By the end of this year, after Paper Excellence indefinitely shuts down its paper mill in Crofton, B.C. will have lost 58% of its paper production capacity and 13% of its pulp mill capacity, according to David Elstone of the Spar Tree Group.

"With only 16 pulp or paper mills in total in British Columbia, and 25% already or soon to be curtailed, there is no denying this sector is in crisis," he writes.

There is such a severe fibre supply shortage now that, if it isn't fixed immediately, two to three pulp mills could shut down by Christmas, warns Joe Nemeth, project manager for the BC Pulp and Paper Coalition.

"You will see two or three more pulp mills -- in addition to what have already been shut - will be shutting in the next 90 to 120 days," Nemeth said.

Pulp mills typically want a cushion of 45 days of chips and logs, Nemeth said.

"A whole bunch of the mills are down to five days or less," he said. "They are hand-to-mouth as we speak. One hiccup and they're down."

Pulp and paper mills are major employers and economic anchors for many B.C. communities. They typically employ 400 people or more, and pulp mill workers are well-paid, many making six figures. So when a pulp mill shuts down, it can be devastating for a community.

The Crofton paper mill, which is to be indefinitely curtailed by the end of this year, will be the third Paper Excellence pulp or paper mill to shut down in two years.

In December 2021, Paper Excellence announced that a temporary curtailment of its paper mill in Powell River would become indefinite. In 2020, its pulp mill in Mackenzie was indefinitely curtailed and then permanently shuttered in 2021.

West Fraser Timber Co. Ltd. recently announced a 16-day curtailment at its Cariboo Pulp and Paper mill in Quesnel.

And Elstone warns that the Taylor pulp mill may have a "tenuous future." That mill, owned by Canfor Pulp Products (TSX:CFX), has been curtailed since earlier this year, mainly due to rail transportation problems, and Canfor now says it may not restart the mill until next spring.

Pulp mills are major contributors to the forest economy. At $3.9 billion in 2021, pulp and paper was B.C.'s fourth most valuable export. Pulp and paper account for 20% of B.C.'s forest sector GDP and 34% of the total value of forest products exports, according to the BC Pulp and Paper Coalition. The sector supports 11,000 high paying jobs in B.C.

While a declining paper market is partly to blame for the shuttering of paper mills in B.C., the same can't be said for pulp mills and pulp markets. Pulp prices are currently about 25% above long-term average prices, Nemeth said.

"Today, if you can make pulp, you're making money," he said.

But pulp mill operators in B.C. are dealing with supply chain problems related to rail capacity and fibre supply shortages.

There is a fibre supply deficit of about four million cubic metres, Nemeth said, largely due to sawmill closures and curtailments.

Sawmills and pulp and paper mills have a symbiotic relationship. They need each other, and a shrinking timber supply in B.C. has resulted in numerous permanent sawmill closures over the past decade. These sawmill closures are now having a predicted knock-on effect on pulp and paper mills. And when pulp mills go down, it can also have an impact on the remaining sawmills.

"Sawmills do not have a physical outlet for their chips and bark and hog (fuel)," Nemeth said. "If the pulp mills go down, they will shut.

"It takes three to four sawmills to supply enough chips for a pulp mill, on average. So if two or three pulp mills go down, they'll take 10 sawmills with it. If 10 sawmills go down, they'll take two or three pulp mills with it."

Over the last two decades, infestations of mountain pine and spruce beetle, and forest fires, have eliminated massive amounts of timber, reducing the annual allowable cut (AAC).

Long-term, the AAC is expected to decline from 61.6 million cubic metres to 51 million cubic metres by 2030. The NDP government's new old growth protection strategy will also remove a significant chunk of the AAC.

Last year, two forestry analysts, Jim Girvan and Rob Schuetz, predicted that if all of the forest policies being considered at that time by the B.C. government were implemented -- including old growth deferrals and new caribou habitat protection laws -- up to 10 sawmills and three pulp and paper facilities could go down.

So far, there have been no major sawmill closures since that report, Girvan said, but the majors have eliminated entire shifts at several large sawmills, which is tantamount to sawmill closures. Shifts have been eliminated at the Fraser Lake mill, Williams Lake and Quesnel plywood plant, Girvan said.

"These are really big mills. They fundamentally reduced capacity across three of their four biggest mills in the interior, and then Canfor - Plateau - took a shift off."

These curtailments happened when lumber prices were still fairly high. And now that lumber prices have fallen, more curtailments could be coming.

When sawmills shut down or curtail production, pulp mills lose an essential input - sawmill waste, which helps explain why there are now so many curtailments happening at pulp and paper mills in B.C.

In addition to sawmill waste, both pulp mills and wood pellet mills can use harvest waste from logging, but a lot of that harvest waste is still simply being piled up and burned in slash piles.

The BC Pulp and Paper Coalition estimates there could be 1.2 million cubic metres of timber waste that could be going to pulp mills. So why aren't pulp mills recovering that waste?

Nemeth said it's a combination of costs and regulations that prevent the pulp and pellet industries from accessing harvest waste. The way logging companies do the sorting in the bush is just one example.

"They do a lot of the merchanizing out in the bush," Nemeth explained. "A faller drops a tree, and let's say it's 500 metres away from the road. A mechanical piece of equipment goes in there, cuts off the top, cuts off the flared bottom, de-limbs it, and then brings it roadside - just brings in cut-to-length pieces they're using for sawlogs.

"So a lot of the wood that we could use is left out in the cutblock. Today, for the forest companies, it's cheaper for them to burn it than to actually salvage it."

There are others regulations that could be changed that would make it economic for the pulp and pellet industries to access more harvest waste that is otherwise just burned. There's also a significant amount of dead or dying timber from forest fires that could be salvaged for the pulp and pellet industries, Nemeth said.

He added that the provincial government recently convened an emergency task force of government officials, First Nations and industry to try to address some of the economic and regulatory hurdles to free up more fibre for the pulp sector. But he fears the changes won't come fast enough to save the two or three pulp mills that now hang in the balance.

"They're saying all the right stuff, but they're moving at the government pace," Nemeth said. "If left to their own devices, they'll take six to 12 to 18 months to study policies ... and by the time they do that, the whole industry's dead.

"We don't have six to 12 to 18 months. We've been telling them for years this has been coming. We have about 90 days or less."