2005 Annual Report

TRANSFORMATION2005 Annual Review

Industry Environmental Highlights

Forest area 3rd-party certified CSA, FSC, SFI to December 31, 2005 119 million hectares

Percentage of Canada’s original forest area retained 91%(1)

Reduction in water use since 1989 34%(2)

Reduction in greenhouse-gas emissions from fossil fuel, 1990–2004 30%

Reduction in particulate emissions since 1992 62%

Recycled materials’ share (sawmill residues and waste paper) of fibre supply for new paper and paperboard(3) 80%

Recovered paper used in paper-making(3) 5 million tonnes

Recycled paper recovery rate(3) 46%

Industry Economic Highlights(4)

Communities highly dependent on forestry(5) 324

Net sales $81 billion

Export sales(6) $45 billion

Export sales to United States $35 billion

Contribution to Canada’s balance of trade $35 billion(2nd-largest contributor)

Annual R&D spending $506 million

Employment (direct)(7) 361,100Employment (indirect)(7) 555,100Forest industry average wage per employee(8) $45,400

Share of Canada’s GDP 3%

Transportation(9)

Largest user of rail transport (2004) 45 million tonnes2nd-largest user of truck transport (2004) 18 billion tonnes / kmLargest user of offshore marine transport in trade dollars $7.3 billion

F P A C V I S I O NA leader in advancing the global competitiveness

and sustainable stewardship of the Canadian forest products industry

(1)World Resources Institute Data Tables, 2000–2001(2)FPAC Environmental Data Survey(3)Statistics Canada, FPAC, PPPC(4)General Economic Highlights, Statistics Canada, 2004/2005(5)Census Data, Canadian Forest Service(6)Largest exporter to India and China; 3rd-largest overall and to USA and Europe(7)Labour Force Survey(8)Survey of Employment, Payroll and Hours(9)Transport Canada

This is Canada’s forest products industry in the news: an industry riding out theperfect storm—softwood duties, declining consumption of newsprint, intensecompetition from abroad, soaring energy and fibre costs, and a Canadian dollar thathas appreciated by 35% in just three years. Often overlooked amid the headlines isanother story: Canada is the largest, most successful forest products exportingnation in the world. The industry accounts for 3% of Canada’s GDP, is one of thiscountry’s biggest employers, and directly supports more than 320 rural communities.While large segments of the industry are doing well, there is a broad, underlyingchallenge facing the industry. Under current financial conditions, many companiesfind it difficult to make the huge capital investments needed to renew their operationsand remain competitive with state-of-the-art facilities being built abroad.

The good news is that we are up to the challenge; the industry has a vision. Our jobwill include tapping our capacity for innovation—introducing new technologies andproducts while striving for full energy self-sufficiency from renewable sources.Capital investment by our companies would be stimulated by pro-competitive, pro-investment, tax, monetary, and regulatory policies from government. Thisapproach will enable us to reduce costs and to further realign our product mix todemand trends, build value-added customer relationships, develop new offshore mar-kets, and make “Made-in-Canada” wood and paper synonymous with exceptionalquality and first-rate environmental stewardship. In this report, we ratchet up ourcommitment to sustainability another notch by launching the FPAC SustainabilityInitiative so you can monitor our progress on a range of environmental, economic, andsocial indicators.

Our vision for the decade before us is for strong Canadian wood, pulp, and paperexports, healthy profits, elevated levels of capital spending, and increased hiring—including of many Aboriginal Canadians—to replace the retiring baby boomers whomake up a large portion of our workforce. The culture of sustainability now takinghold in our forest management will permeate all aspects of our business. Instead ofreading about mill closures, we will read about a healthy, stable industry expandingits dual role as the world’s largest exporter of forest products and the mainstay of athriving rural economy. The reality, however, is that the industry will continue to bechallenged in the short term as it focuses its attention on transformative change toimprove its underlying fundamentals. In the end, we will achieve our vision with aspirit of innovation that will deliver world-class products and a sustainability record tobe envied.

E M B R A C I N G A T R A N S F O R M A T I O N A G E N D A

Avrim LazarPresident & CEOForest ProductsAssociation of Canada

James (Jim) A. ShepherdPresident & CEO Canfor Corporation Chairman, Forest Products Association of Canada

FUTURE-BUILDING

The forest products industry is worth growing, sustainably.The global outlook is bright: Demand is forecast to grow by3% annually well into the future. Canada—the world’s largestexporter of forest products—enjoys extraordinary advantages:10% of the world’s forest area, 20% of its fresh water, and areservoir of great expertise in every aspect of forestry and themanufacturing of forest products.

Over the past few years, Canada’s forest products industry hasencountered a “perfect storm” of adverse circumstancesthat has placed a serious strain on many in the industry.While the nature of the challenges varies across facilities,industry sub-sectors, and regions, the national picture isone of an industry facing the most difficult situation ithas seen in its long history in this country. Contributingfactors include the softwood lumber dispute with the UnitedStates, the unprecedented appreciation of the Canadiandollar, rapid increases in fibre and energy costs in someregions, and the Mountain Pine Beetle infestation in Albertaand British Columbia. These problems have resulted in millclosures and distress for many parts of Canada’s forestproducts industry as well as for the workers and communitiesthat depend on us.

Despite the current challenges, Canada’s forest productsindustry continues to enjoy many strengths in the globalmarketplace. With the right vision and a new spirit ofpartnership with governments and other stakeholders, theforest sector can secure its future as a dynamic and sustainablepart of Canada’s land–based economy for generations to come.

There are numerous success stories on which to builda broader revival of the industry’s economic fortunes.The structural wood panels sector (plywood and orientedstrand board [OSB]) has enjoyed growth and high marginsriding the long North American housing boom. Some of themost cost-efficient lumber manufacturing operations in theworld are in the B.C. Interior. Our classic Canadian long-fibresoftwood pulp is still the world’s best and enables mills toproduce a growing range of lightweight and ultra-lightweightcommunication and printing papers. The growing appeal of

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A V I S I O N F O R R E N E WA L

THE PERFECT STORM

Source: Bank of Canada, Statistics Canada,International Trade Canada.

Dollar has increased over 35% since January 2003

Jan

2003

May

200

3

Sept

200

3

Jan

2004

May

200

4

Sept

200

4

Jan

2005

May

200

5

Cumulatively, over $5 billion in softwood duties paid

Industry’s energy costs have risen 35%

F O R E S T P R O D U C T S A S S O C I AT I O N O F C A N A D A

CANADA’S FOREST PRODUCTS INDUSTRY HAS BEEN HIT BY ANUNPRECEDENTED PERFECT STORM OF ECONOMIC CHALLENGES.

Since January 2003, the Canadian dollar has appreciated by 35%,

or 23 cents, against its U.S. counterpart, including a nearly 6-cent

rise since May 31, 2005. PricewaterhouseCoopers estimates that each

1-cent rise in the value of the dollar reduces revenues in the Canadian

forest products industry by over $500 million.


