Statistical Trends

• Forest Sector Performance
• Forest Products
• Non-Timber Forest Products
• Forest Health and Silviculture

Balance of Trade

Canada’s trade balance (exports minus imports) in 2005 was $55.1 billion. Forest product exports make a large contribution to Canada’s trade surplus ($31.9 billion in 2005); however, in recent years that contribution has declined. Since 2000, Canada’s balance of trade in forest products has been on a steady decline, with the exception of 2004, when high wood prices pushed the value of Canadian exports higher. In 2005, the forest products trade balance resumed its decline, falling by 7.5% from 2004 levels to $31.9 billion, close to the value seen in 2003 when the forest products balance hit its lowest level in the past 10 years. The year-over-year reduction was due primarily to a stronger Canadian dollar, lower prices for lumber and wood panels, and a decline in shipment volumes for pulp and paper producers.

Exports of Forest Products

Following significant growth in 2004, the export of forest products dropped in 2005 by 6% to $41.9 billion, remaining slightly higher than 1995 levels. The continued appreciation of the Canadian dollar compared to the U.S. dollar was the primary reason for the decrease. The major value reductions were in wood pulp and panels, and lumber. The decline in wood pulp exports was due in large part to the weakening of pulp markets in Asia and Europe, which pushed 2005 prices down. The decline in the value of lumber and wood panel exports was due primarily to a fall in prices for these products from the near-record highs of 2004, despite the booming North American housing market. In terms of volume, lumber and wood panel exports actually increased by 3.0% and 6.3%, respectively, over the past year. Conversely, strengthened prices for newsprint and many other grades of paper and paperboard moderated currency effects so that the export value of these products remained unchanged.

Operating Profits

As seen over the past 10 years, operating profits in wood and paper manufacturing follow a strong cyclical trend with significant fluctuations over time. Most recently, operating profits decreased by 36.9% in 2005 to $4.1 billion, following significant growth in 2004. The drop in 2005 was due primarily to the strong Canadian dollar compared with the U.S. dollar, lower exports and higher overall costs, particularly for energy, fibre (in some regions), chemicals and transportation. The highly energy-intensive pulp and paper industry, where energy costs represent 25-35% of the manufacturing costs, was harder hit by the recent run-up in energy prices than the wood products industry. While the wood products industry continued to benefit from high demand from the North American housing market, decreases in wood prices led to lower operating revenue. The softwood lumber dispute also continued to drain the industry’s finances.

Capital and Repair Expenditures

In 2004, the industry spent $7.0 billion in capital investments and repairs, down by 5.1% ($373 million) from the previous year and representing a 0.4% decline over the last 10 years. While repair expenditures rose for the third consecutive year, new investments dropped by 15%, which accounted for the overall decline in expenditures. Because the pulp and paper industry is more capital intensive than the wood or logging industries, it accounted for almost half of the forest sector’s total capital and repair expenditures. However, it also experienced the most significant reduction in these expenditures in 2004, falling by 23.5%, while the wood industry’s expenditures rose by 30.7% to reach a peak of $2.8 billion. The wood industry benefited from near-record lumber and panel prices in 2004, as the North American housing market boom pushed up demand and prices for wood products.

Employment in the Forest Industry

In 2005, 339 900 people were employed in the forest industry, according to Statistics Canada’s Labour Force Survey. This represents a decrease of 22 200, or 6.1%, from the previous year. Since 1999, employment levels in the forest industry have followed a cyclical pattern with peaks in 2000 and 2003 and troughs in 1999 and 2001. However, the recent drop in employment since the 2003 peak has been particularly sharp. Much of the decline was due to the large number of mill closures, particularly in the pulp and paper industry, since 2003.

Indirect and Induced Employment

The forest industry also generates important economic benefits through indirect and induced employment. Indirect jobs are those that are created by forest activity, but are outside the industry. For example, when the industry buys materials such as chemicals, packing materials and energy, invests in machinery and equipment, builds mills and roads, and transports goods to domestic and international markets, it creates employment in those sectors. Induced jobs are the employment generated when workers in the forest industry or those employed in forest-related activities purchase consumer goods.

In 1999, according to Statistics Canada’s input-output model, the forest industry was responsible for 261 500 indirect jobs and 280 000 induced jobs, for a total of 541 500. These are in addition to the 351 300 direct jobs that year.

