Mercer's diversification strategy includes generating less energy to extract value from raw materials, like black liquor, instead of burning them for energy; focus is on isolating high-value components from pulp byproducts previously used for combustion

June 17, 2025 (Biofuels Digest) –

They say pulp was a dirty business. Maybe it was. Maybe it still is. I’ve seen boilers run red, steam choke a skyline, and accountants draw their margins like guns. For a long time, the whole thing was headed for a final scene — old mills, old margins, and the same old ending.

But then she walked in. Not a dame — not exactly. More like a molecule. Black liquor, they called her. Thick, volatile, carbon-rich. The kind you burn without thinking, just to feel the heat. Most mills did. Most couldn’t help themselves.

But Mercer… Mercer looked closer. They saw through the smoke. Saw value, not waste. Sequestration. Substitution. Redemption. They didn’t reach for the match.

And me? Name’s Spade. I’ve seen how this story ends. I’ve walked past enough boiler rooms to know the smell of regret. You can’t change the past — but sometimes, if you look hard enough, you can change what you do with it.

So no — I won’t burn her. However easy it’d be. However much I want to.

This is the pulp non-fiction story of Mercer International — an existential redemption arc with carbon at its core.

Pulp Separation: Rethinking Energy, Unleashing Value

Mercer’s approach to diversification is rooted in a strategic re-evaluation of its core processes, particularly its energy consumption. As Mercer CEO Juan Carlos Bueno explains, Mercer’s “main strategy that we have on on the energy side is to generate less energy so that we can actually use that raw material instead of burning it for energy to extract additional value from them”. This marks a significant shift from simply being a net energy exporter, which Mercer already is, selling 40% of the 400 megawatts it produces to the grid. Instead, the focus is on a more profound “pulp separation” – isolating high-value components from byproducts previously earmarked for combustion.

We’ve seen this elsewhere, Raizen spoke to us of how they were generating power and heat out of by anaerobically digesting vinasse, allowing them to use more sugarcane bagasse to make cellulosic ethanol or other products. Also, Saudi Aramco told us they are interested in electricity generation so that they had to burn less (valuable) petroleum to generate domestic power, making it possible to increase exports.

Is this a trend, where energy efficiency ties into Net Zero or sustainability goals and also supports more traditional goals such as lean operation and new revenue generation? We think so.

In Mercer’s case, the key is black liquor, a byproduct of pulp production, which contains valuable components like lignin and hemicellulose. Mercer is actively extracting lignin from black liquor at a pilot plant in Rosenthal, Germany, producing one ton per day of lignin. The goal is to scale this to 40,000 tons of lignin per year commercially within three years.

The use of lignin to “replace fossil based products”

The opportunity is not just technical — it’s economic. The global market for lignin-derived products is projected to exceed $6 billion by 2030, with rising demand in automotive, packaging, construction, and specialty chemicals. While current supply chains still rely on petroleum-based phenols, carbon black, and bitumen, a scalable supply of low-cost, bio-based lignin could rewrite the rules. Mercer’s 40,000-ton target may be modest in that landscape, but it opens the door to higher-value niches where price premiums and ESG mandates align.

For Mercer, this includes substituting phenols in resins used in the wood product industry, transforming them into “green based glues”. Other potential applications being explored include anodes for lithium batteries, carbon black for tires, bitumen for asphalt, and vanillin for food. From a business perspective, Bueno notes that lignin extraction is “much more attractive, business wise, financially than what would be the income by burning and generating energy”.

Just how attractive? While pulp EBITDA has historically averaged around $150–200 per ton across Mercer’s portfolio (with fluctuations by region and grade), lignin’s targeted commercial applications could exceed $400–500 per ton in EBITDA-equivalent value — particularly in resin and specialty chemical markets with favorable pricing. Add in the carbon accounting upside, and the lignin path begins to look not just additive, but transformative.

From a sustainability perspective, lignin allows for a product that has been sequestered (carbon stored) to remain in a building for decades, rather than being released into the atmosphere when burned for energy. This is seen as a “win win”.

