UPM’s Paso de los Toros pulp mill to reach nominal capacity by end of year

Speaking to reporters at the firm’s Q1 financial results presentation, UPM CEO Jussi Pesonen said that the new 2.1 million tonne/yr bleached eucalyptus kraft (BEK) pulp mill in Paso de los Toros, Uruguay, which started up last week, will complete its ramp-up phase and hit nominal capacity by the end of this year.

“The Paso de los Toros pulp mill in Uruguay is currently ramping up production and is already producing high-quality, sellable pulp,” said Pesonen. “This is a very […] fast ramp-up – within three quarters,” he added, noting that contributions to EBITDA generation would begin by the end of Q2.

The CEO also confirmed that the new mill’s cash cost will ultimately reach a level of some $280 per delivered tonne. “When it comes to starting up the Paso de los Toros [mill], we will see what the cash cost level will be by the end of the year when we are fully ramped up, but basically, there’s no reason why it should not be very competitive,” he added.

UPM also noted that it will carry out “significant scheduled maintenance activity” at its 870,000 tonne/yr Kymi softwood and birch pulp mill in Q2 and at its 770,000 tonne/yr Kaukus softwood pulp mill in Q3. It did not specify the dates of the shuts.

Addressing the financial results, Pesonen said that this had been the firm’s second-best Q1 in over 20 years, with sales up by 11% from Q1 last year to Euro 2.8 billion ($3.1 billion), while comparable EBIT was up by 29% to Euro 356 million.

Intense destocking in the industry

On the downside, the CEO noted that market shipments in most product areas were “substantially below the long-term trend due to intense destocking in the product value chain.” This also held back UPM delivery volumes across almost all of the firm’s business areas, with the average delivery to capacity ratio amounting to some 70% in Q1.

The impact of destocking has been felt across multiple UPM business segments, including pulp, specialty papers and communication papers, Pesonon said. “We expect the destocking impact to phase out in the coming months and quarters, although it will still be impacting the markets this quarter,” he added.

This article was first published in our PPI Europe newsletter. Learn more about how capacity growth is impacting the pulp market in our forecasts and market analysis.