A Business Point of View

The Continuing Importance of the Forest Sector

The forest sector is too often under-appreciated in terms of its important economic contributions within Atlantic Canada and subject to often unfair criticism in relation to the issues of its sustainability and harvesting practices. While some of that criticism is likely warranted, much of the criticism seems to be built on misinformation or a lack of knowledge about modern forest management practices. For example, it is also worth noting the importance of forests to climate change through carbon capture.

Economic Contributions

It may surprise you to learn that the forest industry in Atlantic Canada is worth $1.7 billion and supports more than 20,000 jobs. New Brunswick represents three-quarters of the industry in Atlantic Canada. It is an industry most important to rural communities in our region. The forestry and forest products sector include the harvesting of trees, wood product manufacturing and paper manufacturing. It is a sector under significant threat by US tariffs at the moment.

The forest sector is most important to the province of New Brunswick where it provides 12,400 jobs. In Nova Scotia, the sector supports 5,300 jobs, while in Newfoundland & Labrador, there are 1,900 jobs in the forest sector. Even in PEI, there are 500 forest related jobs according to the most recent StatsCan data available.

Key Forestry Companies

There are only a few larger forestry companies still operating in Atlantic Canada. In Nova Scotia, the major player is Port Hawkesbury Paper, which is owned by Stern Partners, a Vancouver based company. Stern Partners purchased the mill in 2012 and currently Port Hawkesbury Paper specializes in supercalendered paper for magazines and other high quality printed products. Stern Partners is a long-term value investor that owns 20 companies with 7,000 employees and has annual revenues of $1.75 billion, with each company operated and managed independently.

Northern Paper, owned by BC based Paper Excellence, is no longer in operation, but had been seeking government approval to re-open with a new plan to modernize the plant and meet environmental requirements. At the time of closure, the mill had 330 employees. Paper Excellence is now considering a new mill in Southwestern Nova Scotia. The loss of Northern Paper was a significant blow to the forestry sector with the loss of 40 percent of the market for wood fibre in the province. Previously in 2012, Resolute Forest Products had closed the Bowater Mersey mill in Lunenburg County.

In New Brunswick, JDI (an Irving company) is the largest company involved in the forestry sector in the region, with operations in Nova Scotia, as well as in the US. It includes Irving Pulp Paper in Saint John and Irving Tissue in Moncton and Georgia. JDI is a fully integrated forestry company from harvesting to manufacturing and has about 6,000 employees in its woodlands division. Although large from a regional perspective, JDI is small in comparison to some of the largest companies globally in this sector with which it competes. As an example, the AV Group in New Brunswick operates two separate mills in the province, employing 1,200 people and is a member of the Aditya Birla Group based in India, one of the largest forestry companies in the world. The Aditya Birla Group operates in 36 countries, has annual revenues of $45(US) billion and employs 140,000 people.

In Newfoundland & Labrador, the Corner Brook Pulp & Paper, owned by Kruger Pulp & Paper since 1984, employs 120 people and is the largest forestry company in the province.

In addition to these major companies, each province has many independent sawmills operating to process the wood being harvested.

The Issue of Sustainability

One of the keys concerns among the public is the perception that too many trees are being cut down and soon there will be no forests left. In Canada, 40 percent of the land is forested. In fact, Canada has 9 percent of the world’s forests.

To be clear, overcutting trees is not in the best interest of those in the sector. Let’s start with a few facts.

In New Brunswick, 85 percent of the province is covered with forests, an area of over six million hectares (15 million acres). Crown land represents 50 percent of forested lands in the province. There are an estimated 5 billion trees in New Brunswick. Earlier this year, Fredericton was named the Forest Capital of Canada by the Canadian Forestry Institute for the city’s commitment to sustainability and economic investments in the industry.

In Nova Scotia, 75 percent of the province is forested, an area over 4 million hectares (10 million acres). In Newfoundland & Labrador, 56 percent of the province is covered with forests, mostly in the central and western parts of the province. It may surprise some to learn that 44 percent of the Island is covered with forests. This is an increase from the 30 percent that was covered by forests in 1900.

It is estimated that about 1-2 percent of available trees are forested annually and with proper reforestation practices, forests regrow within 30-40 years. This ensures that the forestry is sustainable over the long term. In Nova Scotia, more than 12 million trees are planted per year according to the Forest Nova Scotia. JDI recently celebrated a milestone of planting one billion trees. In fact, the company has a practice of replanting three trees for every harvested on their own land.

As Jim Irving recently told us on the Insights Podcast, forestry management is similar to the agricultural sector in that the land is replanted, managed to grow in a healthy manner and then harvested when mature. The only difference is that it takes decades to regrow the forests.

Harvesting Practices

In addition to concerns about the sustainability of the forests, there has been considerable public concern about the harvesting practices of the forestry industry, especially regarding clear cutting. The major concerns are related to wildlife habitat and watershed protection and the loss of biodiversity in the forests. The ecological approach in place in Nova Scotia attempts to address these concerns by dividing crown land into three zones, a conservation zone, a high production zone (where clear-cutting is allowed) and a mixed forest zone with harvesting restrictions and regulation. The high production zone represents the smallest zone (10 percent) of the forestry.

Companies like JDI who are based in the region have some of the best forest management practices and take a long-term approach to forest management. JDI, as an example, has long had its own research facilities to find new approaches to protect trees from pests and disease and to develop trees that grow faster.

Looking Ahead

There is little doubt that the forestry sector will continue to play an important environmental and economic role within the region. Indeed, the importance of wood products for the housing market has increased significantly across Canada where demand is expected to triple by the end of this decade. Public pressures have led to improved forestry management practices that ensure the sustainability of the forests for the long-term and industry continues to work to develop disease resistant and faster growing trees. The industry needs to continue its work to inform the public of their forest management practices to alleviate concerns about the sustainability and harvesting of the forests across the region, such as the recent public campaign undertaken by Forest NS.