$200B global market for wood bio products

Forget about softwood lumber industry disputes with the Unitd States. Canada has a prime opportunity to transform the battered forestry industry and become a major player in the burgeoning $200 billion global market for bioproducts made from wood fibre, says a study released yesterday.

"It's part of the saving of the forest industry," Avrim Lazar, president and CEO of the Forest Products Association of Canada, said in an interview.

He said the industry's future hinges on becoming more cost efficient, improving its environmental reputation, increasing sales to Asia to become less reliant on the United States and extracting value from every tree.

"Any one of the four is insufficient. We need all four in order to actually be cost competitive."

Lazar said Canada should be able to secure at least one-quarter of the global market in four years — or $50 billion — if industry and government work together to facilitate development of promising innovations.

The best way to harness the benefits of Canada's vast forests and sustain thousands of jobs is by integrating new technologies with existing forest production, says the report sponsored by the association and FPInnovations in co-operation with government.

The Canadian forest products industry is a $54-billion a year business that represents almost two per cent of the country's GDP and directly and indirectly employs 750,000 Canadians.

But the recession and the digital revolution — which have reduced demand for printed media — have resulted in thousands of jobs being lost over the past few years.

Markets for traditional forest products such as wood and pulp will remain.

But a new business model that develops bio-alternatives to chemicals, oil and pharmaceuticals could produce up to five times as many jobs as a stand-alone bioenergy plants, the study found.

These new products won't overtake traditional uses for forest products but could eventually account for 20 to 25 per cent of industry revenues.

While breakthrough products may be years away, many Canadian forestry companies are already investing money seeking the next lucrative bio opportunity.

For example, Domtar (TSX:UFS) has partnered with FPInnovations to build a plant in Windsor, Que., that will make an advanced recyclable material used in bioplastics and high-durability varnishes.

Other industry players such as Tembec (TSX:TMB) and Kruger are doing their own projects.

"The ones who don't want to do it are not going to be here," said Lazar.

Ottawa has already invested $1.1 billion to encourage green energy transformation and the development of new bio-products.

But more needs to be done.

Other countries, including several in Europe, as well as the United States and China are ahead of Canada by retooling their policies and making the necessary short-term investments.

Canada accounted for just two per cent of the global investment in biomass-derived energy between 2005 and 2009, compared with 75 per cent by the three largest economic areas.

The study said Canadian industry needs policies that facilitate the transportation and transmission of green energy and encourage early adoption of promising technologies.

Lazar called on Finance Minister Jim Flaherty to allocate another $1 billion — including a reallocation of existing funds — to support green transformation, market development and research development.

"The role of government is not to help us with subsidies for our products, it's to accelerate the transformation. And it has to be soon and it has to be fast," Lazar told a news conference in Montreal.

Industry must also seek new partnerships outside the forest sector to bring bio-products to market more quickly.

Potential partners include the oil and gas, chemical, auto, aerospace and agricultural sectors, as well as academia.

The Organization for Economic Co-operation and Development found that the bio-economy will contribute 10 to 14 new drugs annually by 2015 and be responsible for 10 per cent of chemical production by 2030.

The forests will also be used to replace fossil fuels in the development of products such as tires, rayon carpet fibres, lighter aircraft and biodegradable plastics.

Canada Press