"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.
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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.”