Top News

Low dollar, oil prices benefit, but not a silver bullet for newsprint

Experts agree lower oil prices and a lower Canadian dollar are going to be around for a while, but what that means for exporting manufacturers like Corner Brook Pulp and Paper is less clear.

Corner Brook Pulp and Paper. — Canadian Press file photo

Gabriella Sabau, an economics professor at Grenfell Campus, Memorial University, said the mill should be able to export more profitably because of the devalued Canadian currency and incur lower production costs because of the dramatic drops in oil prices.

She said other evolutions in the industry give it more hope. Global consumption of paper products is expected to grow at an annual rate of two to four per cent in the next five years, she said, driven by emerging economies in China, India and Brazil.

Kevin Mason, managing director of forest products research with Equity Research Associates in British Columbia, said some  factors offset the benefits of the low dollar and oil prices. With no sign of improvement in the domestic demand for newsprint, Mason said the export market has been disappointing and expects it to worsen in 2015.

Some of the emerging economies in Asia and South America, he noted, have advanced towards the digital age more quickly than anticipated. China, Russia and other European producers have built up newsprint inventories for a demand that is not as strong as was hoped.

The stifled demand and the production overcapacity, according to Mason, could mean at least 600,000 tonnes of production capacity will have to be removed next year in order to balance out supply and demand. Players must reduce their production or risk being squeezed out by the increased pressures of the market.

“Closures are coming, regardless,” said Mason. “It’s just a question of whether it’s going to be done proactively or reactively.”

It is expected American mills will be hit hardest. That doesn’t mean Canadian mills are in the clear, Mason cautioned. There are many factors beyond the industry’s control and the only thing companies can do is try to keep their own costs as lean as possible.

“It’s all about being aware of what’s coming down and trying to position yourself accordingly,” said Mason.

The Liberal MP for Humber-St. Barbe-Baie Verte, Gerry Byrne,  said now is a good time for the Kruger-owned paper mill to invest in infrastructure upgrades that will help the long-term viability of the operation.

The MP said the government, which gave Corner Brook Pulp and Paper a $110-million loan last year, should help other exporting sectors, including the fishing, mining and lumber industries, take advantage of the opportunities presented by the low dollar.

“Diversification is not just about looking for new industries to come forward for our province,” Byrne said in an email. “It’s about putting greater value into some traditional players of our economy that have been largely ignored for the past 10 years.”

Recent Stories