Paracel to reach 40,000 ha of forests this year, begin BEK mill construction in 2024: exec

Story originally published on Fastmarkets.com

Source: istock

Paracel expects to have at least 40,000 hectares of planted forests by the end of this year and to begin mill construction on its bleached eucalyptus kraft (BEK) pulp mill project in Paraguay in 2024, a top executive said during a fireside chat at Fastmarkets’ 18th Latin American Forest Products Conference.

In July alone, the company planted 2,422 hectares of forest around Concepción, Paraguay, where the mill will be located. Paracel intends to have 100,000 hectares of timber planted in the short term and to continue improving its plantation records until it reaches 100% of its target planting by 2026, Per Olofsson, the company’s chairman of the board, said on August 8.

“In the first year [2022], we planted 54 hectares. Today, we can plant 54 hectares between seven in the morning and the lunch break,” Olofsson said. “It’s a pretty interesting learning curve we have gone through.”

The company is now focused on securing the wood supply it will need to operate during the start-up years of its planned 1.8-million-tonne-per-year BEK pulp project.

“We’re focusing on building the fiber base first. Paracel has come up to the level where we wanted to be,” Olofsson said.

Paracel intends to meet 60% of its fiber needs from its own wood plantations, with the remaining 40% coming from third parties. That supply will come primarily from the cities of Concepción and San Pedro, Paraguay, and from Mato Grosso do Sul, Brazil, the executive said.

The company has already secured 104% of the timber required for the initial three years of the mill’s operation, Olofsson said. He emphasized the benefits of this foresight, noting the recent uptick in wood prices across the board in recent years.

The executive also dismissed market chatter that construction of the new BEK facility has stopped or been delayed.

“At this point, Paracel is stronger than ever. We are about twice as big as we were last year,” he said.

“We’re moving forward with full force, better than ever, mainly due to our good forestry potential, advance on wood purchase and engineering expertise,” Olofsson continued. “Even being a newcomer to this industry as a company, Paracel was able to [undertake] the most ambitious biodiversity, environment and social project in the forestry industry, and all is progressing well.”

Paracel has completed more than 50% of the infrastructure preparation on the site, with 92 machines working on the site to prepare for construction and about 1,100 people working on the project across three different main operations.

The next step is to start building the structure of the mill.

“We will do that when we feel it is the right timing. A quarterly forecast can’t be given, since the market is still volatile, but this construction will happen in 2024,” he confirmed. “Once it starts, we can expect a 28-month construction schedule and have proper volume production to officially start up in 2027. This could also be a pretty interesting window to enter the market.”

While the mill was originally planned to be able to swing its production between BEK and dissolving pulp, further engineering analysis led the company to decide to only focus only on kraft pulp production, Olofsson said.

The $3.5-billion mill project is set to have a production cash cost very similar to other competitive projects in the region; however, it will set up a great new frontier for pulp in Latin America, the executive said.

“Logistics is one of the main aspects that make Paracel attractive. Paraguay does have a very big river, which is a direct line to the port in Uruguay,” he explained. “The main difference of this project compared to all others is the province. Being in the province of Concepción, we have access to Argentina, Uruguay and the Brazilian states of Mato Grosso do Sul, Parana, Rio Grande do Sul and even Bahia.”

Announced in 2021, Paracel is a joint venture between three family groups: Zapag (Paraguay), Girindus (Sweden) and Heinzel (Austria).

On June 16, the company named Flavio Deganutti, who had served as Klabin’s paper business director since 2019, as its new chief executive officer.

By ana.enis@fastmarkets.com