10MT MORE PULP TO BE PRODUCED BY 2020 — IF ALL GOES ACCORDING TO PLAN
After a gap of three years, when the amount of market pulp made in Brazil remained almost static at 14mt (million tonnes) and an average of about 8.7mt has been exported each year, a new 1.5mt-capacity pulp mill will start up in the state of Mato Grosso do Sul at the end of this year. It plans to export about 1.3mt in 2013.
If all goes according to plan, this mill — being built by newcomer the Eldorado company, an associate of the world’s largest meat producing company, the family owned JBS — will be followed by another six mills between 2013 and 2020.
Close to 10mt will be added to output and exports — half expected to go to China, compared with the present 40% or so — will almost double as well
Early next year, a 1.3mt-capacity mill being built jointly by the Chilean Arauco company and the Swedish/Finnish owned Stora Enso, partner with market leader Fibria in the Veracel mill in Bahia state, will start up in neighbouring Uruguay.
This mill is expected to be followed towards the end of next year by the first of two mills to be built in the north eastern states of Maranhao and Piaui, by the Suzano company, now negotiating a partnership with the Anglo American associate, Mondi. Back in the 1980s, Mondi had a 30% share in the Aracruz mill.
Brazil’s largest paper maker, Klabin, will be next on the list, with a 1.5mt mill using both eucalyptus and pine as a raw material to come on stream in 2016 or so in Parana state.
Only then will Fibria, which now produces more than 5mt of eucalyptus pulp from its four mills — Aracruz, Jacarei,Tres Lagoas and Veracel — set about adding a second, 1.5mt line to its Tres Lagoas mill, which started up in September 2009.
Another newcomer, the GMR company, an associate of one of Brazil’s largest electricity distributors, is to start building a mill in the state of Tocantins, to come on stream in about 2018
At about the same time, CMPC is expected to complete a major expansion of the Guaiba mill in Rio Grande do Sul state, which CMPC bought from Fibria a couple of years ago, to take output there to more than 3mt.
The Japanese-owned Cenibra company is considering adding a new 1.3mt line to its mill in Minas Gerais state. However, land in the area is hilly, obliging Cenibra to cut more than the average proportion of wood manually, while new restrictions on the amount of land foreign-owned companies can now buy in Brazil may delay this project.
If all the mills do go ahead as planned — and a lot depends on the state of the world economy, notably that of China, gradually increasing its share of the pulp exported by Brazil — about 2.5 million hectares of forest will have to be added to the seven million now owned by Brazil’s pulp and paper industry.
Whether more paper machines will be added at mills has yet to be decided.
The paper makers seems to have convinced the government to take measures to ensure that imports, which totalled about 800,000 tonnes last year, are in fact only destined for the newspaper and magazine industries, as the law envisages.
Imports of paper for use by the press are allowed into Brazil tax free, but there has been considerable abuse of this rule in recent years. It is claimed that at least half all the paper, much of it from China and often from Brazilian pulp, is in fact used for other purposes and undercuts the paper made in Brazil.
Klabin, for one, will eventually use most of the extra pulp it plans to produce, to make more packaging paper. This is not least because Klabin’s leading customer, the Tetrapak company —
one of whose largest plants is located in Brazil — is planning to almost double output to 15 billion units a year. Twenty per cent of what Tetrapak produces in Brazil is now exported to many of the 170 countries where Tetrapak products are sold.
The demand for liquid packaging — for milk and fruit juices, and more recently for solid foods, notably vegetables and fruits — continues to grow steadily.
International Paper, which owns three paper mills in Brazil, may add a new machine at its plant adjacent to Fibrias Tres Lagoas mill, when this is expanded.
Until about March this year, Brazil’s pulp and paper industry had been badly handicapped by the increasing strength of the currency, the Real, which had risen by up to 40% against the US dollar and other currencies in the past seven years.
The strengthening Real made Brazilian pulp and paper lose competitiveness, something which was further complicated by the financial problems in Europe, still the destination for about 60% of Brazil’s long fibre pulp and the United States, market for a further 15%.
But with the Brazilian economy beginning to splutter during 2011, the government took steps to lower the high interest rates paid in Brazil. High interest had attracted a flood of foreign capital, seeking obtain higher rates of return than that obtainable in countries of the developed world since the financial crisis exploded.
Interest rates in Brazil have now been cut to about 3% after inflation and, coupled with the intensification of the crisis in Europe, the Real has lost 20% of its value against the US dollar in the past eight months, which is greatly benefiting exporters.
The average price of market pulp has also risen somewhat in the past year, so for the time being at least, prospects for the industry appear positive.
With no more land available to allow new mills to be built near the coast in Brazil, all the new projects are located 800–1,000km from ports. Notable amongst these is Santos, which is used by the majority of pulp exporters, notably Fibria and Suzano, together with Portocel, used to ship pulp from Fibrias Aracruz mill, as well as that from Cenibra.
The increasing distance between mills and the ports means the cost of transport is rising, and to combat this, all the companies plan to make greater use of rail in future.
The new Eldorado mill, not far from Fibrias Tres Lagoas complex, has signed a 15-year contract with the ALL railway company, which has undertaken to carry 700,000 tonnes of Eldorado pulp from the new mill, to Santos. Eldorado is to build its new terminal adjacent to one owned at Santos by Fibria, which already takes most of its market pulp both from Tres Lagoas and Jacarei, to the fast-expanding port by rail.
The latest generation of wagons able to carry more than 80 tonnes are now being built for ALL, to cut costs.
Progress is also being made in raising yields in the plantations. At the moment, about 40 cubic metres of eucalyptus wood is grown each year on a hectare of the highest yielding areas, much
more than in most competing countries.
However, Fibria anticipates increasing the amount of pulp which can be produced from the wood grown on an average hectare, from 10 tonnes a year to 15 tonnes.
One major advantage of raising yields by so much is that significantly less land will be needed to keep mills supplied in future than at present.
Exports of all timber products continue to slip, and the 3mt or so shipped last year, was only half as much as was exported in the course of 2006.
There are several reasons for this. The main one is the fast growth of the Brazilian economy, which has grown by an average of 4% a year for the past 15 years or so. This means that millions more people have more money to spend on things like furniture. There has also been a boom in construction, with millions more flats and houses
built, which has caused demand for plywood and sawn timber to shoot up.
More than 30 million Brazilians have been vertically mobile in the past few years and if growth continues, even at a slower pace, more will do so.
About half the wood which is exported used to come from the Amazon rainforest. Because restrictions have been tightened up there, the rate at which the forest is being cleared has slowed dramatically in the past few years. Concern about the risk of climate change means this state of affairs will not be reversed.
The steady rise in the value of the Brazilian currency, has also made timber and wood products from Brazil less competitive than in the past, and although this situation has changed somewhat in recent months, the domestic demand has always absorbed the majority of the wood produced in Brazil.
 
 
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