This is the fourth in a series of articles resulting from a yearlong investigation into Paper Excellence, by far Canada’s largest pulp and paper producer following its 2021 acquisition of Domtar, and just this week the North American logging giant, Resolute Forest Products. These articles are part of “Deforestation Inc.” a collaboration of the International Consortium of Investigative Journalists (ICIJ) and 39 media outlets, involving 140 journalists in 27 countries. The Examiner partnered with journalists in France (Le Monde, Radio France), Canada (CBC, Glacier Media), and the United States (Inside Climate News) to produce this series. This article looks at critics’ allegations that the rapid expansion of Paper Excellence in North America is a ‘fibre grab’ to feed a growing demand in China for increasingly scarce high-quality pulp from Canada’s forests.
The pulp and paper industry is not, as Jim, the whistleblower mentioned in earlier articles in this series, puts it, “a sexy industry like tech.”
“You can’t innovate too much on toilet paper,” he says.
But, he adds, diapers, toilet paper, tissues, and other hygienic products, as well as packaging and fancy wrapping paper are all growing markets. To make these you need pulp, and to make pulp, you need fibre.
And that is why he thinks Canadians can’t afford to ignore what is happening in its pulp and paper sector.
Some of the pulp mills Paper Excellence was buying in Canada between 2007 and 2014 were aging and highly polluting plants — only five of the ten purchased in those years are operating today — but they tended to come with access to supplies of quality fibre that is becoming increasingly scarce.
To make strong paper products, Jim points out, you need high quality pulp, the northern softwood pulp made from the kind of fibre that can be harvested in Canadian forests. He says Asia Pulp & Paper (APP) mixes it with inferior pulp produced in plantations on degraded lands in Indonesia. As reported in previous articles in this series, APP is the giant pulp and paper conglomerate headed by Teguh Ganda Wijaya, father to Jacskon Wijaya, who owns Paper Excellence.
Canadian pulp to China
Canada is the world’s largest producer of northern bleached softwood kraft pulp (NBSK), and in 2021 had the capacity to produce six million tonnes of it. Most of the bleached softwood kraft pulp produced by Paper Excellence mills in Canada is exported to Asia, including the pulp produced by Northern Pulp in Nova Scotia before the mill closed.
Leaked correspondence shows that in 2018 Paper Excellence — together with APP employees — was contacting a leading pulp and paper consultancy firm seeking financial forecasts for investors of the Paper Excellence acquisition of Eldorado in Brazil. The investors named were the China Development Bank and the Industrial and Commercial Bank of China (ICBC).
According to the Environmental Paper Network, in 2018 the China Development Bank backed out of financing the Paper Excellence acquisition of Eldorado. There is no evidence of any engagement by the China Development Bank with Paper Excellence investments since then.
However, there has been involvement in the past. Both CBC and Glacier Media, with which the Halifax Examiner worked on the “Deforestation Inc.” project led by the International Consortium of Investigative Journalists (ICIJ), are reporting on the role the China Development Bank has played with Paper Excellence in Canada.
And China is now the main destination for Paper Excellence pulp made from Canadian fibre from Canadian forests.
Brian McClay, chair of the pulp market data firm TTOBMA, told ICIJ partner CBC that China is definitely interested in Canada’s pulp and paper industry.
“China has, in its 14th five-year plan, told all its resource-using industries to essentially go out and buy their supply chains,” said McClay.
APP boasts about its own huge presence in China, with “over 20 pulp and paper mills in the form of subsidiaries and joint ventures.” Those plants have to get their northern bleached softwood pulp from somewhere, and Canada is the world’s biggest producer.
An analysis of Canada’s 2017 exports of NBSK attached to a leaked email from APP’s Deputy General Manager Richard Pho to Paper Excellence’s pulp analyst Edwin Widjaja (no known relation to Jackson Widjaja) shows more than half Canada’s global NBSK exports went to China in the first quarter of that year. The monthly exports to China were four to five times higher than they were to the next biggest destination, the U.S.
