#1New Brunswick Forest Industry Economic Impacts FOREST NB FORÊT NB March 2018#2Introduction maibec CHALEUR GROUPE SCIERIES SAWMILLS Garant SAVOIE ADITYA BIRLA AV GROUP RABBE DELCO ARBEC TWIN RIVERS GOGUEN LUMBER PAPER COMPANY FORNEBU LUMBER ARAUCO Seacoast MARWOOD Fishing Supplies IRVING UM OE John W. Jamer Ltd.#3Purpose Introduction The aim is to inform policy-makers and the public about the contribution of the forest sector to the New Brunswick and Canadian economies. Scope Wood Products Support Activities Forestry & Logging Pulp & Paper#4Sector Overview NB firms are big (employee size) Forestry and Logging – 405 NB firms 100% Wood Products - 117 NB firms 100% 90% 80% 500+ 200 to 499 70% 100 to 199 60% 90% 500+ 50% 50 to 99 40% 80% 20 to 49 200 to 499 30% 70% 10 to 19 100 to 199 20% 60% 5 to 9 50 to 99 10% 50% 40% 20 to 49 Pulp & Paper - 20 NB firms 0% 1 to 4 NB S NS QC ON 30% 10 to 19 20% 100% 5 to 9 10% 90% 500+ 0% 1 to 4 80% 200 to 499 NB NS QC ON 70% 60% 50% Note: Over 600 firms in the sector Including 63 Support Services firms 40% 30% 100 to 199 50 to 99 20 to 49 10 to 19 20% 5 to 9 10% 0% NB NS 30 1 to 4 QC ON Source: Statistics Canada Cansim 552-0002.#52005 2006 2007 10,000,000 % Non-industrial Industrial 110 9,000,000 Crown Total 8,000,000 100 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 22% g 70 90 80 60 50 50 2008 2009 Sources: New Brunswick Department of Energy and Resource Development, 2018 2010 2011 2012 2013 2014 2015 2016 Sector Overview Harvest volumes have made strong recovery Annual volumes by land tenure Harvest recovery since 2006 by jurisdiction 2006 2007 2008 2009 2010 NB ME NS 2011 2012 2013 2014 2015 2016#6Sector Overview Product Manufacturing Recovery since 2009 has been strong, but not back to previous highs. $2,500,000,000 ■Wood products $2,000,000,000 ■Pulp & Paper ■Primary products Total exports in 2016 were $1.7 $1,500,000,000 billion, with 61% in pulp and paper, 37% in wood products, and 2% in primary wood. Since 2009, wood products. ↑138%, and pulp and paper ↑3%. Source: Statistics Canada Trade Data Online. $1,000,000,000 $500,000,000 is 2008 2009 2010 2016#7Sector Overview Forest product exports by country (2005, 2016) 2005 % share 2016 % share U.S.A. 1,670 86% 1,337 78% India 48 2% 121 7% China 10 0% 39 2% S. & C. America 24 1% 27 2% E.U. 84 4% 26 2% Other 96 7% 174 9% Total 1,932 100% 1,724 100% NB exports to over 60 countries and represents 15% of provincial exports. Sources: Canadian Forest Service, 2017; Industry Canada Trade Data Online, 2017.#8Economic Impacts 2016 NB Economic Impacts - Direct and Spinoff DIRECT IMPACT $699 nd in the million direct GDP age part with s $529 und in the T million direct INCOME image $3.2 und the fe billion direct OUTPUT The New Brunswick forest industry generated over $1.7 billion in economic impact in 2016. $2.6 founit in the fle billion spinoff OUTPUT e mage part w $989 und in the fe million spinoff GDP und in the fe $649 million Spinoff INCOME mage part with no 10 ride found in the fin 9,725 direct JOBS Sources: Gardner Pinfold, Statistics Canada, Canadian Forest Service Note: Direct is processing (mills) and spinoffs include logging and support services. it with mlationship 10 Hit was et found in the fle 14,142 spinoff JOBS SPINOFF IMPACT#9Economic Impact Results Total 2016 Economic Impact – Direct and Total impacts - Direct Output $3.2 billion NB $5.9 billion Canada $8.7 billion GDP $699 million $1.7 billion $3.1 billion Jobs 9,725 23,867 35,435 Income $529 million $1.2 billion ■ ◉ ■ $1.9 billion Supply