Comparing Canada and the Nordic countries.

Canada and the Nordic countries (Norway, Sweden and Finland) have similar resource bases and business fundamentals, but have taken different paths in developing their pulp and paper industries. Long-term production of paper and board has grown in both regions, but growth in the Nordic countries has been more than double that of the Canadian countries. Production in Canada grew from 18.3 million metric tons in 1994 to 19.98 million metric tons in 2003, compared to the Nordic countries' growth from 22.3 million metric tons in 1994 to 26.3 million metric tons in 2003. In terms of net trade, the Nordics clearly strengthened their position as net exporters, whereas in Canada net trade stayed nearly the same. Imports have actually grown in Canada.

PRODUCTION FOCUS

Production focus and grade split are different between the two areas and are becoming even more so. Nordic countries have emphasized the development of higher value grades to reduce the impact of cyclicality found in commodity grades. In Canada, the emphasis on lower value newsprint is clear--newsprint represents 42% of total paper and board production (down from 51% in 1994). In the Nordic countries, the share of newsprint is 16% (down from 22%). Production of printing and writing papers has grown in both regions but more rapidly in the Nordic countries--a total of 3.5 million metric tons in 1994-2003 (Canada produces 2 million metric tons). Interestingly, industrial grade production (total for tissue and packaging grades) remained relatively unchanged in Canada (0.5 million metric tons) and imports grew by 0.6 million metric tons, whereas the Nordics boosted output by 1.2 million metric tons--practically all growth was for exports. The cartonboard industry has grown to be a major factor in the Nordic region and production has expanded to 3.9 million metric tons. In Canada, cartonboard capacity remained flat in 1994-2003.

Today, mill size is a differentiator. Looking at the top 10 paper and board mills in each area, Nordic mills are roughly double the size of Canadian mills. A 600,000 metric ton/yr mill does not make the top 10 list in the Nordic countries. Of course there are grade specific issues and in newsprint, the allocated capacities are not drastically different. However, the level of concentration--that is, mill capacity/total capacity--is strikingly different. Ninety percent of capacity is allocated to the top 10 mills in the Nordic countries, while the share is 47% in Canada.

The super-calendered (SC) paper industry is highly concentrated and Nordic and Canadian capacity is crucial. UPM and Norske Skog have the biggest SC mills in the Nordic region, with allocated capacities of approximately 500,000 metric tons/yr. The major Canadian SC mills are Port Hawkesbury, St Marys and Irving. Stora Enso (Kvarnsveden, Sweden) will start a new 420,000 metric tons/yr SC machine in late 2005. Metso Paper will deliver the new production line. Also included are an expansion of the wood room, TMP, and bleaching plants. The new 11.3 m wide machine will have a design speed of 2000 m/min.

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Other recent investments are in new tissue machines (Kruger and Swedish Tissue) and new TMP lines (Stora Enso Port Hawkesbury and Stora Enso Varkaus) to support publication paper production. New BCTMP capacity is also coming on stream at M-real's Kaskinen mill in 2005.

Canada
  Newsprint              42%
  Printing & writing     33%
  Industrial             25%
  Total 20 million tons

Nordic
  Newsprint              16%
  Printing & writing     46%
  Industrial             38%
  Total 26 million tons

Split of Production 2003

Note: Table made from pie chart.

Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, a provider of marketing and consulting services. Contact Soile Kilpi by email at [e-mail], or by phone at [phone].