Evidence of meeting #13 for Natural Resources in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A video is available from Parliament.
Chief Executive Officer, Kap Paper Inc.
Pardon me. I can't go into detail on it. It is public knowledge, but the actual details are not public knowledge. I'm sorry.
Conservative
Richard Martel Conservative Chicoutimi—Le Fjord, QC
You've been in pulp and paper for years.
Could you tell us what the last decade has been like for the sector in Canada?
Chief Executive Officer, Kap Paper Inc.
I certainly can. The digital revolution has moved away from print media on all aspects of print media. I can quote some numbers. In 2006, say, or 20 years ago, North America was producing and consuming about 14 million tonnes per year of newsprint for newspapers like the Toronto Star. We know what they are. We're now down to about two million in that short period of time.
Liberal
Liberal
Claude Guay Liberal LaSalle—Émard—Verdun, QC
Thank you, Mr. Skiffington, for being here. It's much appreciated. Thank you for what you do. I think for northern Ontario it's super important.
I'm going to kind of push you in another direction, maybe, out of curiosity. We all know that the traditional two-by-four business has been challenged for years. We've had multiple wars with the Americans. Is there a world or a product that would make the economics work, so that you could actually take the whole tree and do something different from two-by-fours versus the current model?
I have no idea. I'm just asking if you've ever thought about that.
Chief Executive Officer, Kap Paper Inc.
Again, I need to stay within the limitations of my expertise. I'm not a sawmiller. I'm a pulp and paper guy. My expertise has always been on processing the residuals.
I do know from my involvement in the sector that particularly in northeastern Ontario, with our spruce and our pine, there is not a two-by-eight or two-by-10 on the planet that can compete with that product in terms of quality. There's a term called “MSR”, for material stress rated. Our two-by-eights or two-by-10s that we can use for floor joists and rafters.... Nobody else in the world can produce them. It's a very, very high-quality product.
Liberal
Claude Guay Liberal LaSalle—Émard—Verdun, QC
What I'm saying is, imagine that in the world there is no mill. Is there a kind of product for which you would process the whole tree to do something else? Do they ever think about that?
Chief Executive Officer, Kap Paper Inc.
The honest answer is no. I don't know that there isn't, but no, I haven't really thought about that.
If we look around the world, there are regions in the world that do that, but not with softwood. They do that with hardwood, with eucalyptus, which is growing on a very rapid cycle, a seven- or eight-year growth cycle. They're growing a tree this big in seven years. The economics, because of that rapid growth and the fact that they're very close to their large mills.... There's a mill that's being built in Brazil right now that will produce 3.5 million tonnes a year of hardwood pulp. That's 10 times the size of the mill in Thunder Bay. It's a giant, and they do it with the whole tree with hardwood, but there's no.... Nothing comes to mind in terms of anybody who's doing that with softwood.
Liberal
Claude Guay Liberal LaSalle—Émard—Verdun, QC
Let me ask you a completely different question. You talked about, and it's probably more in your field, having help from FedNor. From the federal government, you've had help from FedNor. You're still discussing another tranche with them. You're in discussion for the strategic response fund. You said it's a multi-decade transformation that you're trying to accelerate. Is there anything else we can do? It sounds like you're getting a lot of help from Ontario and from the federal government. What else could we be doing to help you, aside from solving the crisis for the mills?
Chief Executive Officer, Kap Paper Inc.
The short term is to keep us operating, and both the federal and the provincial governments are doing that right now. We have a commitment to the end of the year, and we're in discussions about next year. The provincial government has provided the vast majority of that support for us.
The federal government has responded remarkably fast, through both FedNor and then, with the SRF, accelerating us, partly because we're in crisis but also because there's a relatively short pathway, two years, to a significant step up in terms of consumption and return to viability.
Minister Joly's people and Minister Hodgson's people, I would say, couldn't be more helpful in helping us to converge very quickly into the queue, and we are in the queue on the SRF program. The SRF program, from my understanding, is perfectly suited to support us. It's for tariff-exposed, market diversification, higher product value from natural resources, which is exactly what we're doing at Kap Paper.
