UPM-Biofore-Magazine-2-2019

THE 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 as well as in UPM's future earnings.

THE EUCALYPTUS availability for the mill is secured through UPM’s own and leased plantations as well as through wood sourcing agreements with private partners. The plantations that UPM owns and leases in Uruguay cover 382,000 hectares.

is expected on the market during the next three years. The new pulp mill is a USD 2.7 billion investment that requires years of planning. In addition, the mill needs access to competitive, sustainably produced wood resources. The largest risks associated with the pulp market relate to fluctuations in the global economy. As with all other commodities, the demand but even more the price of pulp is subject to fluctuation. “Right now, the price of pulp is significantly lower than last year. But this is something we have to work with.” Eikens expects the new pulp mill to yield profit even in varying market conditions as it will be one of the world’s most competitive pulp mills. The mill’s key assets include its efficient system of wood sourcing and logistics. Its competitive edge is sharpened by the size of the pulp mill capacity, the best available production technology available and skilled personnel. “When the efficiency and cost structure are in order, we don’t have to reduce production even if the market price of pulp decreases. Lower prices are a problem for production facilities that have high production costs because they have to scale down their production.”

The investment will have an enormous impact on UPM’s business operations and long-term value creation.

which started up in 2007.

Uruguay rich in synergies Prior to sealing the deal on the

“We know Uruguay well, and we already have an established organisation with a pool of skilful employees there.” Eikens adds that the synergy benefits of the twomills are substantial, as the newmill can utilise UPM’s existing organisation in Uruguay, from human resources management to financial administration. “We can also share our production andmaintenance expertise. Minimising transport distances from the forest plantations to the pulp mills can in turn critically improve the cost- efficiency of both mills. In addition, we are able to use the same vessels and port logistics in the outbound transport of pulp.”

investment, UPMmapped out various alternative locations for the new pulp mill. Uruguay was chosen because it meets all the credentials for responsible forest industry. The country is stable both politically and socially. In addition, the local legislation provides clear regulations on the use of forest plantations, which contributes to a responsible model of business. Another key factor was that UPM has systematically increased the number of its forest plantations in Uruguay, and the group already has another operational pulp mill in the country — the Fray Bentos pulp mill,

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