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direct and online marketing is boosting demand for paperpackaging, flyers, inserts, and catalogues. Canadian woodand paper producers have consistently recorded rates oflabour productivity equivalent or superior to those of ourU.S. counterparts and of other Canadian manufacturers.Our forests are being sustainably managed, and we’re buildingon that strength.

Some of the key elements of our vision are already in progress.The industry is responding aggressively to the challengesit currently faces by improving its productivity, focusing on innovation, and expanding its export markets. Andgovernments, with recent announcements of incentives forresearch and transformative technologies and a focus onmarket diversification, are taking a role in the renewal of anindustry responsible for 3% of GDP. Industry and governmentsneed to invest to enable Canadian producers to improve theireconomies of scale and develop new revenue streams thatwill make them less vulnerable to the fluctuations of globalwood, pulp, and paper markets.

THE INDUSTRY VISION: A global leader in the forestproducts industry, through aggressive market and productdevelopment, deployment of new technologies, excellence inhuman resources, and strong sustainability performance.

The industry’s agenda for transformation requires thatwe build a strong foundation by committing to the following:

DEVELOPING NEW PRODUCTS, SERVICES, AND MARKETS:As more low-cost producers enter the global marketplace,it is becoming increasingly important for Canadian firms todifferentiate themselves by adding value for their customers.This may involve customizing products through furtherprocessing, growing the market for traditional products, orenhancing service provision through such things as specializeddelivery schedules and products tracking.

ESTABLISHING A MARKET-DRIVEN INDUSTRY STRUCTURE:Canadian firms and the forest industry as a whole need to beable to adapt their structures to meet the evolving needs ofthe global marketplace. The industry will continue to have adynamic mix of companies, including small, strategicallyfocused players and larger companies with the ability tocompete aggressively in global markets.

FOREST PRODUCTS LABOUR PRODUCTIVITYReal Value Added per hour worked, 1992 $Cdn

Source: Centre for the Studyof Living Standards, 2003.

Forest Products Sector

31

29

25

23

27

21

19

17

15

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Total Canadian Economy

ABSOLUTE PRODUCTIVITY CONTINUES TO BE HIGHER IN THE FORESTPRODUCTS INDUSTRY THAN IN THE OVERALL ECONOMY.

ACHIEVING EXCELLENCE IN HUMAN RESOURCES: We willpass on our accumulated knowledge and skills to a newgeneration of employees to replace those retiring, creatingtens of thousands of jobs for young Canadians and economicopportunity for Aboriginal communities.

BUILDING INNOVATIVE PARTNERSHIPS: By continuing toshow leadership in partnering with stakeholders, includingconservation and civil society groups, Aboriginal groups,and local communities, the industry will be a model of aprogressive approach to stakeholder relations.

WHY TRANSFORMATION?Canada’s forest products industry has many great strengths,but the competitive landscape is changing quickly. WhileCanada is still a big exporter to the United States, its share ofthis market is decreasing. Europe is emerging as a dominantforce, and aggressive low-cost producers from China, LatinAmerica, and Russia are coming on the scene, capturinggreater shares of the global market.

With global consumption of forest products growing steadilyon an annual basis, the opportunity is there. Stimulatinginvestment in transformative change will improve the industry’seconomic fundamentals, which will, in turn, spur further

capital investment and investment in new product and marketdevelopment. Employees and communities will benefit fromadded economic certainty, and the transformation will solidifythe Canadian industry’s global competitiveness, sustainabilityleadership, and long-term viability.

Can it work as well as that? It has in Finland, which pursued astrategy for renewing its forest industry that involved industryconsolidation, investment in skills development and innovation,capital renewal, and effective public–private partnerships.Today, the Finnish industry is stronger in its absolute andrelative performance on a range of social, economic, andenvironmental measures.

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HARNESSING THE POTENTIAL OF NEW TECHNOLOGIES:Forest products companies will compete increasingly onthe basis of innovation in products, process, and services.The industry will work with government to support a strategicresearch system that fosters R&D and technology development.

RENEWING OUR COMPETITIVENESS IN CORE MARKETS:The strength of Canada’s forest products industry has beenbased on a critical mass of production capacity in marketslike newsprint, pulp, softwood lumber, and some wood-basedpanels where Canada accounts for a large share of NorthAmerican or global production. While our product mix ischanging continually, our future success depends onfinding ways to continuously improve our productivity andcompetitiveness in traditional product lines where maturingdemand and the entry of low–cost overseas capacity into themarketplace pose pressing challenges.

ESTABLISHING LEADERSHIP IN FOREST MANAGEMENTAND SUSTAINABILITY: Canada will establish itself as arecognized global leader in sustainability. We will make“Made in Canada” synonymous with high-quality, certifiedforest products from sustainably managed forests. The industrywill continue to improve its environmental performance andincrease its energy self-sufficiency.

“Over the last few years, it has become increasingly clear that the

North American industry has moved to a new phase in its lifecycle

and will require more fundamental changes.”

Mark Wilde

Analyst, Deutsche Bank

Paperloop

FRESH PERSPECTIVE


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R E - E N G I N E E R I N G O U R S E LV E S

The most important step would be the first: recognizing theneed to be our partners in the endeavour. From that wouldflow measures to re-examine how transportation, energy,fibre, competition, taxation, currency, and interest ratepolicies act as a brake on the Canadian industry’s ability tocompete, and then taking corrective action. Federal competitionpolicy and provincial tenure policies are preventing market-based adjustments that could give some producers greatlyincreased economies of scale. Canadian producers need thefreedom to achieve the same world-class scale as foreign-based competitors and major North American customers.From increased scale flow many benefits: a lower cost ofcapital, increased capacity for R&D spending and early

MODERNIZATIONAnybody who tours a paper mill is impressed by its size.Yet most Canadian mills aren’t large compared with theirglobal competitors. The global trend is towards capturingthe lowest unit costs through massive economies of scale.Large-scale paper machines, three-shift lumber mills, andbig single-line pulp mills are the new standard, offering thebest fibre utilization, labour productivity, and energy efficiency.Niche producers will always have a place, but, in the longterm, if fibre, energy, and other input costs are sufficientlycompetitive to justify the investment, Canada will have morelarge-scale production lines. Another option will be scaling upan existing facility’s revenue base by adding secondary revenuestreams. An example could be a lumber, OSB, or pulp andpaper mill that generates and sells surplus electricity frombiomass cogeneration or produces bio-fuels or bio-chemicalfeedstocks from biomass.

PARTNERS IN PROGRESSRelaunching the industry will require collaborative approachesbetween the industry and policymakers to create a level playingfield for all Canadian producers. Such a national strategywould install a disciplined, pro-competitive frameworkthat stimulates private investment, promotes research andinnovation, aggressively targets foreign trade barriers, and issensitive to the impact of monetary and competition policiesas well as the cost of energy, fibre, and transportation. Whilethe industry has to play the leading role in defining andimplementing the new path forward, there is much thatgovernments can do to create the conditions for its success.

deployment of new technologies, and an enhanced abilityto target capital investments and product mandates. All competition is tough, and, ultimately, remaining costcompetitive in global markets is the industry’s responsibility;however, good public policy can make the difference betweenthat competition being difficult and just plain impossible.

