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Deutsche Bank's Mark Wilde recently reported on new pulp mill announcements noted elsewhere. Arauco is planning a new pulp mill in southern Chile, 1.3 million metric tons per annum starting up in late 2015 (your author gets a bit nostalgic over this -- I was on the board of directors of Jaakko Poyry Chilean when we built a pulp mill in Nacimiento, Chile, in the late 1980s). APP is planning a new mill in South Sumatra that will be the largest in the world -- 2 million metric tons per annum -- when it starts up in 2017. