Paracel has enough wood to start new BEK pulp mill by 2027; forest productivity improves: CEO

Learn about Paracel's efforts to transform the forestry and pulp industry in Paraguay through its innovative BEK pulp mill project, aiming for a sustainable future by 2027

Paracel’s current 103,000 hectares (ha) of eucalyptus plantations are sufficient for the start-up of the company’s planned new greenfield mill in Paraguay by 2027, chief executive officer Flavio Deganutti confirmed to Fastmarkets in an exclusive interview.

Paracel has continued to make progress in its project to build a new 1.8-million-tonne-per-year bleached eucalyptus kraft (BEK) pulp mill in Paraguay, the executive said. This project marks a new frontier for the sector, he said, noting this will be the first pulp mill to be installed in the country.

“Paraguay has been presenting as a great parallel with the Mato Grosso do Sul state in Brazil, [where several large BEK pulp projects were installed in recent years], with a lot of areas that had been occupied by cattle and now can be used for planted forests. This potential only started to be explored with the Paracel project, but to imagine that the country will reach 1 million hectares of plantations in the future is not that hard,” Deganutti said.

The executive, who is Brazilian and previously served as Klabin’s paper unit director, is confident that the global economic environment is recovering. And with interest rates dropping, Deganutti said he sees room for the project to finalize its financial structure.

The financial markets are strengthening back, with a better perspective for interest rates looking ahead in mature markets…

“We continue to expect the start-up of our mill for 2027. The financial markets are strengthening back, with a better perspective for interest rates looking ahead in mature markets, where funding should come from,” he said.

According to Deganutti, Paracel is paving the way for a strong forestry presence in Paraguay. And since the company is completing its first forest cycle after years of plantings, Deganutti said that important data about wood productivity is now being collected.

The mean annual increment (MAI) at Paracel’s areas is around 31 cubic meters per hectare per year in its first cycle, the CEO stated. That is a very good rate, according to Deganutti, and he noted that there is still a lot of genetics research and development in this area that will take place in the future.

According to him, this rate is higher than the average MAI in Uruguay, for example, where large pulp projects were already settled.

“We always compare Paraguay with Mato Grosso do Sul. There, they also opened a new frontier for pulp years ago, and no one believed in those projects at the beginning, but now it has large areas focused on eucalyptus and pulp,” he said.

Timber investment funds are already visiting the region regularly, and some started to invest in the country. They are attracted by the conditions that Paraguay is offering, with a stable economy, stable currency, respect to private property, with one of the most attractive tax systems in the Americas,” Deganutti added.

Paracel takes a long-term view of its works in the country, he continued, explaining that the company hopes to attract more funds and build up a more developed forestry sector that can house a second line in the future as well.

“No forestry-based business intends to import wood, so in the short run we can benefit from wood supply from Brazil. Wood from Paraguay can also go to Brazil, but over the long term we don’t want to consider high distances to secure wood, so we are increasing our forestry base and closing partnerships at full speed,” the CEO stated.

At the moment, around 45% of the wood Paracel has secured for this project is owned by the company, and the remainder is held by third parties; but the company intends to shift this rate to 70-80% owned in the future.

“We have to keep in mind that the Paracel project is designed to be duplicated, so we need to keep attracting investors to plant forests and keep thinking of future expansions,” Deganutti said.

The company is expanding and also taking care of all sustainability aspects, the CEO said, noting that Paracel expects to receive Forest Stewardship Council (FSC) certification this year.

“Paraguay already has some areas certified, and we do not expect any headwinds on obtaining it. We are working with the schedule to have the FSC [certification] during 2024,” Deganutti said.

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