Controversial Botnia pulp mill in Uruguay yields profits for UPM

By Johanna Pohjola
     
      A large pulp mill set up by the Finnish company Metsä-Botnia in Fray Bentos in Uruguay two years ago was transferred to another Finnish forest industry company UPM a couple of weeks ago.
      Pertti Hietaniemi, who was in charge of Botnia’s mill in Uruguay through the autumn, says confidently that the financial crisis has not decelerated their annual production rate of a million tonnes of pulp. In fact, the Fray Bentos mill that started operations in November 2007 has been the most profitable of all Botnia mills.
     
The anniversary of the prosperous pulp mill coincided with a maintenance stoppage.
      Since the start-up in 2007, the aggregate output of the Fray Bentos mill has been more than two million tonnes of eucalyptus pulp. In addition, both the demand for pulp and the global prices of pulp are on the increase.
      ”The mill is on the march again. We can sell as much pulp as we are able to produce. There is light at the end of the tunnel. We hope that the trend continues”, says Hietaniemi, who will leave Uruguay in January.
     
At present, UPM is breaking in its new pulping line. Jussi Penttilä, UPM’s Director of Asset and Pulp Steering, will take over the reins of the company’s new acquisition, which has been renamed the UPM Fray Bentos Mill.
      According to the company, all customer relations remain the same as before. At present, two-thirds of Fray Bentos’s pulp production goes to European paper mills, while the rest goes to China.
     
In November, Argentina received its first delivery from the Fray Bentos pulp mill. Initially, the construction of the Botnia mill was a subject of passionate confrontation between Uruguay and Argentina, as Fray Bentos is situated on the Uruguayan side of the Uruguay River between the two countries.
      The protesters said that they were primarily concerned over the mill’s possible negative impact on the environment.
     
For UPM, the Uruguayan mill means a more established position in the global pulp markets than before.
      However, no extension of the mill is of current interest, says Senior Vice President Jaakko Sarantola who is in charge of UPM’s Pulp Business Area.
      ”The mill has set a world record in bringing up the production capacity, which is the trend we plan to continue. We will concentrate on trimming our magnificent mill and on running at full capacity”, Sarantola notes.
      ”The strategic significance of the investment is that all our eggs are not in the same basket. Our presence in South America gives us an opportunity to learn something new which can lead to other things. At present, the most visible change is that the pulp bales carry a UPM label”, Sarantola adds.
     
At the same time, an anniversary was also celebrated in Argentina, on the other side of the River Uruguay. In November three years ago, the opponents of the pulp mill set up roadblocks in order to hinder cross-border traffic.
      There has been a longtime disagreement about the barricades among local residents. Some say that they are disappointed in this way of protesting, as the pulp mill is still standing on the Uruguay River. Others fear that the opposing opinion might disappear from the eyes of the public if the roadblocks were removed.
      ”We have been fighting against the pulp mill for six years. Why should we give up now? Our goal is that Botnia will be moved inland. We want to maintain the area in its pure natural state”, says Roberto Liebre, who is on duty at the roadblock.
     
Argentina has brought the dispute over the construction of the pulp mill in neighbouring Uruguay before the International Court of Justice in The Hague. A decision is due early this year.
      José Mujica, the new President of Uruguay, who is to take office in March, has promised to find a solution to the pulp mill dispute.
      The most critical opponents are suspicious of everything that has anything to do with the Fray Bentos pulp mill.
      El Día, the local newspaper in Gualeguaychú, claims that the change of ownership is just Botnia’s strategy to ”clean its reputation that has been tarnished by the conflict”.
      ”The new name of the mill is phonetically difficult for us, which is bound to obscure its association with the conflict. Can you imagine how difficult it is to remember - let alone pronounce - the name UPM-Kymmene Oyj? For us the mill will always be Botnia, whatever it is christened”, the anti-mill paper blustered in November.
     
Some rumours circling around the roadblocks even claim that the entire European pulp industry is to be abandoned because of pollution by 2012.
      It is a common belief that the European pulp mills will be moved to South America, with more lenient environmental legislation the incentive.
     
     
FACTFILE: The Fray Bentos pulp mill
     
     
In 2007, the Finnish forest industry company Metsä-Botnia completed a large pulp factory in Uruguay in Fray Bentos near the country’s border with Argentina. The construction of the factory cost approximately EUR 1.0 billion and it began operations in November 2007.
     
On December 8th 2009, the Fray Bentos pulp mill and the eucalyptus plantation forestry company Forestal Oriental in Uruguay were transferred to UPM.
     
The enterprise value of the Fray Bentos pulp mill and Forestal Oriental totals approximately EUR 1.6 billion.
     
The Fray Bentos pulp mill has a production capacity of 1 million t/a of bleached eucalyptus pulp. The project is the largest foreign industrial investment in the history of Uruguay. It is also the largest ever Finnish industrial investment abroad.
     
The profitability of the factory is based on the use of a new raw material - the fast-growing eucalyptus.
     
The eucalyptus cultivation specialist Forestal Oriental owns and manages some 180,000 hectares of land in Uruguay, cultivating some 20 million plants on an annual basis.
     
     
Helsingin Sanomat / First published in print 28.12.2009


Previously in HS International Edition:
  Botnia pulp mill in Uruguay experiences yet another delay (2.11.2007)
  Start up of Metsä-Botnia pulp mill in Uruguay set to be postponed (21.9.2007)
  Harbour handling Botnia pulp deliveries in Uruguay opened on Wednesday (30.8.2007)
  Uruguay government reiterates support for Metsä-Botnia (30.5.2006)
  Botnia pulp factory centre of dispute between Argentina and Uruguay (10.1.2006)
  Argentina to bring pulp mill dispute before Hague court (5.5.2006)
  Argentine president appeals to Finnish government in pulp mill dispute (20.4.2006)

Links:
  UPM press release 8.12.2009
  Forestal Oriental