The Logging Industry: Supplying Sawmills and Pulp and Paper Plants

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

THE LOGGING INDUSTRY: SUPPLYING SAWMILLS AND
PULP AND PAPER PLANTS

Gilles Simard

December 1999

Canada's history is closely tied to its forests and forestry operations. Over 45% of its surface area is covered by forest. This represents approximately 10% of the worldwide vegetation cover. Canada is one of the leading producers of wood pulp, newsprint and lumber in the world. Logging supplies raw materials to two large manufacturing industries which are at the heart of this production: the sawmill industry, planing mills and shingle mills, and the pulp and paper industry.

In 1997, the value of shipments in the logging industry remained at $12.3 billion, which was practically the same level reached the previous year, representing a slight increase of 0.1%. Although very weak, it was nevertheless the sixth consecutive increase. In current dollars, the value of shipments increased by 1.0% over 1996. Figure 1. Logging Industry - Value of shipments (1992=100), shows that this was a net decrease after two years of strong growth.

Due to the strength of the economy, home construction activity was sustained(1), in Canada as well as in the United States, and the wood industry grew by 8.7% in 1997.

On the other hand, the value of shipments in the pulp and paper industry declined by 2.4% when compared with 1996 results. This industry was hit hard by the financial crisis in Asia in mid 1997.

Prices(2) for pulpwood were consequently lower by 2.8%, and prices for logs and bolts decreased by 0.4% in comparison with 1996.

Provincial variations in the value of shipments are however greater. Ontario dictated the rate of growth with an increase of 13.6% in the value of its shipments; Newfoundland posted an increase of 11.1% in the value of its shipments, while the other provinces registered increases that varied between 0.7% in New Brunswick and 6% in Manitoba.

Only one province posted a decline in the value of its shipments. This was British Columbia with a 4.5% decrease. Although this province supplied 56.5% of the shipments of logs and bolts and pulpwood in 1994, it only supplied 51.1% in 1997. The combined effect of the rapid increase in stumpage fees, limits imposed by the Canada-U.S. Softwood Lumber Agreement and the Asian crisis contributed to this worsening.

Quebec and Ontario were the two other major producing regions representing 16.7% and 15.2% respectively, an increase over 1996. These two provinces and British Columbia supply 83% of the total shipments for this industry. Figure 2. Distribution of Shipments by Region shows the distribution of the value of shipments by region in 1990 and 1997.

The total cost for raw materials and supplies used by the logging industry was up by 2.5% over the previous year to $7.8 billion in 1997. This increase compares with that of 3.5% in 1996.

After decreasing for the first time in 1996 following several years of sustained increases, stumpage fees rose again in 1997. Stumpage fees(3) rose by 9.7% to $1.2 billion. For all practical purposes, almost all provinces collected higher stumpage fees in 1997, with the exception of British Columbia where they were pretty much the same as in 1996.

In the wake of export limits imposed by the Canada-United States Softwood Lumber Agreement(4) and the financial crisis in Asia, the government of British Columbia underwent intense pressure to assist one of its key sectors. For this reason, in the spring of 1998, the government of British Columbia announced a 16% reduction in stumpage fees.

The two principal commodities shipped by the logging industry are logs and bolts and pulpwood. The major user of logs and bolts is the Canadian Sawmill and Planing Mills Industry while the main users of pulpwood are the Pulp and Paper Industries. In 1997, logs and bolts represented approximately 69% of the value of shipments and pulpwood represented approximately 13% (compared with 12% in 1996 and 15% in 1995).

Small establishments that produced no detailed reports(5) were the sources of more than 44% of all shipments, worth $5.4 billion. The major portion of this sum consisted of earnings from independent contractors.

The majority (more than 85%) of roundwood(6) harvested in Canada consisted of softwood species such as spruce, pine and fir. While these species are harvested in nearly all the provinces, hardwood species are primarily harvested in eastern Canada, with very little harvested in British Columbia. The Sawmills, Planing Mills and Shingle Mills Industry is the main user of logs and bolts, while the Pulp and Paper Industry is the main user of pulpwood.

