Canada Pulp and Paper Sector to Narrow Loss in 2006
Nov. 14, 2006 - The struggling pulp and paper sector lost
a record $1.4 billion in 2005 and will lose money again in 2006, according to
the report Canadian Industrial Outlook: Canada's Paper Products
Industry-Autumn 2006 published by The Conference Board of Canada.
"The industry is dealing with a string of mill closures, a strong
Canadian dollar and competition from new countries that are entering the
global market," said Michael Burt, Senior Economist. "Although profits are
expected to recover beginning in 2007, this industry will remain very fragile
in the short term."
The paper products industry is highly sensitive to macroeconomic factors
such as the value of the dollar, and is still in the midst of restructuring.
The good news in 2006 is that prices are forecast to grow by 12.3 per cent.
Production levels, which have been in decline since 2004, are expected to
recover in the second half of 2006, although these gains will not be enough to
prevent the industry from losing about $206 million for the year as a whole.
In 2007, rising production is expected to bolster a return to profitability of
about $861 million.
Highlights from the report include:
- A sustained gain in prices for most paper and paperboard grades will help to reduce losses in 2006.
- Rising demand for pulp in China has led to higher prices for both pulp and waste paper.
- The share of newsprint production in Canada’s paper products sector is expected to continue its slow decline over the coming years.
- Feeble demand growth from office users has mitigated growth in the uncoated wood-free paper segment.
- The outlook for growth in printing and writing paper consumption is better than it is for newsprint.
- The growth in online sales has benefited boxboard producers.
- Low capital costs will result from the scaling back and closing of less productive plants.
- Industry restructuring will allow profits to improve moderately.
The Conference Board's final report of The Canada Project, Mission
Possible, Sustainable Prosperity for Canada, will include a chapter on
Canada's resource sector when it is published in early 2007. The volume,
Mission Possible: A Canadian Resources Strategy for the Boom and Beyond, will
discuss the challenges facing Canada's pulp and paper industry and make
recommendations to revitalize it.
SOURCE: The Conference Board of Canada