The industry is encouraged that the Canadian governmentand key provinces are taking steps that could become thefoundation of a more aggressive collaboration to encourageR&D investment, green power generation, and the develop-ment of transformative technologies and innovative forestmanagement practices. Putting bioenergy on a level footingwith other low-impact renewables will stimulate hundreds ofmillions of dollars in new investment in biomass cogeneration,which will result in a more competitive forest products industry, new green electrical generation capacity, reducedgreenhouse-gas emissions, and air quality benefits acrossthe country.

RESEARCH & DEVELOPMENT EXPENDITURES 2005Millions $Cdn

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ABOVE-AVERAGE SPENDING ON RESEARCH AND DEVELOPMENT

FOREST PRODUCT?

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B E Y O N D L U M B E R A N D P A P E R

THESE ARE FOREST PRODUCTS, TOO!The next time you see a log, think of it not only as lumber andpaper but as a plastic milk jug, margarine tub, crayon, shavingcream, soft-drink container, or a fill-up for your car. Think ofit as a bicycle helmet, an article of clothing (think hospitalgown), or as electricity to run your computer. Think of it aseyeglass frames, toothpaste, or environmentally friendly fuelsand fuel additives. Even more remarkable, these productscome from wood residues—what’s left after that log is sawedfor lumber—or pulp-mill effluent or paper-mill sludge.While some of these products are already in commercialproduction, they are just the forerunners of a new generationof biomass-based products, feedstocks, and fuels underdevelopment around the world.

Extracting the fibres, sugars, fuels, and various othercompounds in biomass will foster significant energy andbiorefinery investments. In the next several years, the searchfor non-fossil substitutes for a range of products made fromfossil fuels will intersect with the forest industry’s search fornew revenue opportunities.

PROMISE OF NEW TECHNOLOGIESSome of that biomass fuel is in solid form—bark, shavings,and wood chips. New technologies being developed (some byCanadian companies) are demonstrating more efficient waysto obtain heat and electricity by converting the biomass intobiogas or bio-oil that can be used as industrial fuel or furtherrefined to make a range of products, feedstocks, or trans-portation fuels. Bio-oil can be converted into syndiesel thatcan run diesel motors without any modification.

This year, a B.C. plywood mill will replace natural gas withgasified biomass to generate heat for log conditioning anddrying veneer. A little further into the future, kraft pulp millshope to unlock the potential in gasifying black liquor, theprocess waste liquid comprising biomass residue and processchemicals that is burned internally as fuel (with the chemicalsbeing recycled). Gasifying black liquor would create moreelectricity and heat or syngas for further refining.

Pulp-mill effluent and paper-mill sludge represent a net costfor treatment and disposal but could be turned into profitcentres. Pulp effluent is ideally suited for producing thebiodegradable polymers used to make bioplastics.

There are also technology and biotechnology solutionsthat will contribute to reducing costs in our core business.Lumber mills are using speech-recognition software toaccelerate production by eliminating bottlenecks in lumbergrading and log scaling. Canadian paper mills are pioneeringnew, lighter weight papers with only half the fibre contentof traditional commodity grades. And another Canadianresearch breakthrough maximizes the filler content of paperto reduce fibre utilization. Designer enzymes show greatpotential in increasing the efficiency of the pulping process byup to 30% for the same volume of wood or reducing the volumeof expensive chemicals required in pulp bleaching. Otherenzymes have demonstrated the potential to improve the de-inking process for recycled fibre.

As capital investment in the industry accelerates, Canadianmills will be well-positioned to be early adopters of thesenew technology and biotechnology opportunities.


FIBRES USED IN THEMANUFACTURE OF SOME FABRICSARE BEING MADE FROM WOODRESIDUES—WHAT’S LEFT AFTERTHE LOG IS SAWED FOR LUMBER.

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RENEWABLE ENERGY


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F O R E S T P R O D U C T S : P A R T O F T H E E N E R G Y S O L U T I O N

CANADA’S CLIMATE CHANGE SUCCESS STORYPhasing out fossil fuels in favour of renewable energy is amajor part of the Canadian forest industry’s climate changesuccess story, a story that keeps getting better and better.Since 1990, Canadian pulp and paper mills have reducedtheir greenhouse-gas emissions by 30% in the aggregate and46% per tonne of output while cutting particulate emissions, anair quality concern, in half. The sector has committed to a12% reduction in fossil-fuel intensity by 2010. Bioenergycurrently provides 58% and 46% of the total energy consumedby the pulp and paper and wood sectors, respectively.

While there will always be some residual use of fossil fuelsin our production facilities, their share of the total fuel loadin the pulp and paper sector, currently 19%, is destined todecline. More mills will switch out of fossil fuels and intobiomass in primary production, and bio-oil and other synfuelsare capable of displacing fossil fuels in secondary processessuch as the drying and curing of lumber and engineeredwood products.

TOWARDS ENERGY SELF-SUFFICIENCYAs Canada’s forest products industry derives more of its energyfrom renewable sources, it frees itself from the cost anduncertainty of soaring fossil-fuel prices. The cost of biomassenergy is comparatively more stable and predictable than thatof fossil fuels and, in some provinces, of electricity. Becomingmore energy self-sufficient through the use of renewableenergy is one of the most pro-competitive strategies thisindustry can pursue. Almost 60% of the pulp and paper sector’senergy is self-generated using biomass and small hydro.

Canada has over 50 mills producing 1,700 megawattsof renewable power, most of it fuelled by biomass residue.That’s enough electricity to supply all the power needs ofVancouver, or nearly double the needs of the Ottawa–Gatineauarea. There is a wealth of green power production by thisindustry and the potential to generate even more.

There are some large surpluses of biomass residue inwestern Canada, but cogeneration expansion is possible atvirtually any installation with access to substantial biomassresidue. Expanding biomass cogeneration will improve theindustry’s underlying economics, achieve significant air qualityimprovements, reduce strain on landfills, and help Canadameet its climate change commitments.

THE FOREST PRODUCTS INDUSTRYPRODUCES ENOUGH RENEWABLEENERGY TO POWER THE CITY OFVANCOUVER, AND POTENTIALEXISTS TO SIGNIFICANTLYINCREASE THAT CAPACITY.

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BIOMASS SHARE 2004

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Mon

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ng

Rep

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004.

Self-generated (biomass, small hydro) 59%

Fossil fuel 19%

Purchased electricity 20%

Other 2%

THE MOVE TOWARDS GREEN POWER GENERATION HAS RESULTED IN ASTEADY DECLINE IN THE INDUSTRY’S USE OF FOSSIL FUELS.

“The environmental movement in Canada is indebted to the Forest

Products Association of Canada for leadership on the climate change

issue and leadership on the Kyoto file.”

Elizabeth May

Sierra Club of Canada

The Western Star (Corner Brook)

30 September 2005

MARKET FORCES

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B U I L D I N G T H E F O U N D A T I O N F O R T R A N S F O R M A T I O N

DEVELOPING THE MARKETBuilding tomorrow’s Canadian forest products industryincludes changing our product mix and expanding the marketsfor our products, both within North America and abroad.