Paper Excellence reports that pulp from its mills in western Canada is shipped to “key markets” on the “Pacific Rim” and in “Asia.”
A ‘fibre grab’ in Canada’s forests
In Jim’s view, Paper Excellence’s rapid expansion in North America — with its earlier purchase of mills in Nova Scotia, British Columbia, and Saskatchewan, and more recently its 2019 acquisition of Catalyst Paper, its 2022 takeover of Domtar, and most recently of the North American logging giant Resolute Forest Products — is a “fibre grab.”
Paper Excellence told ICIJ it is “no surprise that APP would be an end-user of certain Paper Excellence-produced pulp,” since APP is a “major player in the pulp and paper industry that is known to require significant volumes of pulp.”
APP said it was “not a direct customer of Paper Excellence.”
Jim’s views on the Paper Excellence and its interest in Canadian fibre echo what Mac Anderson told a British Columbia parliamentary committee on timber supply back in 2012. At that time Anderson was general manager of MacKenzie Fibre Management Corporation, owned by Paper Excellence.[1]
What Anderson said then is revealing:
Paper Excellence is owned by a company called Sinar Mas. Sinar Mas has over 32 pulp mills worldwide. They have some of the largest pulp mills in the world. They have a number of other companies — Asia Pulp and Paper, etc. They’re the largest manufacturer of tissue paper products, cardboard products in Asia. Recently I had the opportunity to speak to the CEO of Paper Excellence. He essentially told me that the fibre that MacKenzie Pulp is producing right now is long fibre. It’s hugely important in their mix, at their various locations, to mix with their short fibre coming from their plantations in Indonesia, South America, and places like that. They’re growing trees [in these places] so that they can produce pulp logs in five to six years. Because it’s juvenile growth and that doesn’t have the strength necessary to make these products. What they’re doing is blending the pulp that comes from here in with that other fibre to make their products. He essentially said it doesn’t matter if the pulp price goes down significantly. They’ll keep this place running, even if they have to subsidize the mill to keep it up and going, because they need that fibre.
What Anderson says now that he is an independent fibre consultant, and no longer with Paper Excellence, is even more revealing.
Anderson believes the strategy was always to get access to forests in Canada.
In an interview with ICIJ partner Glacier Media, Anderson said Asia Pulp & Paper needed the northern kraft pulp to add strength to their products. “Basically, they needed fibre,” he said. “It was a grab.”
“They just thought ‘If we have these mills, we have these jobs, the government’s going to come through and give us licences to access fibre and we’ll just keep rolling along,’” Anderson said. “Well, government never really did that … I mean in BC especially, all of the AAC [annual allowable cut] is accounted for. There’s nothing to give out, everything is dried up.”
“To access fibre, we were building roads and installing bridges and stuff, and I was having to deal with, sometimes, Shanghai,” Anderson said. “Guys at Shanghai were reviewing what I was doing. It was just, it was just brutal.”
“A lot of the decisions were made out of Shanghai,” he said, and while they didn’t tell him details, they would say, “Oh yeah, Shanghai wants to know this or Shanghai wants to know that.”
Anderson worries about the secrecy that shrouds privately owned companies like Paper Excellence and Asia Pulp & Paper, shielding them from public scrutiny:
They’re in for the long haul. You got to remember that these guys are not like the… companies that are publicly traded where it’s all about shareholder value and shareholder dividends, right? These guys can funnel money into the thing and just pay based on a breakeven to keep the operations running. They’re privately held… They don’t have to tell anybody what they’re doing, how much money they’re making.
He said Paper Excellence higher-ups didn’t like employees talking about the connection with Asia Pulp & Paper.
Anderson thinks that Canadians should be worried about a privately and foreign-owned company expanding so quickly. “There’s no question and god only knows where the money’s coming from,” he said.
“It’s scary,” he said.