How big a project? A commercial lignin plant is estimated to be a 100 million euro investment. This move into biomaterials is a core part of their vision of “Transforming biomass into bioproducts for a more sustainable world”.

Carbon Capture for Revenue and Asset Valuation

As they say at Ginsu, “but wait, there’s more,” where pulp non-fiction replaces fiction, opportunity abounds.

Mercer is pursuing a significant carbon capture project at its Peace River mill in Alberta, Canada. This mill is uniquely positioned due to its location “almost on top of” large physiological formations ideal for carbon sequestration, minimizing transport distances. The project aims to extract 500,000 tons of CO2 using a membrane-based technology developed in partnership with Svante. This initiative has “incredible potential for revenue and profit,” with the Juan Carlos Bueno telling us that CO2 could become the “number one profit contributor on top of pulp” for the mill, fundamentally transforming it into a “biorefinery”.

The project, estimated at $500 million, benefits from substantial government support, with up to 75% in subsidies and grants, making it “bite size” and a very quick payback. Bueno explicitly confirms that such a facility “becomes more of a carbon capture asset that just happens to have a pulp mill as a vehicle for it,” significantly increasing the mill’s valuation. This reflects how strategic investments in sustainability can fundamentally redefine the financial value of traditional assets. This initiative directly contributes to Mercer’s target of a 50% reduction in Scope 1 GHG emissions intensity by 2030.

Lean In: Optimization as Ascent

In leadership circles, “lean in” became a rallying cry — an invitation to step forward, take risks, and claim space in rooms where power traditionally excluded. Mercer’s transformation draws from that same boldness: stepping forward not just into sustainability, but into systemic reinvention. Here, leaning in doesn’t mean cutting corners — it means cutting waste. It means seeing operational excellence not as a constraint, but as an engine. Net Zero isn’t a side quest; it’s the proving ground for leadership. So yes — lean in.

Mercer is implementing cost reduction initiatives and operational efficiency measures targeting approximately $100 million in savings by the end of 2026. This includes reducing inventories and focusing capital expenditures on maintenance and accretive projects. They are converting the lime kiln at their largest pulp mill in Germany from natural gas to biomass (pellets produced internally), which will be a “very significant contributor to the reduction of greenhouse gas emissions,” helping them achieve almost halfway to their 50% Scope 1 GHG reduction target by 2030. This project is supported by a 50% grant from the government.

Mercer’s investment in mass timber (like CLT and glulam) is another key area. While not directly about energy efficiency, it’s about expanding higher-value offerings and replacing fossil-based and carbon-heavy materials in construction, thus supporting low-carbon transitions and driving long-term growth potential. Mercer holds approximately 30% of North America’s installed CLT capacity. This contributes to storing carbon in long-lived products and displaces emissions from traditional materials.

The Triple Bottom Line

For quite a while, sustainability has been a simile for environmentalism — but it didn’t start that way. It started with the idea of a triple bottom line: that companies would not achieve meaningful financial goals unless they paired them with social and environmental goals. They are supposed to work in harness — not opposed to one another. Perhaps, we’re getting back that sort of thinking.

Sustainability is not just a separate initiative but is woven into the core business strategy to create lasting enterprise value. By transforming their pulp assets into “true biorefineries” and leveraging byproducts for higher-value products and carbon solutions, Mercer is demonstrating how environmental stewardship can directly translate into financial gain and competitive advantage.

For Mercer, achieving triple bottom-line goals — delivering significant environmental benefits (decarbonization, circularity), fostering societal well-being through sustainable solutions, and driving substantial financial returns — is not an alternative to ESG, but rather the strategic realization of its inherent value. It underscores that truly integrated sustainability, where environmental stewardship and social impact become direct drivers of innovation and profitability, is the definitive blueprint for long-term competitiveness and value creation in the evolving bioeconomy.

Shh, don’t tell anyone. Let me whisper it to you. Lean in. It turns out, truth is not only stranger than pulp fiction — it’s more profitable. Just our little secret.

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