How is the forest industry changing?

Changing markets

Over the past decade, Canada’s forest industry has weathered a deep cyclical decline in demand and structural changes in global paper markets as electronic media has pervaded daily life around the world.

The forest industry responded to these challenges in traditional markets by developing new and innovative products, materials and services, such as new building materials and biochemicals that can be used to produce biobased pharmaceuticals, biodegradable plastics, personal care products and industrial chemicals. This shift positions the forest sector to meet growing demand for environment-conscious products and processes.

Finding new ways to use wood fibre and to maximize the value derived from wood will be crucial to industry performance and its contribution to the green economy.

Changing industry structure

Over the past decade, the Canadian industry has adapted to changes in both end-use markets and fundamental drivers of the global forest sector. As in other industries, there has been increased global integration through trade and multinational firms. Canadian industry consolidated and firms refocused business lines. Canadian firms also acquired more assets in the U.S. to capture investment opportunities, driven in large part by a shift in the global concentration of fibre, from the slow-growing wood of northern regions to the fast-growing wood of southern regions. The sector structure has shifted from Canadian companies in North American markets to North American companies in global markets.

Within Canada, the impact of these changes has varied among regions. The east, where pulp and paper production has historically been concentrated, was the hardest hit by shrinking paper markets. Western provinces are more focused on wood products, and have therefore been recovering faster than eastern provinces. In addition to its different industrial profile, western Canada has a location advantage, with better access to growing offshore markets in Asia. This regional divergence is expected to continue, given the varying outlooks of sub-sectors (negative for most paper products and positive for wood products).

Improving environmental performance

While developing innovative and environment-conscious bioproducts, the forest sector has invested in technologies to reduce its environmental impacts. As a result, the sector drastically cut carbon emissions and energy use. Between 2000 and 2013, direct greenhouse gas (GHG) emissions by the sector fell by 44% and total energy use declined 29%. This is attributed in part to producers generating more power internally from “waste” products such as pulping liquor and wood residues.

Investments in technologies that reduce energy use and GHG emissions are expected to continue. The Government of Canada has been actively supporting this transition toward a greener industry through programs like Investments in Forest Industry Transformation.

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