chain of 2,500+ firms in the province (8% of NB firms). One in 14 NB jobs are linked to forestry sector. NB contributes significant impacts to other parts of Canada. Source: Gardner Pinfold, Statistics Canada Interprovincial Input-Output Model, 2014#10Economic Impact Results Total 2015 Economic Impact - Taxes Taxes on goods and services purchased Provincial Federal Income taxes Provincial Federal Total $109 million $39 million $90 million $117 million ■ Forest sector tax revenues to the provincial government represent $1 of every $42 worth of expenditure in the 2016/17 budget. Source: Gardner Pinfold, Statistics Canada Interprovincial Input-Output Model, 2014; Government of New Brunswick 2016/17 Budget - Main Estimates#11Economic Impact Results Crown harvest - Stumpage and fee revenues $90,000 $80,000 Stumpage & fees -Crown volume (m3) $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $- 2008 2009 2010 2011 2012 2013 2014 2015 Source: New Brunswick Department of Energy and Resource Development, 2018 2016 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000#12Economic Impact Results 2016 Spending Map* Legend Communities Lameque Eel Goulet Grand-Trade-Sheila Spending ($) Dalhousie Athoville Belledune Kedgwick Nigadoo Bathurst Sunt-Quentin Edmundston Clair 0 - 5,000,000 5,000,000 15,000,000 Nequac Saint Andre Drummond Miramichi Plaster Rock Aroostook Blackville Richibucto Bath Upper Miramichi Bouctouche Cocagne Stanley Hartland Woodstock Meductic Fredericton Canterbury Hanwell Cambridge-Narrows Chipman Beaubassin East Riverview Port Elgin Petitcodiac Sackville Norton Alma McAdam Hampton St. Stephen Blacks Harbour Campobello island Grand Manan Quispamsis Saint John 50 50 100 150 200km Source: Survey of Forest NB manufacturing members. 15,000,000 30,000,000 30,000,000 60,000,000 60,000,000 +#13Economic Impact Results 2016 Employee Map Legend Employees 0-50 50-100 100-200 200-300 300+ Spending ($) 0 - 5,000,000 5,000,000 15,000,000 15,000,000 30,000,000 30,000,000 60,000,000 60,000,000 + 50 Source: Survey of Forest NB manufacturing members. 50 100 150 200 km#14Economic Impact Results County and Electoral District Dependence on Forestry* Rank County (15) Income ($000s) County% 1 Restigouche County $232,524 34.9% 2 Madawaska County $142,134 18.4% 3 Northumberland County $117,540 11.8% 4 Victoria County $44,077 11.4% Rank Provincial Electoral District (49) Income ($000s) County% 1 Restigouche West $221,026 33.2% 2 Carleton - Victoria $41,842 8.4% 3 Edmundston - Madawaska Centre $61,165 7.9% 4 Madawaska Les Lacs Edmundston $53,180 6.9% 1 Rank Federal Electoral District (10) Madawaska - Restigouche Income ($000s) County% $363,159 26.6% 2 New Brunswick Southwest $196,911 11.3% 3 Miramichi $129,038 10.7% 4 Fundy Royal $130,156 5.6% *Total income and job impacts distributed according to mill spending and jobs by postal code#15Economic Impact Results Average income by county Forest Manufacturing Avg. Kings Sunbury Albert York Westmorland New Brunswick Carleton Charlotte Northumberland Kent Saint John Madawaska Gloucester Restigouche 29,124 54,419 Victoria Queens 20,000 40,000 60,000 80,000 Sources: 2016 Census; StatCan Input-Output Model, 2014 Note: Forest manufacturing 2016 average is for wood product and pulp and paper product employed individuals. County averages are for individual employment income.