Story | 04/27/2023 13:28:16 | 6 min Read time

UPM is getting ready to deliver more pulp to new markets

Dan Rider

The Paso de los Toros mill will increase UPM's pulp capacity by more than 50%. China remains the largest market, but UPM is also looking for success in North America.

"Our customers have been asking us when they can start receiving pulp from Paso de los Toros since some time already. The mill started operations in April and we will need some time to build up our inventory, after which it will shipped. Customers should expect our product physically in the market in the third quarter of 2023," says Tomas Wiklund, Senior Vice President, Sales, UPM Pulp

UPM Pulp has successfully established itself as a reliable player in the Asia-Pacific region and Europe during the last decade, and is now using this experience, as well as the increased capacity available from the new Paso de los Toros mill in central Uruguay, to begin to develop its third strategic market, North America during 2023.

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China first

China remains the world’s largest pulp market. That said, there are now some concerns growing about the direction that China is moving, and whether it is going to continue to be the engine of growth for industries in the world. The company, however, continues to have a strong belief that it is a good market and there is going to be growth there, but probably not to the same extent as has been seen in recent decades.

“It is becoming more and more important to choose who you work with in China. Even if growth isn’t the same massive annual growth percentage numbers as previously, the actual volumes in demand and output are going to continue to increase. In addition, China is moving in a ‘quantity to quality’ direction, which also has a direct impact on the line of business that we are in. We want to work with the large, well-established, and financially sound Chinese producers. There continues to be more growth in China in comparison to other markets, so that market can more easily absorb larger new quantities of pulp,” notes Wiklund.

UPM inaugurates its new deep sea pulp terminal in the Port of Montevideo

Breaking into North America

With the significant addition of Paso de Los Toros, UPM is determined to seek success in North America as well. Previously, UPM had not delivered to the market, but rather built the customer base in Europe and Asia, with a clear growth focus on China. But with the additional 2.1 million tonnes of capacity from the new pulp mill, the company now believes it is the right time to start selling their pulp in North America.

That said, breaking into new markets has traditionally always carried elevated risks for any business. “The potential concern from investors could be due to the fact that North America is a very mature market and demand for pulp, for fibre, is not necessarily growing,” says Wiklund.

“It might be growing in the tissue segment, but it is declining in the printing paper sector. But North America is the world’s third biggest pulp market, the product we are bringing to the market, eucalyptus, has different quality characteristics than the locally produced hardwood pulp, and the North American market gives credit to the eucalyptus fibre and its technical properties as a superior fibre in certain end-use areas. Hence, we believe that there are good prospects for us to develop a viable market there.”

Betting big on global pulp demand

A global sales organisation boosted

The greater part of the 2.1 million new tonnes of pulp coming to the market will be delivered to existing customers in Asia and in Europe but also new customers in North America. “In some cases, companies in Europe and Asia have been asking for more pulp. Particularly in China, they have been building new paper machines every year that they need to feed with pulp. Now with our new pulp capacity, we can increase our supply to meet their demand,” describes Wiklund.

“During the construction of the mill we strengthened our global sales organisation and now have our own sales team for North America. We have gradually been developing the organisation and our competences, furthering digitalisation in logistics and technical customer service, for example. In addition, the company’s global sales organisation has been strengthened.”

There is definitely a global market for us. We are committed to the market and our customers and we are confident about the future.

While it is going to be a learning curve in 2023, this is a potentially 50-year project, so time is very much on our side.

Responsible wood sourcing

End-use applications

In terms of the end-use applications, the company is confident that the quality of the pulp from the new mill will be industry leading and optimal for what the market requires to be able to convert it to the desired end products, such as tissue papers, printing papers or renewable fibre-based packaging materials. 

"Tissue papers is the end-use area where we see increasing demand globally and consumption is growing even in the mature economies. In the Asian region, that increase in consumption of tissue or hygiene papers is mainly linked to affordability and the growing middle class."

The growing purchasing power of the middle classes, especially in the developing economies, increasing urbanisation, and concerns about the negative impact of climate change, is driving the global demand for renewable wood-based materials like pulp. The demand for market pulp is estimated to increase by about 3% annually.

Pulp can be utilised to create various hygiene products, packaging products, specialty papers, textiles and more. With carefully developed plantation-based eucalyptus, UPM has proven it can consistently provide its customers with the optimal characteristics for their products – qualities related to processing, like runnability, and end-uses like strength, printability, surface smoothness and opacity of the paper.

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UPM foresees that it will be providing pulp to entirely new products going to the market but does not currently believe that it is going to be in significant volumes, or indeed will happen anytime soon. 

"I think it is rather about other things such as replacing plastics with paper packaging material. Consumer preferences who see that that plastic or other fossil-based products isn’t that good for the environment, despite their practical use; that is where we will see a bigger growth in consumption demand for fibre and paper products. We will likely see new applications for our pulp appearing as well, but it will take a while," posits Wiklund.

 

Main image: Loading of the first bales from the UPM Paso de los Toros mill in Uruguay in April.

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