The announcement comes amid wider reports of general market uncertainty in the European biodiesel space, as producers struggle to operate profitably against a backdrop of consistently high feedstock prices.
“The complexity of a multi-feedstock greenfield investment leading to comparatively high capital (CAPEX) and operating (OPEX) costs, combined with a market that demands competitive production economics, would compromise the long-term business case and expected returns,” a UPM spokesperson told Fastmarkets on Tuesday.
Background and delays in UPM’s biofuels refinery plan
As previously reported by Fastmarkets, the proposed 500,000-tonne-per-year biofuels refinery, which would use advanced feedstocks, was earmarked to be one of Europe’s biggest biorefineries, with the capability to produce advanced biofuels as well as sustainable aviation fuel (SAF).
Despite the announcement, UPM remains “committed to the biofuels business and believe[s] that biofuels markets will provide lucrative business options for UPM,” Harald Dialer, executive vice president of the company’s Biorefining and Technology arm, said.
But the executive added that any future investment “will have to perform against long-term profitability and pay-back expectations” and confirmed that UPM does not currently have any firm plans for “growth investments”.
Plans for the now shelved biorefinery were first revealed by UPM at the start of 2021. But, in 2022, the company indicated that the final investment decision for the facility would likely be delayed until the following year. This was then subsequently pushed back to 2026, after the company was expecting to complete its testing and evaluation of the project.
UPM’s alternative strategies for biofuels production
Dialer said that the company was currently evaluating options to debottleneck and increase output at its 44 million-gallon-per-year Lappeenranta biofuels plant – the company’s sole biofuel – producing facility, located next to the UPM Kaukas pulp and paper mill.
“We don’t foresee one major investment, but a series of gradual optimization steps over time,” Dialer said, adding that UPM is confident that it can increase production capacity onsite.
Broader challenges for biofuels investments in Europe
UPM is one of several biofuels producers that have either paused or cancelled plans to develop new facilities in Europe, while many plants have also closed in the past couple of years.
In 2024, Shell announced a temporary pause of the on-site construction of its 820,000-tonne-per-year biofuels plant also in the Netherlands at the Shell Energy and Chemicals Park Rotterdam.
In July, the company cited project delivery challenges and its need to ensure future competitiveness amid current market conditions as the reasons for its decision. As of this May, the project remains on hold, with no clear timeline available for resuming construction
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