While going through the worst crisis in its history, the Canadian forest products industry (including pulp and paper) recorded higher productivity gains than all Canadian industrial sectors, with the exception of the agriculture. This is one of the findings of an extensive study conducted by the Centre for the Study of Living Standards on behalf of the Forest Products Association of Canada. These gains will therefore result in an increase in annual productivity of 2.5% over a period of 12 years, compared to only 0.7 % on average for all other industries.

These figures tell the chief economist of FPAC, Jean François Larue, that the Canadian industry is well positioned for when the revival begins, which is largely supported by the recovery in the U.S. market residential construction. "The industry has gone through the worst crisis in its history, but it has a solid foundation. During the crisis, there has been a consolidation with the closure of the least productive units" says the economist, while specifying that a crisis as serious might close the whole industrial sector.

There is thus on the horizon a strong industry growth based in part on the traditional market of lumber and a whole new industry based on innovation and substituting with wood fiber a large number of products that historically were petroleum based. On the residential construction side, the latest statistics confirm that the level of one million housing starts has been reached.

 

"Historically, it takes 1.4 million housing starts in the United States to adequately support the industry. At the moment, we rely on a million housing starts in the United States and 400,000 starts a year in Asia, where exports have the wind in their sails. This situation should last," warns the economist.

 

The traditional timber industry has done more than well in terms of improving productivity. During the crisis, the Canadian industry has seen its production capacity grow by 6.8% to rank first in the world, ahead of American industry and even Finland.

According to the economist, the only downside in this sector lies in the application of the chips. Production and sale of chips are an important element of profitability in the sawmill industry. However, this market is burdened by the digital revolution that has melted the newsprint production at Canadian plants, causing the closure of several paper machines in the past decade. So there is a delicate balance.

In the results of the study, the economist takes an important finding for the repositioning of the industry. Productivity gains are usually associated with innovations, meaning the forest sector companies have already made the shift to the future. Domtar has decided to turn to toilet paper with an application which promises to be important and Tembec produces pulp used in a multitude of new products. There is even talk of using wood fiber to make the footprint of the lightest cars.


"These results allow the association to intervene on governments to support innovation. For us, it is a central issue if we think we can now use the wood fiber in products like cosmetics," continues the economist.

 

Canada does not have that strength in terms of international competition and the most sensitive items push companies to move towards value-added products. This is the case of wages and working conditions in general that exceed the benefits granted to workers in several other countries. For the association, identifying value-added products is key, so that the industry will be able to maintain these benefits for labor.

Finally, this report confirms another performance which became another hotspot for all industrial sectors. It is the energy productivity, which measures the energy / productivity ratio.

According to the findings of the study, the manufacturing sector of wood products has improved by 2.9% per year in this area, while the paper was 0.9 %. It is in the latter case a more than acceptable performance as the average industrial index reported an improvement of only 0.1%.