The U.S. market will remain Canada’s principal exportdestination. Opportunity continues to exist in the strong U.S.housing market, and we will leverage new opportunities in non-residential construction and re-establish our competitivenessin paper products to tap the potential of this very largemarket. Additionally, we will make aggressive, persistentefforts to innovate in products and services while continuingto lower costs and increase productivity to maintain ourstrong market position.

Historically, Canada has been known for three primaryproducts: dimension lumber, softwood pulp, and newsprint.Since 1990, lumber production has risen sharply, and Canadahas become a major producer/exporter of OSB.

The forest products industry is in the throes of transitioningfrom a predominantly commodity-driven business selling ahandful of standard products to a market-driven businesswhere manufacturers can offer customized products andvalue-added services. For a manufacturer of wood products,that can mean providing custom lumber sizes and gradeoverrides that produce a premium product, managing theinventory of a national retailer on an outlet-by-outlet basis,or providing a vending point at major construction sites. For apaper producer, it can mean providing environmentallycertified or high recycled content paper to meet a customer’sprocurement criteria or ultra-lightweight paper to qualifymagazines and catalogues for lower mailing rates.

Realignment is a long-term, multi-track strategy that includestrade liberalization, offshore market diversification, new productdevelopment, and changes to our product mix.

CANADA IS THE WORLD’SLARGEST EXPORTER OFFOREST PRODUCTS.

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CANADA’S MAJOR FOREST PRODUCTS MARKETSMajor export markets 2004

Source: Statistics CanadaMarch 2005.

European Union 6%

Japan 5%

China 3%Others 7%

USA 79%

THE FOREST PRODUCTS INDUSTRY IS THE LARGEST CANADIAN EXPORTERTO INDIA, CHINA, JAPAN, AND KOREA AND THE THIRD-LARGEST CANADIAN

EXPORTER BOTH OVERALL AND TO EUROPE AND THE UNITED STATES.

Canada can also promote wood use in developing markets.At the federal level, Canada Wood is the main program fundingoverseas export market development activity in the forestproducts industry in Europe and in Asia. And public–privatepartnerships to develop demand for Canadian wood products,combined with efforts to brand our products as high qualityand environmentally preferable, are beginning to achieveprogress in penetrating the fiercely competitive Asian markets.

CHANGING COMPETITIVE ALIGNMENTSWorld trade in forest products is undergoing seismic shifts.Countries like Brazil, Russia, and China are, or aspire to be,major exporters. The potential China paradox is intriguing.China is building a world-class pulp and paper industry usinga great deal of imported fibre. As a result, China is Canada’slargest overseas customer for pulp and waste paper. And yet,China is also a major competitor—for example, production ofcontainerboard is shifting to China as its consumer goodsexports grow. If Russia realizes its potential in forest products,then Russia and China together could become a global forestproducts powerhouse.

For Canada to remain the world’s largest exporter of forestproducts, there are many challenges to overcome, such as therising tide of Latin American hardwood pulp exports or lumberfrom the Russian Far East competing against Canadianproducts in Asian markets. It’s going to take some muscularcompanies to compete in this new world order. That’s where


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AVERAGE ANNUAL GROWTH IN PAPER AND PAPERBOARDCONSUMPTION 1984–2004

By volume

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N F

AO, A

pril

2005

.

8%

6%

4%

2%

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na

7.0

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4.8

Arge

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2.6

Per

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3.2

USA

1.4

2.8

Wor

ld

0

GLOBAL DEMAND FOR FOREST PRODUCTS IS INCREASING.


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the makeover of the Canadian industry comes in, bringingdown production costs and enabling consolidation. Everybodyelse in the global forest products trade has been growing.Among customers, so-called “big box” retailers like HomeDepot, Staples, and Wal-Mart and publishing conglomerateslike Gannett and Knight Ridder wield enormous leverage withtheir suppliers.

Within this competitive environment, the forest productsindustry needs companies both big and small. Each has a roleto play in keeping Canada’s forest products industry vibrantand dynamic.

ATTRACTIVE EMPLOYMENT OPPORTUNITIESThe forest products industry directly employs over 360,000Canadians. With a large portion of Canada’s entire industrialwork force nearing retirement, we have our work cut out forus training—and retaining—skilled replacements, particularlysince many jobs now require not only technical but alsocomputer skills. Today’s mill operators spend much of theirtime managing production from behind a computer screen.Skilled labour will be a source of competitive strength, andfuture demand will be met by graduates of trade schools,apprenticeship programs, or targeted immigration orAboriginal initiatives. Young people looking for a careerwill like our proposition: highly paid, stable employment incommunities with a safe, pleasant, relaxed lifestyle.

RIGHT PLACE, RIGHT TIMEYoung Aboriginal Canadians live near our forestry or milloperations where their skills are needed, and many companiesare funding Aboriginal education or job-training programs.The more than 1,400 Aboriginal businesses that are our joint-venture partners or suppliers constitute an Aboriginalforest economy employing over 17,000, mainly in silvicultureand woodlands operations. Individually and collectively, ourcompanies are stepping up endeavours with governmentand Aboriginal representatives to develop job candidates withthe technical skills and IT knowledge for the modernmanufacturing environment.

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No matter how a Canadian forest company began 2005—profitable or unprofitable—it did less well as the year wentalong, especially after energy prices began to soar heading intothe summer. Higher energy prices pushed up manufacturingcosts, made it more expensive to haul logs to the mill and todeliver finished products, and drove the Canadian dollar to itshighest level in 14 years. In June, the dollar sat at the 80-centU.S. level, and over the next eight months added almost 6 cents.The impact of higher energy and fibre prices, continuingsoftwood duties, structural demand changes for pulp andmany paper grades, a home construction market comingback down to earth, and the strong dollar is forcing manyCanadian companies to review the viability of their domesticmanufacturing assets.

While Canadian lumber and OSB shipments to the UnitedStates set records yet again (mainly because the residentialconstruction market was still growing early on), pulp and papershipments declined 3.5%. That decline is likely to continue asthe full effect of capacity reductions announced last year isfelt. Over 2.7 million tonnes of paper-making capacity arebeing removed, the largest drawdown since the 1990–92recession. Several sawmills also face closure. The expectationis that 2006 will be difficult for most of the same reasonsthat 2005 was, which will keep the spotlight on the need for transformative change to improve the industry’sunderlying fundamentals.

LUMBER AND PANELSIt looked for a time as if nothing could stop the long-runningNorth American housing boom, but each rate hike by the U.S.Federal Reserve slowed the housing market. Lumber, plywood,and OSB prices came off their peaks of 2003 and 2004.Nevertheless, the strong start to 2005 helped producerobust shipments of Canadian lumber—just over 35 billionboard feet—and OSB. Shipments to the United Statesexceeded 21 billion board feet and 9.7 billion square feet,both records.

With most forecasters expecting a weaker North Americanhousing market and expanding capacity for lumber andOSB, 2006 is expected to be a more difficult year for bothdimension lumber and panels. Large amounts of OSBcapacity are being inaugurated or planned, althoughmanufacturers aren’t likely to see a return for some timeto the extraordinary margins they enjoyed during the boom.