As part of its response to ICIJ questions, Paper Excellence noted that while it is a “privately held company with no obligation to do so,” it has “engaged in good faith” with the ICIJ group and given it “unprecedented insight into our company.” It also provided these statements:
Given Paper Excellence’s historic approach of acquiring insolvent mills and investing in the operations of these mills in order to make them viable, the Company uses financing to accomplish this object. Currently, most of Paper Excellence group’s financing for its North American operations is from well-established financial institutions in Canada and the United States, with only a small fraction of outstanding loans coming from Indonesian banks and no outstanding financing agreements with any China-based institutions.
Paper Excellence currently consumes approximately 10.3% of B.C.’s annual allowable cut. The entirely of this product is the by-product of primary harvesting and manufacturing, which is comprised of approximately 70% residual sawmill chips and approximately 30% pulp logs, which are generated as a by-product from harvesting operations that would otherwise stay in the bush and be burnt it we didn’t purchase it.
Ben Parfitt is a policy analyst with the Canadian Centre for Policy Alternatives, who studies and writes extensively about forestry issues in British Columbia. Asked by ICIJ partner Glacier Media how he sees the state of BC forests today, Parfitt said, “I think we are witnessing a crash of epic proportions.”
Parfitt explained:
Too much in the province has been logged too quickly. Because of that, we’re seeing significant numbers of new mill closures and I think that that’s going to continue for the foreseeable future. And it is all caught up in the fact that there’s not enough mature wood left because the industry has logged too much of it away. That is undeniable.
All three pulp mills that are operating on the coasts right now — Crofton and Howe Sound [Paper Excellence] and Harmac [another company] — are all whole-log chipping, either directly or through contracts with others that are doing the chipping. They are chipping an enormous number of logs.
Old growth forest for pulp
In January 2020, Paper Excellence’s chief forester, Quinton Hayward, wrote to British Columbia’s “Old Growth Review Committee” asking it to carefully consider what it defined as old growth forest, and essentially asking for permission to harvest old growth stands.
Hayward noted that if the government reduced the “large log old growth pulp portion” by half, this would be the equivalent of the total consumption needed for Catalyst pulp mills like those in Powell River and Port Alberni, both of which it had purchased the year before.
ICIJ asked Paper Excellence if this request was indicative of responsible forest stewardship. Part of the reply:
Today, the definition of old growth is still not widely agreed upon by academics and other forest experts and strictly an age definition does not necessarily reflect the importance of an ecosystem for its non timber values.
In April 2021, Paper Excellence permanently closed the MacKenzie pulp mill, which the Paper Excellence CEO in 2012 had assured Anderson they would keep going. The MacKenzie site is now for sale.
In December 2021, Paper Excellence “indefinitely” closed the Catalyst tis’kwat mill in Powell River on British Columbia’s Sunshine Coast, and then put it up for sale on the global market.
Shortly after that, Paper Excellence acquired Domtar for $4 billion, and on March 1 acquired Resolute for $3.7 billion, giving it access to enormous amounts of forest and fibre in central Canada and the United States.
Turning Canada’s forests ‘into the world’s toilet paper’
The rapid growth of Paper Excellence has been “astounding,” said Margaret McCuaig-Johnston in an interview with ICIJ partner CBC. McCuaig-Johnston is a former assistant deputy minister at Natural Resources Canada and now a senior fellow at the University of Ottawa’s Institute for Science, Society and Policy.
McCuaig-Johnston noted that the Wijaya family began with one little mill in Canada in 2007, and have been building their assets ever since.
“So I think Canadians would want to know who is behind this Indonesian company, and are there still Chinese interests monitoring what is happening in Canada and steering directions?” said McCuaig-Johnston.
“It is concerning when huge swaths of forests are being taken by a company that’s not a Canadian company per se, maybe registered in Canada, but it’s owned by foreign interests who have Chinese partners and who could decide at a moment’s notice to export everything to China and Indonesia,” she said. “So that is a concern.”
