Innovation is enabling companies to turn yesterday’s waste streams into today’s revenue streams.”
An example is the bio-economy, which the Organisation for Economic Co-operation and Development (OECD) estimates will reach between $2.6 to $5.8 trillion (USD) by 2030. Canada’s forest products industry is well positioned to excel in the new, dynamic, high-growth global marketplace for bio-products such as in fuels, power, plastics and value-added chemicals from biomass. Technological advances and partnerships with bio-tech companies are creating viable transformational pathways for the industry that will allow it to take advantage of the emerging bio-economy and to diversify revenues, create new jobs and foster economic independence.
Pulp mills are transforming into bio-refineries. Tree fibre can be found in electronics like televisions, automobiles, pharmaceuticals and even ice cream. Technological advancements are enabling taller wood-frame buildings as well.
Innovation is enabling companies to turn yesterday’s waste streams into today’s revenue streams.
“Today, wood fibre is being used in ways that would have been imaginable just a few decades ago – strengthening composite car parts, making vehicles lighter, reducing emissions and replacing plastics and chemicals made from fossil fuels,” Natural Resources Minister, Jim Carr wrote in an op/ed published in the Toronto Star in May.
Carr also told a group of forestry CEOs in Ottawa that same month that everything made from a barrel of oil can also be made from a tree. That sentiment has helped the industry’s new tag line, Tackle Climate Change, Build with Wood.
Innovation isn’t solely focused on products and transforming mills. It’s occurring in the forests as well. Canada’s forest products industry is recognized as a global leader in the management of renewable forest resources.
Earning this reputation is courtesy of key facts, including:
- For every tree cut down, one is planted
- The pulp and paper sector has reduced greenhouse gas emissions by approximately 70 per cent since 1990
- Many forest companies have become energy self-sufficient, eliminating the need for fossil fuels
- Canadian mills produce enough green electricity to power all of Calgary
That type of innovative action will unlock doors of opportunity around the globe in the future.
“The trend around Canada and the rest of the world is to build more with wood,” Nighbor says. “The advancements in building codes and engineering is providing an opportunity for Canada to lead in that space and to introduce those new wood innovations to the rest of the world.”
Product & market diversification
Canada, a nation whose iconic tree leaf on its flag is recognized for quality and innovation, is already a key player in feeding world demand for forest products. By value, it is the world’s fourth-largest forest product exporter, and the leading exporter of softwood lumber and newsprint.
In 2016, exports totaled $34.6 billion with wood products accounting for $17.6 billion or more than half of all forest-related goods destined for international markets.
The U.S. is the overwhelming main market for forestry products, followed by China and Japan. As a result of the recession, the U.S. market share declined from 81 per cent to 68 per cent over a 10-year period while Canadian producers doubled their combined market share in China and Japan during the same period. Since 2002, Canadian wood product exports grew to $1.6 billion – an increase of 25 times.
Market diversification is necessary for future sustainability and the federal government is currently focusing on helping Canadian companies tap into Asian marketswith various recent trade missions.
While that’s crucial, it’s only one piece of the puzzle, according Nighbor, who says that efforts to bolster exports to Asia primarily benefit western producers.
“The government has been a big supporter of bringing Canadian wood to the rest of the world,” he says. “But the reality, especially for central and eastern Canadian producers, is that the U.S. is going to be a very, very important export market for the foreseeable future,” he says.
Other future market opportunities include India and the Middle East.
What’s needed is a multi-pronged approach to market diversification – one that includes traditional products as well as focusing on opening up global markets for new and innovative products.
“We need a multi-faceted approach. There will always be a need for two-by-four lumber for construction, so we need to grow markets for those products while we innovate traditional products and introduce those to other markets around the world. There’s an immense opportunity for Canada and Canadian companies to play a global leadership role.”