One important offset to all of the difficulties facing lumberproducers is the virtual halving of softwood duties for 2006.


2 0 0 5 M A R K E T S

LUMBER AND PANELS (% change over 2004)

2005 shipments — Total97.2 million m3 -1.5%

Softwood lumber34.2 billion board feet -1.6%

Softwood plywood2.6 million square feet (3/8") -2.2%

OSB11.7 billion square feet (3/8") +0.2%

2005 shipments to the United States

Softwood lumber21.4 billion board feet +2.3%

OSB9.7 billion square feet (3/8") +2.2%

Source: Wood Markets, 2006.

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PULP1

Canada’s long-fibre softwood pulp is a premium productthat makes a strong lightweight paper; however, the highCanadian dollar and rising fibre and energy costs makeCanadian firms high-cost producers. In addition, global marketpulp prices have been suppressed by a rapid expansion ofsupply from several lower cost sources: notably, big LatinAmerican hardwood mills flooding markets with eucalyptuspulp. Additional eucalyptus-based capacity will come onstream in 2007. Technological advances have made hardwoodpulp almost as good as softwood pulp and certainly sufficientfor some uses. As a result, our pulp doesn’t command a largeprice premium, which is a hardship for producers with highcosts, especially with such a strong dollar. Fortunately, globalmarkets are growing, and Canada’s pulp shipments rose byover 3% last year. Our exports to China—our principal overseascustomer—rose a further 20%, to almost 1.65 million tonnes.

PAPER AND PAPERBOARDWith more people getting their news online and less white paperand fewer forms being used in the business environment, coreareas of Canada’s paper industry face difficult adjustments.Newsprint consumption has fallen by 20% since 2000 becauseof circulation declines and publishers’ attempts to economizeby cutting page sizes and switching to lower basis weightpaper. Canadian newsprint exports to the United Statesdeclined by more than 6% last year. By idling operationsor converting them to make value-added mechanical papers,newsprint producers have been able to keep remainingoperations going nearly flat out. A growing number ofthese value-added mechanical papers are aimed at thecatalogue/direct mail market, with improved characteristicsthat make them a new competitive threat even to some finepaper grades. Shipments of uncoated mechanical paper grewby almost 4%, to over 4.1 million tonnes, while shipments ofuncoated fine grades fell 5%. Packaging declined a further4%, reflecting capacity drawdowns amid the ongoing shrinkageof the North American manufacturing sector as moreconsumer goods are imported already boxed from overseas.


TOTAL SHIPMENTS 1995: 19 MILLION TONNES(million tonnes)

TOTAL SHIPMENTS 2005*: 20.5 MILLION TONNES(million tonnes)

Source: PPPC.*Estimate

Newsprint 9.24

Uncoated mechanical 2.62

Other printing & writing 2.16

Kraft, sanitary 1.16

Paperboard 3.83

Newsprint 8.16

Uncoated mechanical 4.12

Other printing & writing 2.90

Kraft, sanitary 1.30

Paperboard 3.97

1Figures on this page are estimates for 2005.

NURTURE


W O R L D L E A D E R S I N S U S T A I N A B I L I T Y

1 9 / 2 8

THE COMPETITIVE ADVANTAGE OF “MADE IN CANADA”Canada is about to complete a crucial step in establishing itsbona fides as a practitioner of sustainable forest management.By year-end, as a condition of continuing membership, allFPAC members must 3rd-party certify all of their forestryoperations to a recognized sustainable forest management(SFM) standard: CSA (Canadian Standards Association), FSC(Forest Stewardship Council), or SFI (Sustainable ForestryInitiative). At the end of 2005, FPAC members were collectively95% of the way there. Once they cross the finish line, they canpromote their wood and paper exports as a sustainable choicesourced from certified forests.

By choosing Canadian forest products, customers are assuredof high-quality products that embody these national values:

• Our wood, pulp, and paper are derived from sustainablymanaged forests that are fully regenerated after harvesting.

• Conserving biodiversity and wildlife habitat is afundamental requirement of our forest management,determining how and where we harvest.

• Canada’s regulatory regime is among the toughest in theworld, and in many instances our forestry practices gobeyond regulatory requirements.

• As much as we keep improving our environmentalperformance, we always can do better; pursuing continualimprovement is an explicit requirement of our forestmanagement programs.

• Since 93% of our forest operations are on public lands,we involve the public and local communities in planningforest management programs, including the establishmentof conservation goals.

• We respect Aboriginal interests and are making ameaningful place in the industry for more Aboriginalemployees, suppliers, and joint ventures.

DRIVING PROGRESS IN SUSTAINABLE FOREST MANAGEMENTCanada’s forests are abundant, thriving, and sustainable,and it’s our objective to keep them that way. We are committedto serving as global advocates for sustainability and addressingthe problem of illegal logging and other practices that injurethe image and reputation of the global forest products industry.Raising global standards—which we are constantly strivingto do—will become another mechanism for levelling thecompetitive playing field between Canadian and foreign woodand paper producers.

Canada’s preferred system of using the best available scienceto help achieve ecologically based forest management withemphasis on conserving biodiversity and protecting habitat hassignificantly reduced the footprint of our forestry operations.

One driver of progress in Canada is SFM certification, which actsas a catalyst for conservation research and for the developmentof new, lower impact forest management practices. Thevast majority of certifications are on public lands; the remaining7% are on private lands, and private woodlot owners areseeking to develop a specialized certification standard inconjunction with CSA.

CANADA HAS THE MOSTHECTARES OF 3RD-PARTYCERTIFIED, ORIGINAL, ANDPROTECTED FOREST OF ANYCOUNTRY IN THE WORLD.

<

FOREST AREA CERTIFIED(millions of hectares at December 2005)

Sour

ce: C

anad

ian

Sust

aina

ble

Fore

stry

Cer

tific

atio

n C

oalit

ion,

Dec

embe

r 20

05.120

80

40

Can

ada

119.8

Finl

and

31.9

USA

37.8

Ger

man

y

7.5

Aust

ralia

5.7

Swed

en

17.1

Rus

sia

6.5

Mal

aysi

a

4.8

Bra

zil

4.4

Fran

ce

4 2.3

Chi

le

0

CANADA HAS MORE 3RD-PARTY CERTIFIED FOREST LAND THANANY OTHER COUNTRY IN THE WORLD.

May we please have this paperwhen you’re finished with it?

We believe that no good paper should end up as landfill. And, with your help, webelieve that’s an attainable goal. Canada’s forest products industry is already aworld-leading recycler—currently we recycle more than two and a half times asmuch as we did ten years ago. But we’re committed to doing much more and wecan’t do it without you. Pitch in by pitching this paper into a recycling bin.


2 1 / 2 8

ENVIRONMENTAL CATALYSTThe transformation of the forest products industry willbring added impetus to our continuing efforts to shrinkthe environmental footprint of our operations. Large capitalupgrade projects often yield significant environmental andeconomic benefits, a dual dividend.

