Canada’s paper manufacturing industry is expected to post profits this year for the first time since 2002, according to the Conference Board of Canada.
“A rebound in pulp prices and higher demand for paper products provided the industry with a much-needed boost beginning in 2010 and continuing into this year,” said Michael Burt, associate director of industrial economic trends at the conference board.
Global production shortages maintained pulp prices at multi-year highs in 2010.
The 52-week average price for the benchmark Northern Bleached softwood kraft pulp was US$986 per metric tonne.
The conference board believes the industry will post a pre-tax profit of $251 million in 2011 compared with a $147 million loss last year.
Still, the industry has a number of hurdles to contend with.
“The industry is far from healthy,” Burt said. “It still has excess production capacity that will limit price growth, and the trend toward digital communications means that new markets for paper products have to be found elsewhere.”
The ongoing strength of the loonie and increased competition from Asia and South America will also restrain profit growth.
The conference board expects further industry consolidations to continue via mergers and acquisitions.
Joel McKay