Suzano, Klabin, CMPC and Arauco are sector’s heavyweights in investments
Aires Galhardo — Foto: Silvia Costanti/Valor
Brazil’s pulp and paper industry continues to ride out global economic turbulence and increase investments. In addition to the R$60.4 billion already announced for expansion projects and new mills until 2028, including wood panels, Valor has learned that there are at least more R$3 billion planned for the current growth cycle, consolidating the sector among the largest private-sector investors today.
Among a dozen projects announced or under execution are heavyweights of the global industry, such as Suzano, Klabin, CMPC and Arauco. The largest of them is Suzano’s Cerrado, with a total capital expenditure of R$19.3 billion — of which R$14.7 billion on the industrial front.
In Ribas do Rio Pardo, Mato Grosso do Sul, the company is building the largest single pulp line in the world, with an output capacity of 2.55 million tonnes per year and economic and social development throughout the region.
“It is a transformational project, with wealth generation that goes beyond pulp production,” said Aires Galhardo, Suzano’s head of pulp operations, engineering, and energy. Located about 100 kilometers away from Campo Grande, the municipality has 25,000 inhabitants. When operational, the plant will employ about 3,000 workers, including third-party employees.
One investment not yet reflected in the official estimate of the Brazilian Tree Industry (Ibá) is the installation of four tissue paper machines supplied by Asian company RGE (Royal Golden Eagle) in the country. Bracell, the group’s pulp production arm, confirms the plans but does not reveal the size of the investment.
“In Brazil, the company will have four Andritz tissue machines, with an output capacity of 240,000 tonnes per year. This operation is expected to start as of the second quarter of 2024,” he said, in a note to Valor. According to a source from the sector, a tissue line of 60,000 tonnes per year should demand investments of more than $100 million.
RGE is also building two tissue projects in China. In all of them, it will use pulp produced in its plants in Brazil and Asia as raw materials.
Ibema’s likely investment in a new pulp (BCTMP) mill in Turvo, Paraná, was not incorporated into the official projection as well, since the paperboard manufacturer is still conducting feasibility studies. “Those projects are expected to get off the drawing board,” says an industry source.
Availability of area, short cycle for wood cutting, and favorable soil and weather conditions are among the factors that sustain the country’s inclination toward the forest-based industry. Although Brazil is naturally benefited by those conditions and by a large territory favorable to the activity, the sector also has its own merits, said Marcelo Schmid, managing partner of Index.
“We were able to improve tree genetics and productivity, the performance of operations throughout the production chain, and the management of the activity, with cost reduction, state-of-the-art technology, and respect for the most demanding sustainability standards. These factors together make Brazilian pulp the most competitive in the market and explain the sector’s great attractiveness,” says the specialist.
With operations scheduled to start in the second half of 2024, Suzano’s new mill will be self-sufficient in energy, from a renewable source, and export about 180 average megawatts to the power grid, enough to supply a city of 2.3 million inhabitants for a month.
According to Mr. Galhardo, the construction works of the Cerrado project is already 25% completed. Every day, 50 new workers are hired at the site, and 10,000 will be involved at its peak.
For 2022, Suzano projects disbursements of R$7.3 billion for the project. So far, according to the executive, there is no expectation of a revision of the budget (capex), despite the rise in commodity prices and the advance of inflation. “We managed to close the negotiation in euros. Some commodities became more expensive and had an impact. But, at the same time, the euro depreciated,” he said.
To ensure that logistical hurdles do not affect the on-time delivery of the contracted equipment, the company has a permanent team in China and another on the way to Europe. “The biggest fear was with the logistics issue, but we are managing to ship the equipment,” he added.
According to the executive, projects of this magnitude need to go beyond the plant to be successful: besides the counterparts agreed with the authorities, it is necessary to ensure everything from accommodation and food to health care and education, both during the construction period and after the start of operation.
On this front, for example, Suzano will build a new hospital in the region, which will be transferred to a private-sector operator. In addition, the company is already in talks with private schools to set up a new education center.
*By Stella Fontes — São Paulo
Source: Valor International