Summary
Favorable timber growing conditions, a good business climate and a stable political environment has attracted a number of European forest companies to invest in Uruguay the past few years. The establishment of fast-growing Eucalyptus and pine plantations could eventually support two or three new pulpmills.
Analysis
Uruguay is a new destination for investors in forest plantations and in forest products manufacturing. There is currently only one pulpmill in the country but there are plans for at least three more if financing for the projects can be secured. The Finnish company Metsa-Botnia is the owner of the existing mill, which has an annual production capacity of about one million tons. Two-thirds of the wood supply is coming from the company’s nearby Eucalyptus plantations, while local private landowners supply the remaining pulpwood, as reported by the Wood Resource Quarterly.
Portucel Soporcel, a Portuguese paper company, has announced interest in establishing a pulp and paper mill in Uruguay. In the fall of 2008 there was a Memorandum of Understanding signed with the Government of Uruguay stating that an investment in a pulpmill with a capacity of 1.3 million tons should be explored. The site for this mill has not been announced but based on available plantation resources and competing pulp projects, it would be logical to locate the plant in the southeastern part of the country.
Another company that has plans for investing in a pulpmill in Uruguay is the Swedish-Finnish pulp and paper company STORAENSO. The company has plantations in the central region of the country and could also source wood from its plantations on the other side of the border in Brazil. The company’s goal is to manage 100,000 hectares of plantation to supply the planned mill (capacity one million ton per year). The exact location has not been defined, but it will likely be somewhere in the center of the country. The company had purchased about 70,000 ha, of which 14,000 ha have been planted with pine and Eucalyptus in 2008. In late May this year, the company added another 65,000 hectares to its estate with the acquisition of forest plantations from the Spanish paper company ENCE.
ENCE was planning a pulpmill southwest of Montevideo, designed to produce about one million tons of Eucalyptus pulp but recently canceled those plans when the company sold 130,000 hectares of its 160,000 hectares of plantations in Southern Uruguay to STORAENSO in Finland and Arauco in Chile.
As long as the domestic demand for wood is limited, the exports of Eucalyptus wood chips will continue to flourish. In 2008, shipments more than doubled from the previous year, totaling an estimated 1.3 million tons.
