Selective Cuttings

Vulnerability of B.C. pulp and paper mills to MPB infestation

November 16, 2015

Over the past decade, B.C. pulp and paper mills have greatly benefited from increased demand from Asian markets; however, the aftermath of the mountain pine beetle (MPB) infestation is increasingly constraining B.C.’s fibre supply. Since 2014, at least two sawmills in the B.C. interior have shuttered due to a shortage of pine, and more closures are anticipated in the coming years. Because pulp mills tend to purchase wood chips from nearby sawmills, the MPB impact is likely to spread to the pulp subsector if many more sawmills shut down.

There is an important interrelationship between pulp and paper mills and sawmills in Canada. Pulp and paper mills purchase wood chips residues from nearby sawmills, which reduces the need for higher cost whole log chipping. This also provides sawmills an important revenue stream, As nearby sawmills shutter, pulp and paper mills either need to purchase and transport wood chips from more distant sawmills or invest in sourcing and chipping logs themselves – both situations greatly increase the operating cost of the mill.

To gauge how vulnerable B.C. pulp mills are to a decrease in pine supply, let’s first have a look at how much pine is currently used in B.C.’s pulp and paper industry.

B.C. pulp production using pine in 2014

Table detailing the estimated amount of pulp that was produced from pine in B.C. in 2014 at the pulp production stage only. Finished products are not listed. Data is based on 2014 Q3 data from FisherSolve.
Pine usage Number
of mills
Pulp production from pine (tonnes per year, air dry metric ton)
Northern bleached softwood kraft pulp Bleached chemi-thermomechanical pulp / Thermo-mechanical pulp Unbleached northern softwood kraft Dissolving pulp
70% or more 3 290,907 560,632 n/a n/a
60 - 69% 2 593,320 n/a n/a n/a
40 - 59% 4 461,184 n/a 73,527 n/a
20 - 39% 2 127,238 68,094 n/a n/a
1 - 20% 1 39,156 59,769 n/a n/a
Total B.C. production 17 4,036,843 1,741,562 179,804 190,874

(Source: FisherSolve)

Pine represents about a third of B.C.’s SPF growing stock and about a fifth of the province’s total growing stock, so not surprisingly, nearly all of B.C.’s pulp and paper mills used fibre from pine in 2014. For many mills, pine accounts for less than half of their fibre source; these mills will likely be less impacted by a pine shortage because they have other sources of fibre.

However, of the five mills that used the greatest proportion of pine in 2014 (60% or greater), four are located in the heart of the MPB ravaged area. They produce pulp only and have manufacturing costs hovering near the national average. The added cost required to replace 60%+ of their fibre with whole logs rather than chips could be prohibitive.

While both northern bleached softwood kraft pulp (NBSK) and bleached chemi-thermomechanical pulp (BCTMP) have positive market outlooks, global competition is expected to keep heating up which means that demand for pulp feedstock – chips – will become an increasingly important determinant of competitiveness, The viability of mid-quartile B.C. pulp mills that currently rely heavily on pine woodchips could be in jeopardy as their fibre sources become more limited.