As a forest industry consultant, Rob Schuetz has been crunching numbers watching timber supplies fall and for many months and the math he’s been doing has been ringing alarm bells.
The president of Prince George-based Industrial Forestry Service Ltd., has watched anxiously as residual chip supplies have steadily fallen and the availability of pulp logs needed by local pulp mills to make up the difference has also plunged. Without fibre, pulp mills can’t operate and like many others connected to the industry Schuetz was not at all surprised when Canfor announced last week it intends to permanently close the pulp line at Prince George Pulp and Paper mill.
“It always made sense that one of the pulp mills would shut down,” said Schuetz. “We always knew that a complete shutdown of one of the mills would probably happen within the next couple years. When you’ve got three mills and a third of your supply is coming as pulp logs and the pulp log supply dries up, some mill has to shut down.”
It’s a harsh reality that affects 300 PG Pulp workers still coming to grips with the fact their six-figure salaries and the jobs that they’ve come to depend on to feed their families are coming to an end when the closure happens in March.
“The bottom line is that they need at least two to three million cubic metres a year of pulp logs, and where do you find that when the (annual allowable count) is dropping,” said Schuetz.
“The government is putting in all these constraints with regards to old-growth deferrals and you’re not really sure what the First Nations are going to do when they get their licences. Are they going to salvage pulp logs or just work for their own best interests and maximize their internal revenue by harvesting saw logs.”
Schuetz says Canfor requires at least six million cubic metres of fibre annually to operate PG Pulp and its two other pulp mills in the city, Intercontinental and Northwood. Some of that fibre has to come from pulp logs, trees no fit for lumber because they are dead or are in a weakened state due to beetle attacks. But they’ve been logged to the point where the pulp log supply is not enough to make up for the reduced supply of wood chips.
Chips come primarily from sawmills but lumber prices have fallen drastically over the past year and most sawmills in the region have had to endure curtailments or have reduced shifts, so fewer chips are being produced.
“All the (pulp) mills are operating now but where do they get their wood?” asked Schuetz. “They looked forward and it looks so bleak with regard to sawmill operating rates over the next six months and all that’s another nail in the coffin.
“At the same time, pulp prices are really good right now, probably 40 per cent higher than the lowest they sometimes get. The spot market for pulp is around $1,000 or $1,200 (per tonne) and those mills have operated when the price for NVSK (Northern Bleached Softwood Kraft pulp) was around $600.
“It all comes back to what your fibre supply is, what the cost is and the security of supply and you look forward and there’s no good news,” he said.
In the wake of last week’s Canfor announcement, are more pulp mill closures coming to the region? Schuetz says Quesnel is certainly not out of the woods. West Fraser operates Cariboo Pulp & Paper and Quesnel River Pulp in Quesnel and both are dealing with the same fibre shortages Canfor has had to face.
“In Prince George, the shortfall in chips was almost two million cubic metres of pulp logs they needed to make up,” said Schuetz. “In Quesnel, it’s probably not quite a million, but that’s still a few years away. But then it looks bad. By 2027 (when the AAC drops) they’ll be scratching their heads thinking is it worth it to continue to operate.”
When sourcing fibre, mills factor in an eight-hour cycle time from the time it takes for a truck to get loaded, drive to the pulp mill and unload. Any longer than that and hauling costs become prohibitive. Chips are sent to the Canfor pulp mills in Prince George from other forest areas and come from as far away as Houston, Smithers and northwestern Alberta. The Forest Enhancement Society of BC offset some hauling costs and that resulted in huge chip stockpiles at the mills but that program ended a year ago and the surplus vanished.
So what about trees burnt in forest fires? Can they be used as pulp logs?
Schuetz says no. Logs that have been burnt through to the wood fibre under the bark are problematic for pulp mills and aren’t suitable to make pulp because they require more bleach and that means higher costs.
That burnt dead wood works for wood pellet manufacturers and they will use it if they can get it. The spot market for pellets in Europe has tripled since the war started in Ukraine, with countries scrambling to replace supplies cut off from Russia and Belarus.
Alberta pulp mills are operating at close to capacity. Compared to B.C. mills they pay slightly lower costs for fibre and Schuetz they have better access to timber supply because they face fewer restrictions. B.C mills pay stumpage based on what lumber prices were four to six months ago.
“Their stumpage (the fees Alberta companies paid to log stands of timber) is more reactive and probably a lower price and they have a government, I hate to say it, that has not imposed so much insecurity with respect to old growth and First Nations and Caribou habitat. They’re a lot more positive with respect to investment and B.C. isn’t any of those.”
Friday’s announcement in Crofton that the Paper Excellence paper mill has secured $18.8 million in combined federal and provincial funding to reopen the plant to produce water-resistant paper and replace dependency on single-use plastics will put 100 workers back to work. They were among the 150 mill workers sent home in December when the mill went into curtailment.
The news out of Crofton could offer some hope to the 300 workers in Prince George facing unemployment. Some suggestions have been made that Canfor could take advantage of the province’s new BC Manufacturing Jobs Fund, announced Tuesday in Prince George by Premier David Eby, which will provide up to $10 million over three years to help forest companies reeling from current conditions get back on track.
Schuetz prepares timber forecasts for BC Hydro and one of the discussions he’s had centred around the possibility of converting PG Pulp to a bioenergy plant to help Canfor meet its electricity purchase agreement obligations.
“My gut feeling is they will continue to operate until their electricity purchase agreement expires,“ said Schuetz.
“They consume hog fuel, the stuff they bring from the side of the road, in their energy boilers to produce high-pressure steam to run the internal pulp mill processes but they also produce surplus steam to run their electricity generators and sell the surplus to BC Hydro.”