Between 1999 and 2005, direct employment in the forest industry dropped by 3.2% to 339 900. Assuming a proportional decrease in indirect and induced employment, it is estimated that the forest industry generated a total of 524 100 indirect and induced jobs in 2005. Thus, the total estimated number of jobs created in and by the forest industry in 2005 was 864 000, down from an estimated 920 400 in 2004.

Softwood Lumber

Canada is the world’s second largest producer of softwood lumber and the largest exporter. Almost all of Canada’s softwood lumber is sold either to the United States (more than 60%) or within Canada (about 33%). The volume of Canada’s total softwood exports increased by 0.3% in 2005, with shipments to the United States rising by 2.8% while exports to Japan and other countries dropped by 19.5% and 15.0% respectively. The increase in exports to the United States was fuelled by strong demand for lumber from the U.S. housing market, supported by low interest rates, a solid U.S. economy and reduced U.S. softwood lumber tariff rates compared with 2004 rates. Production, on the other hand, decreased (1.9%) as producers in many regions felt the impact of the strong Canadian dollar, which increased their costs relative to their U.S. competitors. However, production levels varied significantly across the country. In British Columbia, production increased as producers worked to salvage timber from areas affected by the mountain pine beetle epidemic. In contrast, Quebec’s production declined in response to curtailments in timber supply, which increased wood fibre costs. Production also decreased in the Prairie and Atlantic regions while increasing slightly in Ontario.

Structural Panels

Structural panel products include both plywood and oriented strandboard (OSB). While both are important products in Canada, OSB has been gaining market share at the expense of plywood over the long term. In 2005, OSB constituted 81% of total structural panel production, compared with 75% in 1997. The main market for structural panel products is residential construction (54%), followed by repair and remodelling (21%) and industrial demand (20%). Within the residential construction market, single-family homes accounted for more than 85% of the demand. About three quarters of Canada’s structural panel products are exported, with virtually all of these exports (99%) going to the United States. In 2005, following a record year of activity, structural panel production slowed by 0.4%, while exports grew by 4.2% in contrast with domestic consumption, which fell by 11.3%. The growth in exports was a result of strong demand in the U.S. housing market, buoyed by low interest rates. The decline in domestic consumption was due in part to lower Canadian housing starts, which fell by 2.0%.

Newsprint

Canada is the world's leading producer and exporter of newsprint, with 75% of its newsprint exports going to the United States. However, while Canada has traditionally held a dominant position in the newsprint industry, production and consumption in North America have been slowly declining over the past 10 years. This decline is due to several factors including the maturation of the newsprint market, affording limited opportunities for growth; the shift in advertising from newspapers to online media sources; and the trend for newspaper publishers to trim their newsprint usage. In 2005, production dropped by 5.0% and exports fell by 5.1%, although domestic consumption increased by 1.6%. While the long-term factors are in continual play, the more recent phenomena of the strong Canadian dollar, rising wood fibre costs in certain regions and rapidly increasing energy prices have put additional pressure on producers, causing them to close mills and curtail production.

Wood Pulp

Canada is the world’s largest exporter of wood pulp, with key markets including the United States (40%), European Union (20%) and China (15%). In 2005, the volume of exports dropped by 7.6% from 2004 levels, while production and consumption fell by 3.8% and 0.2% respectively. Facing higher prices for energy and wood fibre in some regions, a stronger Canadian dollar and shrinking demand for newsprint and other types of paper, wood pulp producers trimmed their output by means of numerous mill closures or simply by reining in production. While the impact of increased costs has affected pulp producers across the nation, eastern Canadian producers have been particularly hard-hit due, in part, to regional differences in fibre costs. In British Columbia, wood chip prices have declined at an average annual rate of 4.6% (since 2000) as sawmills in the interior process timber affected by the mountain pine beetle, while prices in the eastern provinces have risen by 10.4% (annually) responding in part to sawmill closures in those regions which have reduced chip supplies.