While the industry has already made tremendous strides,Canadians can expect another significant contribution fromthe pulp and paper sector towards improving air quality.We’re certain that modernizing or optimizing manufacturingprocesses in the industry will further reduce emissions ofgreenhouse gases, smog-causing pollutants, and toxicreleases. To that end, FPAC is spearheading a multi-stakeholderprocess—the Pulp and Paper Air Quality Forum—to draft a10-year action plan on lowering air emissions that shouldbecome the foundation for future government air regulationof mills across Canada.

The Forum’s mandate is to coordinate improvements with theinvestment cycles of the industry, thereby enhancing its futureviability. Forum members, including government, industry,environmental, and Aboriginal representatives, are seeking tocut red tape and minimize regulatory overlap between levelsof governments. The industry will access government energy-efficiency and green power incentives to help fund an initialwave of reductions, after which companies will have a choice

of paths to follow in pursuit of additional goals. Among thepolicy options the 10-year plan is expected to promote arecommunity-based, multi-stakeholder risk managementapproaches that would endeavour to lower specific emissions.

INDUSTRY’S GOAL: NO GOOD PAPER TO LANDFILLIn a few years, it will be hard to imagine any rationale forsending good paper to landfill. Virtually all paper waste canbe used either as recycled fibre for making new products likeboxboard and containerboard or as newsprint. Our objective asan industry is for no good paper to go to landfill. What weused to think of as waste materials should be recovered.

ADVERTISEMENTS SUCH AS THISWERE PART OF A 2005 PUBLICAWARENESS CAMPAIGN BY FPAC.

<

CANADA’S PAPER RECOVERY RATE (%)

Sour

ce: P

ulp

and

Pap

er P

rodu

cts

Cou

ncil.50

40

30

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2004

2003

0

46

THE NATIONAL PAPER RECOVERY RATE IS 46%, BUT WITH CONCERTEDEFFORT BY INDIVIDUALS IT COULD RISE TO 55% OR HIGHER.

Already, sawmill residue combined with recovered paperprovides 80% of the fibre used to make paper in Canada.

The paper industry can use all the waste paper it can get. Theindustry needs consumers, businesses, and local governmentsto increase the amount of paper collected and to ensure that itis clean and free of glass and plastic contaminants, which candamage paper-making equipment. The industry supportsthe efforts of Canadians across the country in collectingreusable fibre and encourages municipalities to collect paperproducts separately in their recycling programs to maximizethe amount that can be used.

“As I traveled through Canada touring several thousands of acres

of forests by foot, plane, and vehicle, visiting mill operations, and

talking with timber owners, forest contractors, environmentalists,

and other timber and wood-products buyers, I came away with

greater appreciation and first-hand knowledge that these companies

are doing more than the minimum of what’s required and are taking

great pride in advancing forest sustainability in an environmentally

sound manner.”

Leroy Custer

Vice-President, Marketing and Purchasing

BMC West

COLLABORATION


2 3 / 2 8

F O RW A R D P R O G R E S S T H R O U G H C O N S T R U C T I V E P A R T N E R S H I P S

BUILDING TRUSTCanadian forest products companies are becoming catalystsfor positive change by striving for consensus with other inter-ested stakeholders. These trust-building activities will be adominant characteristic of how we do business in the future.Already, co-operative leadership is becoming second nature tous, as reflected in many noteworthy partnership achievements.

Nationally, FPAC, in conjunction with the Canadian BorealInitiative, Canadian Wildlife Federation, Ducks UnlimitedCanada, World Wildlife Fund, and others, is undertakingnumerous pan-Canadian initiatives to improve forestmanagement practices and conservation in key ecosystems.

These undertakings include:

Land-use agreements. Major forest companies havenegotiated landmark multi-stakeholder land-use agreementsin key ecosystems.

Managing sensitive forests. FPAC and member companieshave partnered with World Wildlife Fund to identify ecologicallysignificant forests within company operating areas.

Healthy rivers and streams. FPAC and member companies aresupporting work with Ducks Unlimited Canada to reduce thepotential impact of forestry operations on fresh water in theboreal forest.

Model forests. Canada’s network of model working forests,supported by many stakeholders, including forest companies,is considered the world’s finest.

Sustainable Forest Management Network. Member companiesare supporting research and, more importantly, putting resultsinto practice in the forest.

Cleaner air. FPAC’s Pulp and Paper Air Quality Forum isdemonstrating how stakeholders can work together efficientlyto advance a key environmental file.

Forestry planning and certification. Canada is unique in theextent to which the public (i.e., local communities as wellas other forest users) provides input into company forestmanagement programs on public lands, which constitute 93%of Canadian forests. Public consultation occurs by statute or asa requirement of some certification standards.

Species at risk. With industry and environmental partners,FPAC advocated for the development of Canada’s Species atRisk Act. Now, it meets with some of the partners to ensurethat the act is implemented in a collaborative manner.

Multi-industry collaboration. In Alberta, a forestry companyand a petroleum company jointly manage common forest area,sharing road construction and access, securing caribouhabitat, protecting fish streams, and tending to reforestation.

Aboriginal job training. In northwestern Ontario, a largeforest company initiated a major community college trainingprogram in Thunder Bay to prepare Aboriginal youth forcareers in the industry. The program is now supported byseveral major forest companies active in the region.

Trade liberalization. FPAC is working with a coalition ofnational forest products associations to elevate forest productson the agenda of trade liberalization processes like the WTO’sDoha Round.

CONTINUING DIALOGUE WITH CUSTOMERSThere is also a collective role for industry in helping to marketCanadian wood and paper products. It’s another form ofadding value to our customer relationships. Retailers want tosell more wood and paper, and we can produce it sustainably.Expanding our efforts to market the sustainable virtues ofCanadian forest products will help maintain our markets inNorth America and develop new ones overseas.

Large customers also want their suppliers to validate theirsustainable procurement policies. Canadian producers wouldlike to ensure that these policies recognize the rigour of forestryregulations, standards, and practices in Canada. By engaging ina continuing dialogue, each side gains a better understandingof the other. Some large buyers are working collectivelythrough coalitions like MetaFore, whose membership includeslarge users of paper like Time, Starbucks, Kinko’s, and Toyota.MetaFore is championing the environmentally preferableprocurement of forest products.

For its part, FPAC has created the Market Acceptance Program,whose mandate is to complement member company efforts toengage customers—including collaborative organizations likeMetaFore—on Canadian environmental practices. When webring customer representatives to tour Canadian forestryoperations, they give us a great deal of positive feedback,because they see tangible proof of our progress on the ground.

ECONOMIC VIABILITY

To maintain the profitability of our industry as thebasis for sustainable development

• Financial viability: Ensure the profitability of ourindustry and its long-term economic viability.

• Competitiveness: Continuously improve thecompetitiveness of our industry within the globalmarketplace.

• Customer focus: Develop and deliver qualityproducts and services to meet present customerand future market needs.

ENVIRONMENTAL RESPONSIBILITY

To ensure that our activities are conducted in asustainable manner that protects the environment

• Environmental performance: Comply withall applicable regulatory requirements andcontinuously improve the environmentalperformance of our operations.

