UPM annual report 2014

20-21 / 150

UPM Annual Report 2014 UPM Annual Report 2014 17 18
CONTENTS
BUSINESSES 15–30
role in the wood supply chain,
as their by-products are used in
the production of pulp and
energy. In UPM Biorefining,
UPM benefits from efficient use
of sustainable wood raw materi-
als and integrated production.
Business development
In 2014, UPM proceeded with
efforts to increase pulp capacity
through debottlenecking invest-
ments, and to improve the
efficiency of mill integrates in
order to release the full poten-
tial of production assets.
As part of UPM’s growth
projects, it is targeting a 340,000
tonne increase in existing pulp
production capacity with invest-
ments of approximately EUR
200 million. These projects are
primarily production debottle-
necking investments and estimated to be value
enhancing at low risk.
The modernisation of one fibre line at the
UPM Pietarsaari pulp mill was completed in
June. The investment of EUR 13 million
increased the mill’s production flexibility in
terms of the use of wood raw materials, as well
as the mill’s capacity to gradually grow by
70,000 tonnes.
In February, UPM announced EUR 160
million investment in its Kymi pulp mill, com-
prising a new pulp drying machine, modernisa-
tion of the softwood fibre line, a new barking
line, as well as improvements to the energy
balance of the Kymi integrate. The investment
will increase the mill’s production capacity by
170,000 tonnes and advance the decoupling of
UPM’s pulp and paper operations. The invest-
ment is expected to be completed by the end of
2015.
In June, UPM received an increased produc-
tion permit for the UPM Fray Bentos pulp mill
in Uruguay, entitling the mill to increase its
production from 1,200,000 tonnes to 1,300,000
tonnes. To achieve this, minor investments were
carried out during Q4 2014. Debottlenecking
potential has also been identified at the UPM
Kaukas mill.
UPM has consistently developed its pulp
business with a unique sales and marketing
network providing customers with a multi-fibre
pulp product range directly from producers to
the global market. Pulp has a wide range of end
uses with different features and quality require-
ments, and selecting the most suitable fibres
provides clear benefits. UPM’s own pulp sales
and technical service experts locate strategically
close to customers and in each mill. This model
provides the customer with fast service and
support.
As a product, UPM BioVerno has been
extensively tested in engine tests and fleet tests,
and has been found to function like any regular
diesel. Due to the high quality, there are no
technical blending limits. UPM BioVerno is
also a sustainable alternative – it ensures a
considerable reduction in greenhouse gas emis-
sions, and is refined from a sustainable raw
material, a residue from pulp production. UPM
BioVerno is a competitive alternative to provide
the renewable component in traffic fuels, and is
well-positioned among the few existing
advanced biofuel alternatives available on the
market.
In sawn timber, UPM proceeded with meas-
ures targeting improved operational efficiency,
and focused sales and supply chain manage-
ment. As an example, the modernisation of
the sticking machine at the Alholma sawmill
increased production efficiency.
In January 2014, UPM
strengthened its fibre offering
through a strategic sales and
marketing co-operation with
Canfor Pulp Products Inc. This
co-operation provides customers
with the most versatile range of
northern softwood, birch, euca-
lyptus and mechanical pulp
available on the global market, in
combination with world-class technical service.
As part of UPM’s growth projects, commis-
sioning of the UPM Lappeenranta Biorefinery
proceeded well during the second half of 2014
and commercial production of UPM BioVerno,
its advanced renewable diesel, started in Janu-
ary 2015. The focus is on commercialising the
investment and developing UPM’s proprietary
technologies for broader raw material use.
In June, UPM published a sales agreement
for UPM BioVerno renewable diesel with
NEOT (North European Oil Trade). NEOT
specialises in oil and biofuels wholesale to
service stations such as St1 and ABC. UPM
BioVerno is distributed to Finnish service
stations and the annual production of UPM
BioVerno will cover nearly a quarter of Fin-
land’s 20% renewable energy target for trans-
port in 2020.
UPM Biorefining
WOOD-BASED UPM BIOVERNO
IS SUITABLE FOR ALL DIESEL ENGINES
UPM’s renewable diesel fuel, UPM BioVerno, is an exceptional
innovation. It is produced from crude tall oil, a residue of UPM’s
own pulp production.
The high quality wood-based renewable diesel reduces greenhouse
gas emissions significantly compared to fossil diesel fuel, and does
not compete with food production. UPM BioVerno is manufactured in
Lappeenranta, Finland. The production supports the local economy
and improves self-sufficiency in traffic fuels.
UPM BioVerno is compatible with all diesel engines in passenger cars,
buses and trucks – without modification. In Finland, UPM BioVerno
is available in St1 and ABC service stations.
UPM BioVerno has been granted the Finnish Key Flag Symbol, which
guarantees the Finnish origins of a product. It has also received
international awards, such as the EU Sustainable Energy Europe
2014 Award, granted by European Commission.
UPM BioVerno diesel has been granted certificates for sustainable
sourcing, production and product safety. The certifications verify
that the fuel has been produced according to the EU directive on
renewable energy, taking into account environmental, social and
transparency aspects.
Read more:
FIBRE UNITED,
UNIQUE COLLABORATION
UPM Pulp and Canadian-based Canfor Pulp’s sales
and marketing co-operation started strongly in all its
markets in 2014. Customers are able to choose from
the most versatile range of pulp available on the global
market in combination with world-class technical
service.
As of the beginning of 2014, UPM’s sales network has
represented and co-marketed Canfor Pulp’s products in
Europe and China, while Canfor Pulp’s sales network
has represented and co-marketed UPM Pulp in North
America and Japan.
Based on customer feedback, customers have benefited
from direct access to a broader product offering for
every end use, enhanced product quality and improved
business planning.
During the first year of co-operation, former sales
channels were replaced, sales personnel were trained
and product information was shared. Further benefits
are expected to achieve from the technical and logistics
co-operation.
The co-operation includes six pulp grades and approxi-
mately one million tonnes of pulp sales from eight mills
on three continents.
Read more:
Markets and drivers
• Chemical pulp demand is growing globally
by approximately 2-3% annually, driven by
growth in private consumption. In 2014,
global market shipments increased by 2%
compared to the previous year.
• In mature markets, consumption is driven by
an increasing use of hygiene, packaging and
speciality products. In developing markets,
growth is also underpinned by middle class
expansion and fast urbanisation.
• Demand for hardwood pulp grows faster than
for softwood pulp due its end-use qualities
and lower production costs.
• The global hardwood pulp production capac-
ity is growing, primarily through new produc-
tion line installations entering the market.
The softwood pulp market has remained in
balance thanks to limited capacity additions.
• Chemical pulp demand is also supported
structurally as the graphic paper segment
supplies fewer white recycled fibres for the
growing tissue and speciality segments. Older
pulp capacity has been closed down for finan-
cial and environmental reasons.
• Demand for biofuels is growing due to stricter
environmental standards and sustainability
requirements. The share of advanced biofuels
in increasing.
Risto Kotilainen (left),
Hannu Kykkänen and
Thomas Björklöf cheer after
the start-up of the UPM
Lappeenranta Biorefinery.