Printing and Writing Paper

Canada exports more than 80% of its printing and writing paper production, primarily to the United States. While Uncoated Groundwood (UGW) is the largest volume product, accounting for 63% of all printing and writing paper produced in Canada, UGW does not traditionally hold a large share of the entire U.S. printing and writing paper market. However, due to a number of quality improvements enabling relatively inexpensive production of higher-grade products, UGW can now compete successfully against several higher-grade Uncoated Freesheet products and is currently enjoying expansion at the expense of the latter. This has led to several industry developments, including the conversion of existing newsprint capacity into UGW-based capacity. In the long run, more such expansions are anticipated, driving growth in Canada’s printing and writing paper industry. More recently, in 2005, exports of printing and writing paper declined by 2.8% while production dropped by 3.9% from 2004 levels. Although domestic consumption improved (2.2%), exports and production were dragged down by increasing costs for wood fibre and energy, a higher Canadian dollar and weak U.S. demand.

Maple Products

Canada accounts for 85% of the world’s maple syrup production, with the United States supplying the remainder. More than 80% of Canada’s production is exported to the United States. Japan is the second largest market with sales to this country growing significantly in recent years—doubling, in fact, from 2001 to 2003. In 2004, Canada’s production of maple products dropped by 3.6% while exports increased by 4.1%. Even though production declined, Canadian suppliers were able to satisfy domestic and foreign markets by drawing on the high inventory left over from the exceptional 2000 harvest. Quebec is Canada’s biggest producer of maple products (93%), with Ontario and New Brunswick accounting for most of the remainder. In 2005, the Canadian maple products industry received a boost when the Fédération des producteurs acéricoles du Québec (Quebec Federation of Maple Syrup Producers), in conjunction with the federal government, announced plans to promote maple products in international markets and to make the maple industry more innovative.

Christmas Trees

Canada's main Christmas tree species are balsam fir, spruce, Scots pine, lodgepole pine and Douglas fir. Some trees are harvested from natural forests while others, such as Scots pine, are grown on plantations. In 2004, Christmas tree production volumes dropped by 3.3% and export volumes fell by 5.8%. The decrease in exports was likely due to the strong Canadian dollar, which appreciated by 7.5% in 2004 over 2003. Most of Canada’s Christmas tree exports in 2004 were from Quebec (1.2 million trees), Nova Scotia (0.9 million) and New Brunswick (0.4 million).

Forest Certification

Forest certification is an important way of assuring buyers of forest products that the products they purchase come from sustainably managed forests. Canada’s forest companies have made significant progress in forest certification. Canada now has the largest certified area of forests in the world, representing about 50% of global certified area. As of December 2005, nearly 120 million hectares—and an estimated annual allowable cut of 100 million cubic metres—had been certified under one or more of the three forest-specific certification systems available in Canada (Canadian Standards Association, Forest Stewardship Council and Sustainable Forestry Initiative). This represents a seven-fold increase in certified area since 2001, and an average annual growth rate of nearly 150% since 1999, when on-the-ground implementation of the standards began in Canada. This impressive growth rate is due in part to initiatives such as the Forest Products Association of Canada’s 2002 commitment that all of the lands under its members’ management be certified by the end of 2006, a goal that is well on the way to being met.

Harvest Levels and Wood Supply

On provincial Crown lands, harvest levels are a regulated component associated with the licensing of forest management activities. These levels are usually specified in terms of an allowable annual cut (AAC). An AAC is the annual level of harvest allowed on a particular area of land over a specified number of years. In practice, annual harvest levels may be above or below the AAC, but must balance out over the regulation period.

Each province calculates AACs differently. Calculations are based on the size of the land base; the growth rate of trees; losses due to fire, insects and disease; accessibility; economic conditions; environmental considerations; silvicultural investment; degree of protection and management objectives. There is no single correct harvest rate for a forest.

Harvest levels on private, federal and territorial lands are not regulated by legislation, although the managers of these lands do sometimes set harvest targets. This means that the wood supply from private, federal and territorial lands can only be estimated, based on the sum of these targets and, for lands where targets have not been set, the average of past harvest levels.

While there is no official AAC for Canada as a whole, the country’s “wood supply” can be estimated by combining the provincial AACs with the wood supply from private, federal and territorial lands. The results show that over the period from 1994 to 2004, Canada’s wood supply remained stable at approximately 238 million cubic metres per year, 52 million cubic metres more than was actually harvested. In 2004, 37% of Canada’s wood supply was located in British Columbia, followed by Quebec (22%), the Prairie provinces (18%), Ontario (14%) and the Atlantic region (9%).

