Pulp snapshot: UPM CEO, CFO confident market will absorb pulp from new 2.1-million-tonne Paso de los Toros eucalyptus pulp mill in Uruguay, set to start up in Q1 2023; demand continues to grow, but few new pulp mills are being built, old mills will close

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LOS ANGELES , April 27, 2022 () –

Executives with UPM Kymmene Oyj updated investors on the company’s 2.1-million-tonne Paso de los Toros eucalyptus pulp mill being built in Uruguay.

Though the company has pushed back the project’s completion date, work is “progressing well towards its start-up by the end of Q1 2023, with very competitive cash cost level of US$280 per delivered tonne of pulp,” UPM CEO Jussi Pesonen said during the company’s Q1 earnings call on April 26, 2022. UPM has also increased its total estimated investment for the project to US$3.47 billion.

But that investment will grow UPM’s current pulp capacity by more than 50%, resulting in a “step change” in the scale of UPM’s pulp business and in the company’s future earnings, UPM said in its Q1 2022 interim report.

Depending how quickly Paso de los Toros ramps up, the mill will add some 1.5 million tonnes or more in deliveries from UPM’s system, an analyst noted. He then asked how UPM views the market's capability of absorbing that extra volume. 

“The market seems to have been strong for longer, but how does that sort of show in your supply-demand thinking?” he asked.

UPM CFO Tapio Korpeinen said the annual growth is there, as businesses and consumers look for sustainable alternative materials to replace fossil raw materials, “therefore, there is a good demand for pulp.”

There aren’t many new pulp mills in the works, and there will be more closures of old, worn-out mills – all while demand continues to grow, he said. 

“Trend growth will swallow one pulp mill a year going forward and, therefore, quite solid kind of outlook,” Korpeinen added.

Pesonen reminded investors that, for a number of years, “the net increase of capacity has been zero because there’s been delay on most projects, and there’s been exit all the time,” he said. “So, sooner or later, there needs to be some new volume coming to the market because the market continues to grow.”

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