Canada’s pulp industry is benefiting from an extended upswing in demand for toilet paper and other tissue products during the COVID-19 pandemic while getting hurt by a collapse in purchasing for office printing and writing paper.
There are regional cases of a supply crunch for wood chips that are used to make pulp, but there isn’t any shortage of pulp, industry analysts say.
“The price of pulp hasn’t gone up much at all. It’s just edged a little higher,” Brian McClay, a global pulp market analyst based in Quebec, said in an interview. “COVID-19 has had a mixed impact on the pulp business.”
Mr. McClay said factors bolstering the pulp market include robust purchases of toilet paper, paper towels, facial tissues and disinfecting wipes during the pandemic, and steady buying of disposable diapers and sanitary pads.
The stockpiling of tissue products at home, notably toilet paper, has lessened after hoarding by consumers left many store shelves bare in March and early April. Industry experts are forecasting a second wave of tissue-related stockpiling as pantries get depleted, although it would be for modest topping up at home and far from the earlier hoarding frenzy.
Canada’s largest tissue producers are Kruger Products LP of Mississauga, New Brunswick-based J.D. Irving Ltd. and Cascades Inc. of Kingsey Falls, Que.
The jump in demand for retail products that have pulp content has been largely offset by the plunge in orders for office supplies and a continuing decline in the newsprint market.
With most offices closed across Canada over the past nine weeks, they no longer need to reorder stacks of printing and writing paper.
Newsprint demand already has been steadily dropping for two decades during the digital transformation in media. The impact of COVID-19 has added to that downward trend this year in the market for uncoated groundwood paper, which includes newsprint and book-grade paper. Major newsprint producers in Canada include Kruger and Montreal-based Resolute Forest Products Inc.
Stéphane Renou, president of Canada’s forestry research institute called FPInnovations, said strong demand continues for medical-grade paper that goes into certain types of hospital masks, though from an industry perspective, the volume is relatively minor. “It’s about taking wood and decomposing and finding fit, form and function in multiple products,” Mr. Renou said. “But compared with the quantity of newsprint and paper, the quantity of masks produced is still a relatively small amount of volume.”
B.C.-based forestry companies such as West Fraser Timber Co. Ltd. and Canfor Corp. have scaled back their lumber production amid reduced demand for building materials as the pandemic slows construction in North America’s housing sector.
Lumber mills seek to be efficient by making the most of logs when cutting pieces into two-by-fours while saving the wood chips to supply their own or other pulp operations. With decreased B.C. lumber production, however, that has meant the amount of wood chips available for pulp operations also has fallen, RBC Dominion Securities Inc. analyst Paul Quinn said.
West Fraser and Mercer International Inc., for instance, suspended pulp production for four weeks at their Cariboo joint venture in Quesnel, B.C., citing a lack of wood chips in the region.
Still, global pulp output has kept pace with increased demand in the worldwide market, in which supply chains are driven by international economics and not restricted by national borders. Some B.C. pulp is exported by ships to China, but it’s too costly to transport the commodity by rail to Quebec from the West Coast.
Global benchmark prices for pulp have staged a modest rally in recent weeks.
The price for northern bleached softwood kraft pulp from Canada delivered to China’s ports peaked at nearly US$890 a tonne in February, 2018, but as pulp supplies rose, the price tumbled to US$565 a tonne in late 2019, according to data complied by Mr. McClay. The NBSK price recently climbed to US$590 a tonne, up 4.4 per cent compared with late 2019.
With most offices closed since mid-March, paper recycling has been vastly reduced. Given the lower amount of recycled material available, that means a greater reliance by paper mills on virgin pulp for a range of items such as tissue products, office paper and containerboard packaging.
“Wood pulp has benefited from the lack of recovered paper or office waste,” Mr. McClay said. “There’s a grade of material called sorted office paper, SOP, but with people not going to the office today, that supply channel has basically collapsed.”
Plastic bags for groceries are being provided or reintroduced by many retail stores during the pandemic. But Derek Nighbor, president of the Forest Products Association of Canada, said the long-term outlook is bright for increased use of paper products for everything from grocery bags to takeout containers to straws. “Governments want to minimize the use of single-use plastic, and we’ll see more paper bags, straws and cups,” Mr. Nighbor said.
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