From 1994 to 2004, annual softwood harvest levels remained relatively steady, averaging 155 million cubic metres per year, about 23 million cubic metres below the wood supply. While hardwood harvest levels increased by 61% in that period, from 23 million cubic metres per year to 37 million cubic metres, they were still well below the wood supply of 60 million cubic metres per year.

Planting and Seeding

By law, all forests harvested on Canada's public lands must be replaced. Foresters replace these harvested areas using either natural or artificial regeneration.

Natural regeneration occurs with little or no assistance by humans. For example, trees establish from seeds originating from the adjacent forest or when small trees in existing stands (advanced regeneration) are protected from change during the harvesting operation. The natural regeneration system being used varies by species and region in Canada.

Artificial regeneration involves either direct seeding of an area, or planting seedlings (young trees grown from seed in a greenhouse or nursery) or cuttings. Artificial regeneration, particularly planting, allows maximum control over the species, the spacing between trees and the timing of treatment.

Until the early 1950s, foresters relied almost exclusively on natural regeneration. Improvements in seedling production methods and changes in provincial standards for regeneration success have resulted in increased use of artificial regeneration.

In 2004, 382 000 hectares were either planted or seeded in Canada. Quebec accounted for 70 000 hectares; Ontario, 104 000 hectares; and British Columbia, 156 000 hectares.

In 2004, British Columbia planted 184 million seedlings; Ontario, 106 million; and Quebec, 100 million. Of the 481 million seedlings planted in Canada, 96% were on provincial Crown land.

Over the past 10 years, the area regenerated by planting or seeding has dropped slightly (2.1%) as has the number of seedlings planted (3.3%). This may be due to a small decline in harvest over the past 10 years (0.4%) and an increase in the area of aspen harvested, as aspen is a species that regenerates naturally by sprouting from roots.

The accompanying graph shows regeneration of areas disturbed by both harvesting and natural disturbances. It also includes a small area of afforestation (that is, the conversion to forest of land that has not been forested for a long time).

Forest Fires

Forest fires in Canada vary considerably in number and in area burned. Historically, there are large fluctuations in fire activity, both nationally and among provinces and territories, in a given year. For example, Ontario went from a low of 6633 hectares burned in 2000 to a high of 314 219 hectares burned in 2003.

Nationally, the 2005 fire season represented a typical year with 7438 fires, close to the 10-year average of 7496, and 1.7 million hectares of area burned, below (70.8%) the 10-year average of 2.4 million hectares.

Quebec accounted for almost half (49%) of the area burned in Canada in 2005. A full 90% of the annual area burned in Quebec took place in May. This drew fire suppression resources from Saskatchewan, Manitoba, Ontario, Northwest Territories, Newfoundland and Labrador, and New Brunswick (British Columbia and the U.S. Forest Service contributed resources during the summer).

Forest fires tend to rage in warm, dry weather brought about by high-pressure ridges in the atmosphere. These ridges are associated with Rossby waves, also called planetary waves, which can be seen in the wave pattern of the jet stream. Planetary waves move slowly, usually west to east, influencing the regions under the ridges for days or weeks. Canada is approximately one planetary wavelength in size, which is why, every summer, at least one province or territory suffers an extreme fire season.

Insect Defoliation and Tree Mortality

The National Forestry Database provides statistics on various aspects of Canada’s forests, including insect damage. The database reports on areas in which there is tree mortality and/or moderate to severe defoliation due to insects. Moderate to severe defoliation means that 30% or more of the foliage has been removed. Significant growth losses are generally deemed to begin when crown defoliation reaches 40%. Among the insects that significantly damaged forests in 2004 are mountain pine beetle, large aspen tortrix, forest tent caterpillar, spruce budworm and western spruce budworm. Other insects such as gypsy moth, hemlock looper and balsam fir sawfly also caused defoliation over localized areas. Overall, 13.1 million hectares of forest area were affected in 2004, a decline from 20.5 million hectares in 2003.

2004 ↑ 2003 The mountain pine beetle is the most destructive pest of mature lodgepole pine forests in North America. British Columbia has been experiencing an epidemic of this insect for several years, and a large-scale effort has been mounted by federal/provincial governments, research institutes, First Nations, academic institutions and industry to mitigate the effects of the outbreak. In 2004, the mountain pine beetle killed trees over a forest area of more than 7 million hectares in British Columbia, up from 4 million hectares the previous year. Significant areas of attack occurred north of historical outbreak areas and are attributed in part to the absence of sufficiently cold temperatures to offset increases in the beetle population.

