Canada’s Paper Products Industry: Industrial Outlook Spring 2006

Canada’s paper products sector is struggling to stem losses by closing mills and changing the mix of paper grades it produces. The sector is expected to lose $89 million overall this year, after suffering a record loss of $664 million last year.

Healthy growth in the North American economy has not been able to solve the sector’s structural crisis, in part because improving prices for newsprint and pulp have barely covered the effects of the strengthening Canadian dollar.

Profits are forecast to rise in 2007, reaching $332 million, and then climb to $1.2 billion by 2010, as companies cut costs and convert plants to produce printing and writing paper instead of newsprint. Still, ongoing challenges will include a limited ability to raise prices and increased competition from South America and China, where trees grow faster, labour is cheap and economies of scales are fully reached with super-sized paper machines.