NEWPAGE SITUATION SIGNALS NEED FOR NEW APPROACH: FOREST SECTOR NEEDS NEW VALUE PROPOSITION

While the impending shut down of the NewPage paper mill in Port Hawksbury will cause significant economic disruption, especially in the Straits area, the situation should be viewed by the Provincial Government as an opportunity to begin promoting transition to a new, sustainable approach to use of Nova Scotia’s forest resources.

Some Background and Some Facts

First, some facts about the power rate situation. Yes, electricity prices are rising in Nova Scotia, as they are in virtually every other jurisdiction in the world which relies on hydrocarbons as the primary fuel for electricity generation. But, no, even with proposed increases, industrial power rates in Nova Scotia will not be significantly higher than in other areas with a similar generation mix.

Indeed, existing industrial power rates in New Brunswick, Ontario, Maine, Michigan and Wisconsin – all jurisdictions with significant forest products industries and forest industries closures – already exceed rates requested but not yet approved in Nova Scotia. And rates in many other jurisdictions are higher still.

Second, some facts about markets for paper produced at Port Hawksbury. Demand for newsprint in North America today has declined by more than 60% from levels that prevailed as recently as 2005. Demand for supercalendared paper has also declined significantly, though not as precipitously as for newsprint.

Market prices for both types of paper have also declined over the past several years and are widely recognised in the industry to be at or below cost of production. And for Port Hawksbury, the changing relative values of the Canadian and US Dollars has represented a double hit –a decline of 33% in the US Dollar market price for paper over the same period as the Canadian Dollar has increased from roughly USD 0.80 to slightly above parity represents about a 50% effective price drop for the Port Hawksbury mill in Canadian Dollars. Multiplied by 600,000 tonnes of output, the effective Canadian Dollar revenue decline is dramatic.

The challenges faced by NewPage in Port Hawksbury, as well as by AbitibiBowater in Liverpool, reflect fundamental transformation of global forest products markets, and cannot be resolved through artificially reduced power rates and what would amount to effective subsidisation by other rate payers.

(In the interests of full disclosure, it should be noted that over recent years Halifax Global has advised both the Nova Scotia Government and Nova Scotia Power on issues related to comparative energy costs and forest sector competitiveness.)

Towards a New Forest Products Value Proposition

A sustainable value proposition for Nova Scotia’s forest industries will likely be found in a combination of processing technologies and product streams that capture value from the widest possible range of properties of current and future forest resources. Lumber and pulp and paper may continue to be part of the mix, but with North American lumber production having declined almost 50% since 2005, and demand for paper declining as well, these segments will likely become a reduced portion of the overall sector.

New industries need to be considered as part of Nova Scotia’s future forest sector. Examples can include biochemical extraction and processing of the hemicelluloses (sugars) in woody biomass to facilitate production of five and six carbon sugars which can be fermented and processed into advanced biofuels, biopolymers and other products The cellulose fibre and lignin that remain after such processes also exhibit enhanced unit energy values and can be used for production of sustainable, renewable bioenergy.

Development of an agro-forestry industry to produce purpose-grown bioenergy crops, (eg. willow, miscanthus, reed canarygrass, switchgrass), has potential as part of the future forest sector. Cultivation of such crops can offer the agriculture sector potential new cash crops; and, applicability of completely mechanised planting and harvesting processes can ensure predictable and lower costs than conventional forest harvesting.

A sustainable future forest sector in Nova Scotia will need to include a combination of outputs that generate sufficient value to ensure viability for all product streams, whether conventional or alternative. As hydrocarbon costs continue to rise – and they will – we need to look to a wide range of forest and agro-forestry opportunities to achieve sustainable value and energy relationships based on our renewable resources.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply