Canada Invests $7.5 Million in Kap Paper Inc. to Boost Northeast Ontario Sawmills and Employment

Federal Funding Targets Northeast Ontario Forestry Sector

The Government of Canada has announced a significant investment of $7.5 million through its Strategic Response Fund (SRF) to support Kap Paper Inc. in Kapuskasing, Ontario. The announcement, made on January 31, 2026, by the Honourable Mélanie Joly, Minister of Industry and Minister responsible for Canada Economic Development for Quebec Regions, aims to bolster regional sawmills and safeguard employment in Northeast Ontario.

Strategic Investment for Future Growth

The funding is specifically allocated to enable Kap Paper Inc. to complete a Front End Engineering Design (FEED) study. This crucial study will establish the necessary execution criteria for a final investment decision on creating a new medium-density fibreboard (MDF) facility. This strategic pivot in operations is designed to move towards growth markets, ensuring the continued viability of Kap Paper and strengthening the regional economy.

Kap Paper Inc. is recognized as a vital economic driver in the region, providing essential integrated support to Northeast Ontario's softwood lumber industry. The investment is expected to help the company diversify its revenue streams, stabilize demand for fibre, and maximize the economic output of harvested timber by enabling the manufacture of higher-value products.

The Role of the Strategic Response Fund

The Strategic Response Fund (SRF) is a federal initiative designed to support large-scale, transformative projects that enhance economic resilience, fortify supply chains, and protect jobs in key sectors, including forest products. The fund assists Canadian industries in innovating, adapting, and competing within a dynamic global economy, particularly those facing challenges from U.S. tariffs and global trade instability. The SRF is structured to provide flexible funding for early-stage activities, such as engineering design studies, which are critical for future development.

Ensuring Stability in Kapuskasing

This latest federal investment follows previous efforts to support the Kapuskasing mill. In October 2025, a combined $29 million financial aid package from both provincial and federal governments allowed Kap Paper to resume operations, preserving approximately 300 mill jobs. The company had previously advocated for federal intervention to stabilize Canada's forestry supply chain. The mill's ongoing operation is crucial for regional sawmills, as it processes wood chips, sawmill residues, bark, and tree debris, maintaining the integrated forestry supply chain in Northeast Ontario.