An 11% increase in kraft pulp production would normally suggest more wood, more chemicals and more energy.

Thunder Bay Pulp and Paper is trying to change that equation.

Ontario is providing more than C$2.4 million to support planning for boiler and chemical-plant upgrades at the Thunder Bay mill in Northwestern Ontario.

The proposed modernization is expected to increase daily kraft pulp production by 11%, while reducing bleaching-chemical consumption by around 30% and cutting annual natural-gas use by more than 5 million cubic metres, according to the Ontario government.

That combination makes this more interesting than a conventional capacity-expansion project.

Thunder Bay is effectively trying to produce more pulp by improving how efficiently the existing mill converts fibre, chemicals and energy into saleable tonnes.

For mature Canadian pulp mills facing high capital requirements and international competition, that may be a more realistic growth model than simply building another fibre line.

The 11% production increase starts with existing bottlenecks

Ontario says the funding will support planning around upgrades to the mill’s boiler and chemical plant.

Those areas sit at the heart of kraft pulp production.

Increasing digester throughput alone does not guarantee more saleable pulp.

Additional production also increases demand on:

chemical recovery,

steam generation,

bleaching,

evaporation,

utilities,

and environmental systems.

If one of those systems reaches its limit first, it becomes the production ceiling.

Thunder Bay has already been studying those constraints.

In July 2025, Ontario provided the mill with C$87,750 for studies covering boiler, fibre-recovery and sludge-processing upgrades. The province had previously contributed C$5 million toward modernization of the mill’s electrical system to support higher green-energy production, lower emissions and greater biomass use.

The latest C$2.4 million therefore looks less like an isolated grant and more like the next stage of a longer modernization programme.

Lower bleaching-chemical use may be almost as important as higher output

The headline production number is 11%.

But the planned 30% reduction in bleaching chemicals could have a significant operating impact.

Bleaching chemicals are a recurring variable cost.

Unlike installing a new machine once, the mill purchases and consumes them continuously.

Reducing chemical demand can therefore lower cost on every tonne produced.

The exact saving will depend on:

which chemicals are reduced,

their delivered prices,

pulp brightness targets,

wood species,

incoming kappa number,

and actual production after the upgrades.

Ontario has not published enough technical detail to calculate a dollar saving.

But a 30% reduction is large enough that the chemical plant should not be treated as a secondary environmental project.

It is part of the production-cost strategy.

The boiler upgrade attacks another recurring cost: natural gas

Ontario says the proposed boiler work could reduce natural-gas consumption by more than 5 million cubic metres annually.

The government compares that with the annual heating needs of roughly 2,000 Northern Ontario homes.

For the mill, the more relevant comparison is operating cost and exposure to fossil energy.

A kraft mill already has access to large quantities of biomass-derived energy through:

black liquor,

bark,

wood residues,

and other fibre by-products.

Every unit of process heat that can be generated more efficiently from those internal or regional biomass streams potentially reduces dependence on purchased natural gas.

That is why pulp-mill decarbonization can sometimes align unusually well with cost reduction.

The mill is not necessarily buying a separate environmental technology.

It is improving the efficiency of the energy system required for production anyway.

Higher pulp output creates another market: forest biomass

The expansion also moves upstream into Northwestern Ontario’s forestry supply chain.

Ontario says the higher production rate would create demand for more than 130,000 tonnes of forest biomass per year, supporting harvesting, hauling and trucking activity.

That number matters because one of Ontario’s forestry challenges is finding economically viable outlets for:

underused wood,

harvesting residuals,

mill by-products,

and lower-value fibre.

The province’s Forest Biomass Program was specifically created to expand those markets.

Since May 2023, the program has committed more than C$86 million across 74 projects, attracting more than C$279 million in additional external funding and creating more than 115 jobs, according to the latest provincial figures.

Thunder Bay therefore functions as more than a pulp producer.

It is also a major fibre sink.

If the mill can consume another 130,000 tonnes annually, the benefit reaches companies that never make paper themselves.

That is why government is interested in an existing mill

This is an important feature of the funding strategy.

Ontario is not investing C$2.4 million simply because one company wants to make more pulp.

The government says the three latest projects could protect more than 700 direct jobs and 3,350 indirect jobs.

Pulp mills are unusually important to regional forest economies because they consume fibre that sawmills and other wood-product plants cannot always use.

A sawmill produces lumber.

It also creates:

chips,

bark,

sawdust,

and other residuals.

Those streams need markets.

A large pulp or biomass user helps keep more value inside the regional forest system.

That is why the loss of a pulp mill can affect logging, trucking and sawmill economics far beyond the mill workforce itself.

Conversely, increasing pulp and biomass demand can strengthen those same linkages.

Thunder Bay has become a useful test of post-divestiture investment

There is another piece of context.

Thunder Bay Pulp and Paper has operated independently from Resolute since August 2023, when the mill was sold to an Atlas Holdings affiliate as part of the regulatory remedies surrounding Paper Excellence’s acquisition of Resolute. The sale price was approximately US$231 million after adjustments.

Since then, the mill has continued attracting modernization funding rather than simply operating the inherited asset base.

That matters.

Divested mills can move in two directions.

They can become assets managed primarily for short-term cash generation.

Or new ownership can selectively invest where targeted upgrades improve competitiveness.

Thunder Bay’s recent sequence—electrical modernization, boiler studies, biomass projects and now chemical-plant planning—suggests the mill is pursuing the second route.

The other two projects show the same logic at smaller scale

Ontario is also providing about C$92,500 to AUX Energy to develop plans for a biomass-powered generator in Fort Frances.

Weyerhaeuser will receive about C$32,650 to study production-line upgrades intended to reduce cost while improving efficiency and product quality.

These are small grants compared with the capital required for full construction.

But that is partly the point.

Feasibility studies and engineering work help answer whether the larger investment should happen at all.

The province is effectively funding part of the development risk before companies commit much larger sums.

For biomass projects in particular, the difficult questions often come before equipment is ordered:

Is enough feedstock available?

At what delivered cost?

How far can it economically travel?

What is the heat or electricity value?

What permits are required?

What happens when wood markets change?

Small planning grants can therefore influence much larger capital decisions.

The real test will be whether the projects move from planning to construction

That distinction should remain clear.

The C$2.4 million does not mean Thunder Bay has completed an 11% production expansion.

It funds planning for upgrades intended to deliver those results.

Likewise, the projected reductions in chemicals and natural gas remain expected outcomes.

The more important future milestones will be:

final engineering,

total project cost,

investment approval,

equipment orders,

construction timing,

and ultimately operating results.

Only then will the industry know whether the mill actually achieves the projected productivity and energy gains.

But the strategy itself is already clear

Ontario’s Forest Biomass Program is often described as a programme for finding new uses for forest residues.

Thunder Bay shows a second function.

It can also help make existing mills better consumers of the regional fibre base.

That creates a useful industrial loop.

The mill becomes more efficient.

Higher output creates additional biomass demand.

That supports forestry and transport companies.

Lower chemical and natural-gas consumption improves the economics of the extra pulp.

And the resulting regional fibre demand can strengthen the broader forestry supply chain.

The important number, therefore, is not simply 11% more kraft pulp.

It is whether Thunder Bay can produce that additional volume with meaningfully lower input intensity.

If it can, this becomes a good example of how mature pulp mills can expand without treating production growth and decarbonization as competing objectives.

Sometimes the same bottleneck can be responsible for both.

Last Updated on 18/09/2026 by Jota Machinery