Arauco enters the pulp business in Brazil with its largest investment in history

RIO DE JANEIRO, BRAZIL – Arauco took an important step in announcing its entry into the pulp business in Brazil after closing an investment agreement with the government of Mato Grosso do Sul for the future construction of a pulp mill.

The new venture of the Angelini group company will be located in the municipality of Inocência, 337 km from Campo Grande, the capital of the state of Mato Grosso do Sul (MS).

According to figures from the forestry company, the project contemplates an investment of US$3 billion and will begin construction in 2025.

“Brazil is an important pole for the company’s global strategy. We have had a presence in this country since 2002, with industrial timber facilities and forestry operations, and we are now evaluating increasing our investments in Brazil, entering the pulp business,” said Matías Domeyko Cassel, executive vice-president of Arauco.

The governor of the state of Mato Grosso do Sul, Reinaldo Azambuja, commented: “we are going to welcome one of the largest pulp mills in the world to the state. It will be a modern unit generating jobs, opportunities, income, and social development in a region that is also part of the Eastern Forest Coast but did not have any such enterprise”.

Arauco estimates that its arrival in the pulp business in Brazil will create 12,000 jobs for the construction phase and 2,350 permanent positions.

However, the company clarified that it still has to wait for “the approval of the Environmental Licensing, the evaluation of the timber offer, and the confirmation of the investment by the company’s board of directors”.

The company added that if there are no setbacks in the processing of the project, the mill should be operational in the first quarter of 2028, with a capacity to produce 2.5 million tons/year of short-fiber pulp.

The initiative, known as “Projeto Sucuriú”, would increase the company’s total production capacity to 7.7 million tons/year of pulp from 2028, according to a press release issued by Empresas Copec.

Following the announcement, and if the project is completed in Brazil, Arauco will add the South American giant to its pulp operations in Chile, Argentina, and Uruguay.

Arauco has been present in Brazil since 2002, but not in its core business: it has four wood panel mills in Paraná and Rio Grande do Sul states.

The Angelini group company has seven pulp mills: five of them in Chile (with 2.9 million tons, including the upcoming start-up of Mapa), one in Argentina (350,000 tons), and another in Uruguay (710 tons), totaling 5.2 million tons per year.

In 2021, Arauco’s sales reached US$6.4 billion, of which 44% came from pulp sales and 56% from wood products. The total area of planted forest, from which part of the raw material supply for the global production of 4 million tons of pulp, 13 million cubic meters of wood and wood-based panels, and 779 MW of energy is obtained, amounts to 900,000 hectares.

According to a presentation by Arauco, the company is the second-largest pulp producer in the world and will reaffirm this position after the start-up of the modernization and expansion project of the Arauco Plant (Mapa) and the project in Brazil. The company is above CMPC and well below Suzano (a Brazilian company).

CMPC also has large investments in pulp in Brazil and, together with Arauco, is diversifying its presence in this area in the region’s largest market. In addition, the Matte family company is also diversifying its other business lines on Brazilian soil.

A HISTORIC MILESTONE

Arauco’s announcement also stands out as one of the most expensive projects in recent times for a Chilean company and is considered the largest investment by this Angelini group company.

The venture in Brazil exceeds the US$2.35 billion investment initially earmarked for the initiative to modernize and expand the Arauco Plant (Mapa), announced in 2018 and projected to be operational by the end of March 2021 as rectified from Arauco.

However, Mapa would not be much further behind in amounts, as the delays of this initiative will make the project more expensive on Chilean soil.

Another difference is that Mapa will produce 2.1 million tons/year of short-fiber pulp, and Brazil will be able to generate 2.5 million tons.

With information from La Tercera