Canadian Paper Industry Takes Big Hit in 2009

Canada's paper industry expects to lose about C$1.2 billion ($1.1 billion) this year as a stronger Canadian dollar and changing demand spell more gloom, the Conference Board of Canada said yesterday. In a Reuters news report, the board noted that the industry is not expected to return to profitability until 2011, when industry prices will significantly improve. "Even then," the board warned, "margins will remain thin." This year's losses will be the biggest on record for Canadian paper producers, the board said in the Reuters report, and mark the seventh consecutive year of losses. Revenue will be the lowest since 1993.

Production curtailments reduced the industry's operating rate in 2009 to 73.1%, the lowest level since 1975, but even that was not enough to offset this year's sharp drop in demand, the report said. According to Reuters, the board further said that the market has begun to improve, but that the industry may not benefit from economic recovery because the appreciation of the Canadian dollar and changes in the paper products that are in demand may reduce its ability to compete.

Canadian pulp producers have benefited from lower prices for wood chips, but the availability of lower-cost chips has been limited by shutdowns of lumber sawmills caused by the weak housing market, Reuters pointed out.