In 1997, logging on provincial Crown lands(7) accounted for almost 80% of production, and private land accounted for the balance. Canada is one of the rare countries in which most forests are publicly owned. Canada, with 10% of the planet's forests, supplies 5% of the total world production in roundwood and a quarter of the North American production.

Roundwood production was estimated at 187,754 thousand cubic metres in 1997, up 2.3% from the previous year. This means growth returned after a year of reduction in 1996. Production of logs and bolts increased by 0.7%, while production of pulpwood increased by 12.1%. Figure 3. Logging Industry - Round Wood Production Estimates shows the trend of roundwood production estimates since 1982.

In 1997, total employment in the logging industry decreased by 2.8% compared to the revised total of 45,501 workers reported in 1996. This was a second consecutive decrease. Total employment in the logging industry remains 7.5% below the peak of 49,190 workers reached in 1989.

For the third consecutive year, capital expenditures(8) declined in 1997, from $703 million to $635 million.

In the context of global discussions about the evolution of the greenhouse effect and global warming, Canadians are increasingly aware of the importance of our forests.

Continued logging with the goal of ensuring that our forests survive is becoming an ever increasing concern of the public as shown in demonstrations by environmental groups, Amerindians and inhabitants of rural communities whose lives depend on forests. An increasing number of Canadians are concerned about the operations of the industry and the renewal of forest resources.

According to the last forest inventory(9) in 1991, Canada had 235 million hectares of productive forests. In 1996, a total of 183 million cubic metres of wood was harvested from a potential 234 million cubic metres available for annual cutting.

Every year, the industry harvests approximately 1% (1,023,440 hectares or 183 million cubic metres in 1996) of the total volume of wood estimated in forests that can be logged commercially. Approximately 86% of the surface is harvested by clear cutting (89% in 1991) and the balance is harvested by selection cutting and commercial thinning.

A surface of 413,545 hectares was replanted in 1996 using 666 million seeds. During the same year, $2,941 million was spent in forest management, 49% of which was provided by the federal government and 47% by the logging industry.

Results from the Environmental Protection Expenditures Survey(10) of 1996 show that the logging industry spent $107 million on environmental protection, of which $63 million was for the protection of wildlife and its habitat.

In 1997, there was only slight growth in the logging industry. The strength of the American economy sustained the demand for building timber. However, the demand for wood pulp, of which a significant portion is exported to Asia, was a victim of the crisis that affected this part of the world in the second half of the year. In 1997, it became increasingly apparent, particularly in British Columbia, that stumpage fees were restricting the competitiveness of Canadian companies in North America.

References

1. Housing Starts and Completions, Canada, CANSIM Matrix No. 80. Private Housing Starts, USA, CANSIM Matrix No. 254

3. In Canada, individuals and companies must pay fees to harvest roundwood on Crown lands.

4. Canada-United States Softwood Lumber Agreement. In force for five years starting April 1, 1996.

5. These establishments are not surveyed and provide no information on products they make. Summary financial data are obtained from administrative databanks.

10. Econnections: linking the environment and the economy, Environment Accounts and Statistics Program, Statistics Canada

This article was written by Gilles Simard. Gilles is a Statistics Canada economist in the Manufacturing, Construction and Energy Division.

Further information on Canadian manufacturing can be found in the publications Manufacturing Industries of Canada: National and Provincial Areas (Catalogue 31-203-XPB), available annually for $68 per issue in Canada and for $68 U.S. outside Canada, and Products Shipped by Canadian Manufacturers (Catalogue 31-211-XCB), available annually for $430 per issue in Canada and for $430 U.S. outside Canada. Order these products and other Statistics Canada publications by telephone, dial 1-800-267-6677, by fax: 1-800-889-9734, or by Internet.

For more information about manufacturing data or time-series, call the Disclosure and Dissemination Unit, Manufacturing, Construction and Energy Division at (613) 951-9497 or by Internet: manufact@statcan.gc.ca. For information from International Trade Division telephone 1-800-294-5583 or by Internet: trade@statcan.gc.ca.

Archived Content