OTTAWA, Dec. 10 /CNW Telbec/ - Canada's paper products industry is expected to lose more than $1 billion this year. This is the industry's seventh consecutive year of losses and largest on record, according to the Conference Board's Canadian Industrial Outlook - Canada's Paper Products Industry - Autumn 2009.
"The recession brought on such a rapid decline in demand that paper producers were unable to cut production quickly enough, leading to rising inventories and falling prices," said Michael Burt, Associate Director, Canadian Industrial Outlook. "What's more, the industry will be permanently smaller because of lower demand for paper products going forward."
Production is expected to fall by 14 per cent this year and decrease again next year, marking six consecutive years of decline. The negative effect of the recession on personal income and corporate profitability has reduced both consumer and business demand for paper products. In addition, the recession has accelerated the loss of advertising revenues and circulation at newspapers, leading to a reduction in demand for newsprint in North America.
Lower prices and collapsing demand will lead to a loss of $1.2 billion for the industry this year. The industry is not expected to return to profitability until 2011 when prices are anticipated to significantly improve.
One of the few notes for optimism is the federal government's recently announced Green Transformation Program. This program provides pulp and paper producers with access to a $1 billion fund for capital investments that will improve the environmental profile of the industry. Given that the industry's total annual investment in 2008 and 2009 was about $1 billion, the Green Transformation Program could provide a significant boost in investment levels over the next two years.
SOURCE Conference Board of Canada
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