#16Economic Impact Results One of the top private GDP generators in NB Construction (residential, non-residential, engineering) Forest products (paper and wood manufacturing, logging) Electric power generation, transmission and distribution Food manufacturing Petroleum and coal product manufacturing Primary metal manufacturing Crop and animal production Mining and quarrying (except oil and gas) Fishing, hunting and trapping Fabricated metal product manufacturing Plastics and rubber products manufacturing Beverage and tobacco product manufacturing Non-metallic mineral product manufacturing Machinery manufacturing Furniture and related product manufacturing 0 200 400 600 00 800 1000 1200 Note: NAICS level-1 sectors are larger, but this compares forest activities versus others at the same NAICS level-2.#17Sector Competitiveness Capital and repair investment % of revenues, 2016 NB NS QC ON Canada Forestry & log Capital 8.0% 1.9% 2.3% 3.5% 4.1% Repair 4.0% 0.0% 0.5% 2.6% 2.8% Pulp & paper Capital 5.6% 7.3% 3.3% 1.5% 3.2% Repair 3.9% 3.2% 2.3% 1.8% 2.8% Wood product Capital 1.3% 2.0% 2.3% 2.5% 3.7% Repair 0.8% 1.2% 1.9% 1.8% 2.1% Sources: Canadian Forest Service, 2017; StatCan Cansim Table 029-0045 Note: Capital and repair investment average for last five years#18Sector Competitiveness Forestry financial performance of small firms, 2015 NB NS QC ON Canada Revenu Forestry & log (532 NB firms) Support activity (73 NB firms) e $463 $389 $426 $363 $448 Net% 9.3% 10.3% 12.4% 14.6% 15.0% Revenu e $711 $600 $579 $743 Net% 6.2% 12.3% 13.5% 13.5% Revenu Wper net profit 6.8% Canedot available by province) 11.2% $584 Brice). $683 (114 firms) Net% 0.6% 1.7% 5.5% 4.9% 5.5% Sources: Industry Canada Financial Performance Data, 2018. Small firms have revenues from $30K to $5M.#19Sector Competitiveness Operating Expenses - Pulp and Paper Truck transportation as a percentage of operating expenses are highest in NB. Pulpwood and petroleum products are second highest for NB. Pulp and Paper Industry Operating Expenses as % of Total, 2015 14% 12% 10% 8% 6% oo ou ove go 4% 2% 0% Electricity Pulpwood Truck transportation services Petroleum products Taxes on products Wood by- products Source: Statistics Canada, CANSIM Table 381-0035 ■NS NB PQ ON#20Industry Competitiveness Industrial Electricity Rates Index numbers are a way of expressing the difference between two measurements by designating one number as the "base", giving it the value 100 and then expressing the second number as a percentage of the first. In this case, the highest electricity rates in Nova Scotia are set to 100, and the other three provinces are examined in relative terms. New Brunswick has the second highest rates across each power usage range, except 40kw and 5,000kw. 100 90 80 70 60 50 40 Indexed Industrial Electricity Rates by Monthly Power Demand and Province 2015 30 20 10 0 40 kW 500 kW 1,000 kW 2,500 kW 5,000 kW 50,000 kW ■Nova Scotia ■New Brunswick ■Quebec Ontario Source: http://www.hydroquebec.com/publications/en/docs/comparaison-electricity-prices/comp_2015_en.pdf#21Sector Competitiveness Growth strategies of NB mills, 2017 Low* High Average 1. Operational efficiency 15% 60% 25% 2. Expand in new markets 10% 100% 20% 3. Seek lower cost inputs 5% 33% 12% 4. Process innovation 5% 25% 9% 5. Product innovation 5% 25% 8% 6. Invest in labour development 5% 20% 8% 7. Strategic partnerships 5% 20% 7% 8. Improve regulatory environment 5% 10% 5% 9. Invest in marketing 5% 5% 3% 10. Invest in research 5% 5% 3% Note: Most firms invest in at least 5 strategies and have done so for many years. Source: Survey of Forest NB manufacturing members. * Some firms report zero for strategies, the low figure is for those that report any investment in the strategy.