Forestry companies are finding new ways to turn a profit.
The recession sent a number of industries into turmoil, but none may have been hit harder than Canada's forestry sector.
America's housing crash had a devastating impact on companies – about 80 percent of exports went to the U.S. back then – and throw in a higher dollar and declining paper usage and, as David Lindsay, president and CEO of Ottawa-based Forest Products Association of Canada says, "it was the perfect storm."
While the U.S. has rebounded and things are looking up, the recession taught the industry a valuable lesson: it had to find new partners and new ways to generate revenues. We spoke to Lindsay to find out how the sector has done since the recession and why it will look different in the years to come.
HOW HARD WAS THE RECESSION FOR FORESTRY COMPANIES?
We had 340,000 employees at peak employment and we're down to 230,000. A number of mills shut down during the recession, which is partly why staffing dropped.
WHEN DID THINGS START TO REBOUND?
It stared coming back in 2010 and has climbed steadily since. The sector grew by 3.4 percent in 2013, while the overall Canadian economy expanded by 2 percent. So we're doing well. Exports of wood, pulp and paper were up, so everything's starting to move in the right direction. Lumber exports, for instance, has nearly doubled from the 2009 low.
HAVE YOU DIVERSIFIED AWAY FROM THE U.S.?
We have. Before the recession we were exporting 80 percent of our products to the U.S. That's down to 63 percent. Now, pulp, paper and lumber is Canada's largest export to China. We'll see further opportunities in the Asian markets in general, but specifically in places like China and South Korea.
HOW IS THE INDUSTRY OFFSETTING THE DECLINE IN PAPER USAGE?
Opportunities for new uses of fibre are just starting to be realized. Think about bioplastics, biofibres and bioenergy. Pulp can be used to make rayon fabric clothing – it's used as a cotton alternative. You can also extract oils and sugars out of pulp, which can then be used in lipsticks or as an additive in pharmaceutical products. Fibres can also be used in cars to make lighter composite materials.
HOW CAN FORESTRY COMPANIES ADAPT TO THESE INDUSTRY CHANGES?
By investing in new technology, equipment and processes. The ones with modern equipment are the ones that are producing again. There are some neat technologies being used, such as computer systems that can figure out the best way to cut a log and GPS systems that can track all of the work happening in a forest.
HOW DO YOU FEEL ABOUT THE NEXT FIVE YEARS?
We're excited. We now sell to 180 countries and we're looking ahead to new products, new markets and new opportunities. The industry is being transformed.
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