According to investment documents filed in Hong Kong in 2019, as of 2018 the massive APP Ever Dragon Investments Group, headed by Jackson Wijaya’s father Oei Tjie Goan (also Teguh Ganda Widjaja), managed only 280,000 hectares of plantation in China with an average harvest cycle of six years, which supply its pulp and paper production there. [2]
For perspective, Paper Excellence’s Northern Pulp holds a licence to harvest 100,000 green metric tonnes of timber on 308,000 hectares in central Nova Scotia, according to Department of Natural Resources and Renewables spokesperson Adele Poirier. Paper Excellence also owns about 170,000 hectares of forested land in the province.
As noted in previous articles, now that Paper Excellence’s Domtar has completed its acquisition of Resolute Forest Products, private companies belonging to Paper Excellence — a foreign-owned entity — will own 37 pulp and paper mills in North America, and manage about 22 million hectares in Canada, forests covering an area the size of four provinces of Nova Scotia.
ICIJ partner CBC asked Paper Excellence about the 20 million hectares of boreal forest of Ontario and Quebec that it manages with the Resolute takeover, First Nations statements that logging in the boreal region isn’t sustainable, and several other specific questions about what it will do to protect biodiversity and endangered species. Paper Excellence sent a long statement about Resolute forest tenures, part of which reads:
Resolute respects numerous protocols to ensure appropriate consultation with Indigenous communities. Provincial and territorial forest laws, regulations and policies require that Indigenous interests be considered and respected. In Ontario, Indigenous communities are consulted as part of the development of forest management plans … It is important to note that Resolute has consultative relationships and direct business partnerships with about 40 Indigenous communities and organizations in Ontario and Quebec.
Courtenay Lewis of the Natural Resources Defense Council (NDRC) is co-author of two 2021 reports looking at forestry in Canada, “Pulp fiction: Canada’s largest pulp producers’ actions do not match their sustainability claims and “By a thousand cuts: how powerful companies’ wood sourcing is degrading Canada’s boreal forest.”
In a recent commentary, Lewis writes that the Resolute merger will give Paper Excellence control of a logging giant that has “some of the highest levels of wood sourcing from Canada’s boreal forest.”
Lewis adds:
Some of Canada’s largest logging companies have been sold to corporations tied to foreign interests — some of which have notorious connections to global deforestation and human rights abuses. At a time when the vast majority of Canadians believe government should be doing more to protect Canada’s forests, federal and provincial governments are giving foreign corporations enormous leeway to log climate critical primary forests and export much of it as pulp for single-use products. Canada says that “94 percent” of its forest land is publicly owned, but its citizens don’t know multinational corporations are turning much of these forests into the world’s toilet paper. Meanwhile, public input into how these “public” forests are managed is increasingly restricted.
Next in series: A forestry certification scheme critics call “industry-led” is the one of choice in Nova Scotia, but the provincial government doesn’t require Paper Excellence to have any certification on the large chunk of Crown land where Northern Pulp has its timber licence.
Endnotes
[1] According to leaked correspondence between APP and the lawyers handling the submission to China’s anti-trust agency in 2018 for the Paper Excellence acquisition of the Eldorado mill in Brazil, “PEBV [Paper Excellence B.V. is engaged in forestry business through its affiliates, SEBSO SAS (France), Northern Pulp Nova Scotia Corporation (Canada) and MacKenzie Fibre Management Corporation (Canada).
[2] Green Fortune Capital Ltd filings in Hong Kong on September 24, 2019, on bonds guaranteed by APP Ever Dragon Investments Group Limited, p 84.
People need to recognize that the Chinese super wealthy are buying the world. They have taken over the fishing industry in Nova Scotia and pwn the processing plants. They are buying all the lobster we have harvested. They own the land and can pilage at will. Same thing is happening in Africa with their building of super highways and ports all to transport the resources they pilage to ports in order to ship it all off to China and other parts of the world under their economic control.
I’m so deeply grateful for this level of investigative journalism. A fibre grab on this scale is terrifying. Our boreal forests are already emitting more carbon than they are storing. Wildlife is left with nothing. Meanwhile government at every level seems to keep on making deals that favour industry over the need for a liveable planet for all species. The alarm bells are clanging, folks. Our house is on fire. Time to act like it.