Supply cuts that were supposed to bolster the beleaguered lumber market are now creating an unintended effect: the wood chips required to make sought-after toilet paper and wipes during the coronavirus pandemic are becoming more scarce.
Right now, about 25 per cent of Canadian sawmill capacity is shut after producers from West Fraser Timber Co. and Canfor Corp. idled operations amid a price slump and poor outlook for spring building as the coronavirus spreads.
That’s reduced the output of wood chips that pulp mills rely on to make everything from toilet paper and wipes to cardboard boxes and paper bags, said Derek Nighbor, president and chief executive officer of the Ottawa-based Forest Products Association of Canada.
Without federal aid to get some sawmill capacity back on line, input costs could rise or there could be a shortage of the materials pulp mills need for household products, he said. Panic buying has already caused shortages of toilet paper and other hygiene products in supermarkets around the world.
“The demand from pulp mills has gone up at a time when we’re starting to see the chip supply become more scarce from the sawmills,” Nighbor said in a telephone interview. “It could drive the cost up or there could be product constraints for sure in the months ahead.”
High production costs in Canada squeezed profits for sawmills. The U.S. housing market remains under pressure as the coronavirus spreads, and lumber futures plunged a record 32 per cent in March.
The industry is optimistic that Canada’s government can tweak its wage subsidy program to help forest operators qualify and bolster their access to cash to help them survive the coming quarters, Nighbor said. Canada exports the bulk of its pulp, paper and packaging products and the U.S. is one of its major markets, he said.
“We’re in a crisis here,” Nighbor said. “We need more of our sawmills running.”