I'm not sure what the right word is. I'm non-partisan, but the federal government has been extremely helpful.
Bloc
Mario Simard Bloc Jonquière, QC
I'm going to try to help you become partisan, for fun.
I digress. You said something very important. You have to keep operating in order to get through this crisis and have players.
In response to a question from my friend Mr. Martel, you said you were trying to transform your facility and create new production lines.
As I understand it, you work in pulp and paper, so it's odd to me that you are going from pulp and paper, a chemical product, to engineered wood.
What is it? Is it a type of pressed wood?
Chief Executive Officer, Kap Paper Inc.
It's a very good question.
There are two worlds in pulp and paper. There's a chemical world and a mechanical world. We are in the mechanical world of pulp and paper. Fundamentally, it starts with a softwood chip. That softwood chip can be processed through a mechanical pulp process into a product such as MDF. Instead of making a sheet of newsprint, we make a sheet of very compressed board. It is an entirely different production line, but it's similarly designed to take that sawmill residual chip and convert it into a higher-value product.
Bloc
Mario Simard Bloc Jonquière, QC
I see. Thank you.
Moving from pulp and paper manufacturing to kraft manufacturing is very worthwhile. Where there's still demand, I assume it's currently impossible to retrofit a pulp and paper mill so that it can produce kraft pulp. I also assume doing that would be very expensive.
Since you want to manufacture engineered wood, how long could it take to get a production line up and running and gain access to an existing market?
You'll have to convert your facility, but the crisis is happening now. It takes five to seven years for a business to change direction and develop new products, does it not?
Clearly, it won't happen overnight, or even in six or 10 months' time.
Can you talk more about that?
How long could it take to build new production lines?
Chief Executive Officer, Kap Paper Inc.
We've modelled the transformation as taking 30 months. It's actually far less complex than, say, repurposing to a chemical pulp or a kraft pulp. It's quite fast.
We would need to keep our current production lines running in our traditional pulp and paper-based products, and 30 months later we would be able to start up the new....
Part of the interest in the SRF is that we can do something very rapidly. It's not a seven- to 10-year transformation. We're not developing the markets; we're taking an opportunity to be part of an existing growing market.
Bloc
Mario Simard Bloc Jonquière, QC
If it's no longer worthwhile to keep your core operations going, you'll need liquidity to invest in a new production line.
I imagine that, without government support, there is no way to change the dynamics of the forestry sector and embrace new products.
Is that correct?
Bloc
Mario Simard Bloc Jonquière, QC
No company would make the move.
You said it would take at least 30 months to build the new production line. You talked about engineered wood.
Is there an existing market for that type of product?
Chief Executive Officer, Kap Paper Inc.
There is a well-established market, and it's growing rapidly. I mean, not rapidly, but it has healthy growth.
One of the reasons for that is that many markets, including ours in North America, and Europe and Asia, are moving back to wood-based construction. We're seeing a lot of discussion about multi-storey, wood-based towers, homes and all of the other associated components of building a home moving away from steel, concrete and plastic to wood-based products.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Mr. Chair.
Mr. Skiffington, you would benefit if the government introduced an incentive.
I'm going to circle back to what I was telling you earlier.
We have asked the government numerous times to make the carbon footprint of materials a requirement for contracts awarded through public tenders. Such a requirement would favour the use of wood, because it has a much lower carbon footprint than other materials.
Applying such a policy to public tendering would send the right message: the government wants low-carbon products.
Do you think that would definitely help out the forestry sector?
Chief Executive Officer, Kap Paper Inc.
I'm not an expert in that field, but my intuition is that it absolutely would.
Liberal
The Chair Liberal Terry Duguid
Colleagues, we're into our third round now. I've been a little lenient on some of the times, so we'll have time for three speakers.
Mr. Dawson, welcome to the committee again. Mr. Viersen, I forgot to welcome you. It's nice to see you today.
We will follow that with Mr. Danko.
Mr. Simard, you will be our last speaker on this round.
Mr. Dawson, you have five minutes.