• Sustainable forest management: Practicesustainable forest management in all ouroperations in accordance with recognizedstandards and ensure that wood supply isfrom legal sources.

• Resource use: Continuously improve the efficientuse of natural resources, material, and energy.

• Product recycling: Promote and continuouslyimprove product recovery and re-use.

SOCIAL DESIRABILITY

To conduct our business with integrity and reflectevolving societal values in our performance

• Our employees and workplace safety:Provide economic opportunities and a safe andproductive work environment for our employeesand contractors.

• Community and stakeholder relations: Engageour stakeholders in a proactive and transparentmanner and be respectful of their interests.

• Relations with Aboriginal Peoples:Be respectful of the economic and culturalinterests of Aboriginal Peoples and encouragetheir participation in the forest products industry.

• Economic contribution: Contribute to theeconomic and social well-being in communitieswhere we operate, as well as regionally andnationally.

F P A C S U S T A I N A B I L I T Y I N I T I A T I V E

F P A C V I S I O N

A L E A D E R I N A D VA N C I N G T H E G L O B A L C O M P E T I T I V E N E S S A N D S U S T A I N A B L E

S T E WA R D S H I P O F T H E C A N A D I A N F O R E S T P R O D U C T S I N D U S T R Y

F P A C S U S T A I N A B I L I T Y S T A T E M E N T

The Canadian forest products industry contributes to society’s well-being through itsproducts and activities—from forest to market. FPAC members are committed to a

sustainable development path built on a profitable and competitive industry.

We will operate in a manner that is: Economically viable, Environmentally responsible, Socially desirable

O U R C O M M I T M E N T S

2 5 / 2 8


FPAC will be a leader in advancing the global competitivenessand sustainable stewardship of the Canadian forest productsindustry. Leaders lead by deeds. Four years ago, it was decidedthat as a condition of continuing membership all FPACmembers would be required to have all of their Canadianforestry operations 3rd-party certified to one of three majorsustainable forest management standards by the end of 2006.By the end of 2005, we were 95% of the way there. Now, themembership is taking accountability to the next level throughthe FPAC Sustainability Initiative.

Every two years, FPAC will report on the collective performanceof its members in three key areas: economic viability,environmental responsibility, and social desirability.Reporting biennially in this fashion recognizes the integratednature of these three key pillars and demonstrates ourcommitment to continual improvement. In this 2005 AnnualReview, we report an initial set of eight environmental andforestry indicators that will be expanded for 2007. For addedcontext, FPAC performance will be compared with that ofthe rest of the Canadian forest products industry.

Economic Viability: Maintaining an economically strongindustry will ensure that we can meet the expectations of majorstakeholders, including customers, lenders, and investors, byproviding a platform for sustainable development and continualimprovement. An economically viable industry produces agreater magnitude of benefit for society. The single-mostimportant facets of economic viability are being competitiveon a global scale and retaining a strong customer focus—delivering quality products and services to meet presentcustomer and future market needs.

Environmental Responsibility: Our commitment includescompliance with all applicable regulations and more. By promoting continual improvements in every aspect ofour environmental performance, we will strive to reduce theenvironmental footprint of our operations through efficientuse of raw materials and energy and to promote even morerecovery and re-use/recycling. Practising sustainable forestmanagement along with forest certification will assurecustomers that the products they buy are made from woodlegally sourced and from forestry operations managed inaccordance with internationally recognized standards.

Social Desirability: This is about being good neighboursand employers. We will provide economic opportunities and productive and safe work environments for employeesand contractors as well as encourage the participation ofAboriginal Canadians in the industry in a manner consistentwith their economic and cultural interests. By engaging ourcommunities in a proactive and transparent manner andstriving to contribute to their economic and social well-being,this industry can be a source of strength and stability, locally,regionally, and nationally.

“The Canadian forest products industry wants to make a statement:

FPAC members are proud of their improving record pursuing

sustainability in every aspect of our business. In 2005, FPAC’s Board

of Directors approved the FPAC Sustainability Initiative formalizing

our commitment to achieve further sustainability improvements,

and expanding our accountability to all Canadians. As a result,

FPAC members will now publicly benchmark and report on their

performance every two years against a range of environmental, social,

and economic indicators that are litmus tests for sustainable development

and global competitiveness. We’re not going to make it easy on

ourselves. We welcome the challenge.”

John W. Weaver

Chairman, FPAC Sustainability Committee

President & CEO, Abitibi-Consolidated

FOR FPAC MEMBERS FROM COAST TOCOAST, EVERY ECOSYSTEM IS A LIVINGLABORATORY FOR IMPROVING CANADA’SENVIRONMENT.

Better watercourse conservation:To mitigate soil disturbance andsedimentation into watercourses,a Nova Scotia company is incorporatinga GIS tool developed by the Universityof New Brunswick into its managementplanning to identify potentialunmapped watercourses.

Minimizing site disturbance:As part of its certification requirements,an Ontario company has helpeddevelop guidelines for minimizingsite disturbance and damage fromharvesting. This has been successfulin further reducing the extent ofrutting and site disturbance onharvested areas.

Maintaining bird populations:A Manitoba company has undertakena forest bird monitoring project tostudy the relationship between stand-level habitat attributes and thepresence and abundance of specificspecies during breeding season.This will help develop biodiversitystrategies predicting the populationof species as the forest landscapechanges over time.

Caribou conservation: Protectingwoodland caribou is a priority acrossCanada. In Quebec, one company hasdeveloped a new logging pattern thatconserves caribou habitat. It hopesto learn more about how forestryimpacts the herds and to adapt forestmanagement planning and practicesto maintain and even increase currentcaribou populations.

Carbon tracking: An Alberta companyrecently commissioned a carbonlifecycle analysis for its operationsas well as a critique of its currentbusiness plan. This is helping preparethe company for regulatory emissionreductions as well as for developmentof initiatives enabling carbon uptakeand storage.

THE FPAC SUSTAINABILITYINITIATIVE

TOTAL PARTICULATE MATTER (PM) EMISSIONS (kg/tonne) Average for pulp and paper mills reporting

Sour

ce: F

PAC

Env

iron

men

tal D

ata

Surv

ey.

2.0

1.5

1.0

.5

0

1998

1999

2000

2001

2003

FPAC Members

Non-FPAC

FPAC Members

Non-FPAC

TOTAL REDUCED SULPHUR (SO2) EMISSIONS (kg/tonne)Average for pulp and paper mills reporting

Sour

ce: F

PAC

Env

iron

men

tal D

ata

Surv

ey.

5

4

3

2

1

0

1998

1999

2000

2001

2003

ENERGY INTENSITY (Pulp and Paper Mills) Percentage change (GJ/tonne product)

Sour

ce: F

PAC

Ene

rgy

Mon

itori

ng R

epor

t.

-5

-15

-10

-20

2002

2003

2004

2001

2000

FPAC Members

Non-FPAC

GREENHOUSE-GAS EMISSION INTENSITY (Pulp and Paper Mills)Percentage change (CO2e kg/tonne product)

Sour

ce: F

PAC

Ene

rgy

Mon

itori

ng R

epor

t.

