UPM and the Government of Uruguay sign an investment agreement to establish new pulp mill in Uruguay
9 November 2017
UPM and the Government of Uruguay have signed an investment agreement, which outlines the local prerequisites for a potential pulp mill investment. The agreement details the roles, commitments and time-line for both parties as well as the relevant items to be agreed prior to the final investment decision.
The agreement defines the requirements for the operating environment of a world-class pulp mill project. The site of the mill would be close to the city of Paso de los Toros, in the department of Durazno in central Uruguay.
A long-term industrial operation requires stable and predictable operational environment. This will be supported by several measures in the areas of regional development, environment, forestry and land planning as well as labour and energy conditions.
Infrastructure development as key enabler
The Government will develop the rail and road network by tendering the construction and long-term maintenance of the network. The total investment by the Government has been reported to be approximately USD 1 billion. This investment is necessary to enable the establishment of efficient logistic infrastructure in the Uruguayan inland. The Government will also promote concession for a terminal specializing in pulp in the Montevideo port with rail access in order to secure reliable and competitive outlet to export markets.
Once the permitting requirements are fulfilled, the Government will grant the mill a free trade zone status, which is necessary to ensure competitiveness on international markets.
UPM will carry out an engineering study and permitting process for a pulp mill with an annual capacity of about 2 million tonnes of eucalyptus market pulp. The preliminary estimate for a pulp mill investment on site is approximately EUR 2 billion.
In addition, a successful project requires off-site investments in plantation land and forestry, road network and nursery capacity, harvesting and transport equipment, rolling stock for the rail, export facilities and human development.
"Robust infrastructure is elemental for industrial development. The Government of Uruguay is stating their serious intent with this agreement and timeline. The agreement sets the foundation for UPM's planning of a state-of-the-art pulp mill investment," says Jaakko Sarantola, UPM's Senior Vice President, Uruguay Development.
Global demand for sustainable pulp continues its strong growth
"A competitive world-class pulp mill must have a solid wood supply, well-working logistic infrastructure and efficient mill operations. The environmental performance of the mill would be secured with competent and engaged personnel and with best available technology. When in operation, the mill, forestry and related activities would employ 8,000 additional people in its full value chain. The operations would also have a significant positive impact on the central and north-eastern regions."
"The signing of this agreement confirms that we are now entering the second preparation phase of this prospect, which is expected to take some 1.5 to 2 years. Achieving significant progress in the implementation of the infrastructure initiatives is critically important for the final investment decision," says Sarantola.
"The world megatrends support a strong growth of the market pulp demand. UPM's customers value the stable quality of the Uruguayan eucalyptus pulp and hence Uruguay could be a competitive alternative for addressing UPM's pulp market opportunities in the 2020s. The possible new capacity in Uruguay would support UPM's multifibre strategy; to serve customers in growing hygiene, packaging and speciality end-use segments," concludes Sarantola.