KAP Paper Faces Ongoing Financial Challenges Despite Progress

Engineered wood products will be the saviour to keep a still struggling Kapuskasing forest products mill open for business.

Kap paper is working with Ottawa and Queen's Park on formulating a long-term plan and a financing package to undertake a major plant conversion, worth “hundreds of millions of dollars,” through a combination of federal, provincial and private sector financing, according to the company’s CEO.

Terry Skiffington appeared before the House of Commons Standing Committee on Natural Resources, on Nov. 17, to tell MPs that Kap Paper is once again on the precipice of facing closure.

“At present, we are no longer economically viable.”

Skiffington told the committee that the traditional pulp and paper business “has run its course” and their plan is to quickly pivot toward engineered wood products, like medium-density fibreboard (MDF), a high-value forest product that would be more in line with the federal government’s housing strategy.

Timeline-wise, Kap Paper wants to move quickly.

Instead of taking years to convert the plant, Skiffington told the committee that the conversion can take place in two to three years, once the funding is in place.

“We’ve modelled the transformation (as) taking 30 months.”

Skiffington said this is not a mill upgrade, but involves installing a new production line to turn softwood chips into a higher value product.

“Instead of making a sheet of newsprint, we make a sheet of very compressed board.”

The lack of ongoing government support resulted in Kap Paper announcing a shutdown in September, creating a crisis in the mill town of 8,000.

Kap Paper has been surviving on loans from the Ford government. Last month, the company was the recipient of provincial and federal government support to preserve 300 mill jobs while the company searches for new products and new markets. But this was only a short-term lifeline until year's end, Skiffington said this week.

On Oct. 17, the province provided the company with a $16.8-million loan for continued operations.

On Oct. 31, FedNor delivered a $10-million loan to keep the mill operating from October to the end of 2025. Skiffington said another tranche is coming from FedNor.

At the same time, Skiffington said the company is in “very active” discussions with the feds to tap into the $5-billion Strategic Response Fund to make this “major transformation of our facility.”

He said other markets around the world are switching to products like MDF, cross-laminated timber (CLT) and oriented strand board (OSB). These are tariff-resistant and are the kind of building products that Canada and the rest of the world wants.

“We’re taking the opportunity to be part of a growth market,” Skiffington said, one that already exists in North America, Europe and Asia, particularly revolving around multi-storey, wood-based construction in homes and high-rises.

Skiffington is confident they can attract strategic partners, experienced in these product lines, that would enable them to repurpose the mill’s infrastructure, expand First Nation participation, and grow their activities.

Because of the density of the northern boreal softwood, he believes they can make a superior engineered wood product.

In Northern Ontario, there are other engineered wood facilities, with the Interfor operation in Sault Ste. Marie and Georgia Pacific’s Englehart plant, where that U.S.-based company is making $191 million in upgrades.

Kap Paper is the only remaining pulp and paper operation in northeastern Ontario, following Domtar’s closure of its Espanola mill in 2023.

Where once there were 21 pulp and paper mills, Skiffington said, today, there only three remaining, with Kapuskasing, Thunder Bay Pulp and Paper, and Dryden Fibre Canada.

In operation for 103 years, the mill has been one of the tentpole operations in the northeast’s integrated forest products ecosystem, handling sawmill residuals in the form of bark, sawdust, shavings and chips from three sawmills in Kapuskasing, Hearst and Cochrane.

Collectively, these facilities support 600 jobs, 1,900 indirect jobs and numerous First Nation forestry contractors.

Without facilities like Kap Paper, Skiffington said the forestry industry in the northeast could collapse due to the mounting pressure of U.S. tariffs on lumber producers and the loss of a paper mill where biomass residuals can be sold.