2003 ↓ 2004 The large aspen tortrix is one of the main insects associated with the trembling aspen. The defoliation caused by this insect generally does not affect tree survival as it occurs early enough in the summer for the tree to produce new foliage. In unusual circumstances, outbreaks may last beyond three years and may, if other stress factors such as drought are present, kill the tree. In 2004, this insect defoliated about 750 000 hectares of aspen forest in Canada, a significant drop from 6 million hectares the previous year. Much of this occurred in Alberta, where 320 725 hectares were defoliated in 2004 compared with 5.2 million hectares in 2003.

2003 ↓ 2004 The forest tent caterpillar is another serious defoliator of trembling aspen in Canada. Outbreaks may last four to six years, and may return as frequently as every 10 years. Larger populations tend to occur in parkland and boreal mixedwood areas. Forest tent caterpillar infestations cause branch diebacks and growth reduction; extended periods of severe defoliation may kill the tree, especially if other stress factors such as drought are present. In 2004, defoliation was largely confined to Alberta and Ontario where a total of about 1.6 million hectares of aspen forest was affected, a sharp decline from 2001 when some 13 million hectares in Ontario alone were defoliated.

2003 ↓ 2004 Spruce budworm is the most destructive insect pest of spruce and fir species in Canada. Outbreaks are part of the forest renewal cycle and usually last six to eight years but can last more than ten. Severe outbreaks in commercial forests, however, create serious wood supply problems. The larvae of spruce budworm damage trees by feeding on the current year’s needles and cones and occasionally on mature needles. In 2004, 755 325 hectares were defoliated by this insect, the lowest level in the past 10 years and significantly lower than in peak years, which have reached 20 million hectares.

2004 ↑ 2003 The area of forest damaged by western spruce budworm increased steadily from 123 638 hectares in 2001 to 623 735 hectares in 2004. This insect is a significant pest of Douglas fir in the interior of British Columbia. Spray programs using biological insecticides are frequently carried out for forest protection against both the spruce budworm and the western spruce budworm, on small portions of the defoliated area.

2003 ↓ 2004 The balsam fir sawfly is a native defoliator that feeds mainly on balsam fir and, occasionally, on white spruce and black spruce. Outbreaks usually last only a few years and have occurred mostly in the Atlantic provinces. Western Newfoundland has experienced the most damage, with moderate to severe defoliation every year since 1996 and with the largest area (68 698 hectares) recorded in 2002. The amount of damage caused by this insect in western Newfoundland has diminished in recent years (39 366 hectares in 2004) due to aerial applications of a balsam fir sawfly-specific virus developed by the Canadian Forest Service of Natural Resources Canada.

Update on invasive alien species… A serious invasive alien species is the emerald ash borer, which was first detected in Windsor, Ontario, in 2002, and has since been detected through parts of southwestern Ontario. This insect attacks primarily native ash species, which are an important part of both our urban and forest environments. The emerald ash borer does not defoliate trees; rather, it kills them by feeding under the bark and disrupting the flow of nutrients and water throughout the tree. The movement of wood in the affected areas of southwestern Ontario is now regulated and, as this insect is also a serious pest in the United States, Canada and the United States are working together on strategies to combat its spread. The Asian longhorned beetle was discovered in September 2003 in the Toronto/Vaughan area of Ontario. Numerous infested trees have been located in industrial, residential and park areas. This insect attacks many hardwood species in Canada, but prefers maple, elm, birch and sycamore. As with the emerald ash borer, tree removal is currently the only viable approach to eradicating this insect, although alternative pest control techniques are being investigated. To date about 75 000 trees have been removed in the Toronto area control program, and it appears the program has been successful in containing the beetle to the greater Toronto area. A new pest in eastern Canada is the European wood wasp, Sirex noctilio. Native to Europe, Asia and northern Africa, this insect was discovered in Ontario in 2005. It feeds on many species of pine and, given the climatic conditions of its native range, it could establish anywhere in North America where pine grows. The wood wasp is known to have caused serious damage in more southern latitudes and is considered “very high risk” in North America. Surveys will be conducted from Ontario to Nova Scotia in 2006 to determine the extent of the problem. This insect is currently a serious pest of pine plantations in Australia, South America and South Africa.