LD Celulose to reach 96% of dissolving pulp capacity in 2023: CEO

Story originally published on Fastmarkets.com

Source: LD celulose press office

Brazilian dissolving pulp (DP) producer LD Celulose, a joint venture between the Austrian Lenzing and Brazilian Dexco, has been ramping up to full capacity after more than a year from its start up in April 2022.

The mill, located in the Brazilian state of Minas Gerais between the cities of Indianópolis and Araguari, has a designed capacity of 500,000 tonnes per year of DP.

“We plan to ship 480,000 tonnes of DP in 2023, just short of reaching our full capacity of 500,000 tonnes per year," Luís Antônio Künzel, the company’s chief executive officer, said in an interview with Fastmarkets.

The executive added that LD should end the year with 60,000 hectares of planted forest, a significant increase compared with the initial plantations of 45,000 hectares.

Künzel said that most DP sales are shipped to Asia, mainly to Lenzing's plants in China, Indonesia, and Thailand. "In that first moment, Indonesia and China receive more than 90% of the pulp produced, and only small portions go to other destinations in the area or to mills in Europe.”

With the company focusing on producing DP for the textile market — which is sold directly to viscose fiber producer Lenzing — LD Celulose produced around 200,000 tonnes in its eight months of production last year, shipping 140,000 tonnes. According to LD’s financial statements, its net revenue totaled 1.1 billion Reais ($226 million) in 2022.

In in its latest financial report, Dexco reported that LD posted net revenue of 1.2 billion Reais in the first half of 2023. Künzel forecast that the second half of 2023 "should not be any different from this."

However, the CEO pointed out that those results may vary also according to exchange rates, because production costs are in Reais and revenue from exports are in US dollars.

"At this moment, what dramatically affects us is the exchange rate. The Real appreciation against the dollar [for some weeks of July and August] is much more relevant in our case than the international pulp price variation," Künzel said.

In the first quarter, LD also finished its first scheduled shutdown for adjustments and minor replacements. "This strategic pause allowed fine-tuning of operations, and LD Celulose emerged from the shutdown with production hovering around nominal capacity levels," according to the CEO. "We are now planning the next stoppage, which should take place in March next year."

Production developments

LD’s current focus is also on adapting to fluctuating chemical input costs and keeping production efficiency, with a primary concern being the cost of caustic soda.

"The mill's main [chemical] input is caustic soda, and it is still internationally expensive. Also, we don't have much soda production for our business in Brazil, so this may still be a challenge for us," Künzel said.

The executive also said that LD is working on other issues such as natural gas supply, but it targets a future investment to adopt wood gasification technology for its operations, like other new pulp mills in Brazil are adopting.

For the future, LD Celulose's strategy focus is on stability, quality, and efficiency. "Our growth will take place over the next few years, but very gradually, eliminating small bottlenecks, feeding equipment, optimizing production and resources, and aiming our solidification in the market," the CEO said.

The company has also been committed to developing its workforce, particularly in the local communities. Over the last two years, LD Celulose has invested considerable effort in training over 700 individuals, preparing them for various roles within the organization and bolstering both the local economy and employment prospects.

"We are now at a stable level with the staff. We count on more than 1,000 people in the pulp team, and outsourced employees that also account for over 500 people," Künzel said. "It is an interesting contingent and helps us to follow our project plan strictly."

By ana.enis@fastmarkets.com