Canada’s Pulp Industry in Crisis: Mill Closures, Fibre Shortages, and Global Headwinds
Canada’s pulp producers are facing a deepening crisis marked by mill closures, job losses, and mounting financial pressure. Once a cornerstone of the country’s forest economy, the sector has seen its number of pulp mills roughly halved over the past three decades—from around 75–85 in the mid-1990s to about 38 today. Recent years have accelerated the pain, particularly in British Columbia, with high-profile shutdowns and curtailments at facilities operated by companies such as Canfor, Domtar (formerly Paper Excellence), and others.
Hundreds of workers have been affected in communities that depend heavily on these operations. Examples include Canfor’s permanent closure of its Northwood pulp mill in Prince George (around 300 jobs and 300,000 tonnes of annual Northern Bleached Softwood Kraft, or NBSK, capacity), Domtar’s shuttering of the Crofton mill and later the Howe Sound facility, and temporary or indefinite curtailments elsewhere, such as the Nackawic mill in New Brunswick.
The crisis stems from a combination of structural, market, and policy-driven factors rather than a single cause.
Fibre Supply Constraints: The Core Challenge
The most persistent and acute problem, especially in British Columbia, is access to affordable wood fibre. Pulp mills traditionally rely heavily on residual chips from sawmills. As sawmills have closed or reduced output due to lower timber harvests, residual fibre has become scarce and more expensive.
Harvest levels have fallen significantly—driven by wildfires, insect infestations (such as the mountain pine beetle), old-growth protections, Indigenous reconciliation processes, regulatory delays in permitting, and reduced allowable annual cuts. In coastal B.C., for instance, actual harvests have dropped well below sustainable levels in recent years, with permit processes taking far longer than historically. Industry voices frequently describe this as a policy-driven shortage that raises transportation costs (mills must source fibre from farther afield) and undermines competitiveness.
Analysts note that future mill survival will hinge more on fibre availability and cost competitiveness than on demand alone. Canada’s harvesting and transportation costs are substantially higher than those of competitors in the U.S. South or South America, cascading through the entire supply chain.
Global Market Pressures and Oversupply
Global pulp markets have been weak. After strong post-pandemic prices, demand softened—particularly from China, the world’s largest consumer of softwood pulp—while inventories rose and new hardwood pulp capacity came online in South America. NBSK prices have fallen well below long-term averages (recently trading near US$700 per tonne versus historical levels closer to US$850–875).
Structural shifts in end markets compound this. Demand for graphic papers (newsprint, printing, and writing grades) has collapsed with the rise of digital media. While tissue, hygiene products, packaging (boosted by e-commerce), and specialty pulps offer more stable or growing demand, much of that growth is occurring outside traditional Canadian strongholds, and Canadian mills have struggled to fully pivot.
Canadian producers, often operating older and less energy-efficient mills, find it harder to compete on cost with modern facilities abroad.
Trade Frictions and Cascading Effects
Ongoing softwood lumber disputes with the United States—featuring high duties and additional tariffs—have hurt sawmills, reducing residual chip supply for pulp operations and adding another layer of pressure. Trade uncertainty and higher costs have led to further curtailments that ripple through the value chain.
High Costs, Aging Assets, and Investment Challenges
Canadian mills face elevated costs for energy, labour, and compliance with a complex regulatory environment. Many facilities are aging and less efficient than global peers (higher thermal energy and water use per tonne of pulp). Investor confidence has suffered after years of closures, capital flight to lower-cost regions, and uncertainty over fibre access and policy. This creates a vicious cycle: without investment in modernization or efficiency upgrades, competitiveness erodes further.
Looking Ahead
Some observers see potential for modest recovery in NBSK prices over the next few years as high-cost capacity exits the market and limited new softwood pulp capacity comes online globally. Longer-term demand support could come from packaging (including fibre-based alternatives to plastics), tissue, and specialty products.
However, without addressing fibre supply stability, regulatory efficiency, and cost competitiveness, further consolidation appears likely. Industry groups and reports emphasize that stable, long-term access to economic fibre is the essential precondition for any turnaround. Governments at both federal and provincial levels have been urged to streamline permitting, clarify land-use policies, and support workforce transitions and modernization.
The crisis is reshaping Canada’s forest sector. Surviving producers are focusing more tightly on market pulp, packaging, and higher-value grades, but the human and community costs in forestry-dependent regions remain significant. Resolving the fibre and cost challenges will determine how much of the industry remains competitive in the decades ahead.
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