Over the past decade, UPM Pulp has successfully established itself as a trusted pulp supplier in the Asia Pacific region and Europe. Now, the company uses its experience – and the increased available capacity of the new plant in Paso de los Toros, Uruguay – to develop, in 2023, its third strategic market: North America.
“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.
CHINA: THE LARGEST MARKET
China remains the world’s largest pulp market, however UPM claims that there are some growing concerns about the direction China is moving and whether it will continue to be the engine of growth for the world’s industries.
The company, however, continues to strongly believe that this is a good market and that there will be growth there, but probably not at the same rate as 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.
A NEW STRATEGIC MARKET: NORTH AMERICA
The start-up of the company’s plant in Paso de Los Toros, Uruguay, will bring a significant addition and will increase the company’s pulp capacity by more than 50%, therefore, UPM is determined to expand its reach and seek success also in the North America.
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. However, with the new pulp mill’s additional 2.1 million tonnes capacity, the company now believes the time is right to start selling its pulp in North America, despite the elevated risks that entering new markets traditionally brings 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”, completes the executive.
A BOOSTED GLOBAL SALES ORGANIZATION
According to UPM, most of the 2.1 million new tons of pulp coming to market will be delivered to existing customers in Asia and Europe, but also to 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 [in Paso de los Toros], 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. There is definitely a global market for us. We are committed to the market and our customers and we are confident about the future. While it is going to be a learning curve in 2023, this is a potentially 50-year project, so time is very much on our side,” adds the executive.
FINAL APPLICATION
In terms of end applications, UMP claims to be confident that the pulp quality from the new mill will be industry leading and ideal for what the market demands to be able to convert it into the desired end products such as tissue papers, printing papers or packaging materials based on renewable fibers.
“Tissue papers is the end-use area where we see increasing demand globally and consumption is growing even in the mature economies. In the Asian region, that increase in consumption of tissue or hygiene papers is mainly linked to affordability and the growing middle class,” comments Wiklund.
The growing purchasing power of the middle classes, especially in the developing economies, increasing urbanization, and concerns about the negative impact of climate change, is driving the global demand for renewable wood-based materials like pulp. According to the company, the demand for market pulp is estimated to increase by about 3% per year.