-20

-40

-60

2002

2003

2004

2001

2000

FPAC Members

Non-FPACTRACKING OUR PROGRESS ENVI

RO

NM

ENTA

L IN

DIC

ATO

RS

FPAC members are reducing total emissions of particulate matter,a significant component of poor air quality.

FPAC members are decreasing sulphur dioxide emissions, reducinga pollutant that contributes to smog and acid rain and is associatedmainly with the burning of fossil fuels.

FPAC members continue to make energy efficiency improvementsto enable pulp and paper mills to reduce their energy consumptionper tonne of product.

FPAC pulp and paper members have made significant reductions ingreenhouse-gas emissions per tonne of product.

Aboriginal partnership:The Missanabie Cree First Nationof Ontario signed a comprehensiveforestry partnership agreement withthe province and an FPAC memberto generate jobs, training, and otherbenefits in exchange for access toforest harvesting rights in part of theFirst Nation’s traditional territories.

Air quality improvements: FPAClaunched the Pulp and Paper Air QualityForum process to stimulate investmentsat pulp and paper mills that improve airquality. One example: Taking biomassthat used to be incinerated in beehiveburners and using it to fire a cogenera-tion plant will give two mills in PrinceGeorge, B.C., all the heat and electricitythey need plus enough surplus powerfor 39,000 homes, while closing thebeehive burners will lower emissionssignificantly in the local airshed.

Sowing the urban forest: FPACmembers recycle over five milliontonnes of waste paper annually. Thisis more than 20 million cubic metresof material diverted from landfill, orabout enough to fill Toronto’s domedstadium 13 times over.

Fuel conversion: A Manitoba companyrecently upgraded its energy systemby including a wet fuel burner/dryerenergy system to burn 100% of itswood residues, resulting in significantenergy savings, waste reduction, andlower emissions, including ofgreenhouse gases. The designincludes a recirculation feature thathelps to reduce energy demand fromthe mill’s pollution-control equipment,further reducing greenhouse-gasemissions.

Waste not: A Quebec paper millderives about 75% of its thermalpower needs from landfill gas pipedin from a municipal landfill nearly13 kilometres away. The gas providessteam for the mill’s paper machinesand heats the buildings in winter. Itreplaces 36 million cubic metres ofnatural gas and reduces carbondioxide emissions by 540,000 tonnesper year.

SFM CERTIFICATION IN CANADA 2001–2005Millions of hectares

Sour

ce: C

anad

ian

Sust

aina

ble

Fore

stry

C

ertif

icat

ion

Coa

litio

n, D

ecem

ber

2005

.

100

80

60

40

20

2002

2003

2004

2005

0

Total Forest Land Certified – FPAC Members

Total Forest Land Certified – Non-FPAC

ANNUAL ALLOWABLE CUT (AAC)Millions of cubic metres

Total AAC certified in Canada (FPAC and non-FPAC)

100

73

Total AAC certified in Canada by FPAC members only

Sour

ce: C

anad

ian

Sust

aina

ble

Fore

stry

C

ertif

icat

ion

Coa

litio

n, D

ecem

ber

2005

.

EFFLUENT FLOW: BOD and TSS per tonne trend (kg/tonne)Average for pulp and paper mills reporting

Sour

ce: F

PAC

Env

iron

men

tal D

ata

Surv

ey.

5

4

2

3

1

1998

1999

2000

2001

2003

0

TSS per tonne – FPAC Members

TSS per tonne – Non-FPAC

BOD per tonne – FPAC Members

BOD per tonne – Non-FPAC

BIOMASS SHARE 2004 (Pulp and Paper Mills)So

urce

: FP

AC E

nerg

y M

onito

ring

Rep

ort 2

004.

Self-generated (biomass, small hydro) 59%

Fossil fuel 19%

Purchased electricity 20%

Other 2%

FOR

ESTR

Y IN

DIC

ATO

RSFPAC members are contributing to the reduction of BOD (Biochemical

Oxygen Demand) and TSS (Total Suspended Solids), two indicators ofwater quality. The lower each indicator is, the less the impact of milloperations on river health and aquatic life.

FPAC members have committed to full 3rd-party certification (CSA,FSC, or SFI) of forest lands under their management by the end of2006.They are currently 95% (96 million hectares) towards achievingtheir goal.

Biomass and small hydro power accounts for nearly 60% of theenergy used by Canadian pulp and paper producers.

Of the annual allowable cut from certified forests in Canada (100 million m3), FPAC members account for 73% (73 million m3).

Abitibi-Consolidated www.abitibiconsolidated.comAlberta-Pacific Forest Industries Inc. www.alpac.caBennett Fleet Inc. www.bennett-fleet.comBowater Incorporated www.bowater.comCanfor Corporation www.canfor.comCariboo Pulp & Paper Company www.westfraser.comCascades Inc. www.cascades.comCatalyst Paper Corporation www.catalystpaper.comF.F. Soucy, Inc.Howe Sound Pulp and Paper Ltd.Partnership www.howesoundpp.com

Kruger Inc. www.kruger.comLouisiana-Pacific Canada Ltd. www.lpcorp.comMarathon Pulp Inc. www.marathonpulp.comMill & Timber Products Ltd. www.millandtimber.comPapier Masson Ltée www.papiermasson.comStora Enso Port HawkesburyLimited www.storaenso.com

Tembec Inc. www.tembec.comTolko Industries Ltd. www.tolko.comUPM-Kymmene Miramichi, Inc. www.upm-kymmene.comWest Fraser Timber Co. Ltd. www.westfraser.comWeyerhaeuser Company Limited www.weyerhaeuser.com

In CanadaForest Products Association of Canada99 Bank Street, Suite 410Ottawa, Ontario, Canada K1P 6B9

Tel: (613) 563-1441Fax: (613) [email protected]

In EuropeForest Products of Canada12A, Place Stéphanie, 1050 BrusselsBelgium

Tel: 32-2-512 50 51Fax: 32-2-502 54 02

The Forest Products Association of Canada (FPAC) is the voice of Canada’s wood, pulp, andpaper producers nationally and internationally in government, trade, and environmental affairs.The forest products industry represents 3% of GDP, exports $45 billion annually, and is one ofCanada’s largest employers, operating in hundreds of communities and providing over 900,000direct and indirect jobs across the country. With the help of member companies, FPAC designsprograms to promote Canada’s leadership in trade and economic matters, sustainable forestmanagement, and environmental stewardship.

FPAC would like to thank FERIC, FORINTEK, and PAPRICAN for their contribution to this report, andin particular we wish to express our sincere gratitude to Kevin McElhatton and his team at PPPC.

Call us, contact us, invite us to brief you:

FPAC Member Companies

This annual review is printed on Canadian offset papercontaining 20% post-consumer fibres.Publié également en français.

Design by McMillan©2006, Forest Products Association of Canada

The Forest Products Association of Canada is a proud partner of the Canada Wood program.

2005 Annual Report

Documents

Transcript of 2005 Annual Report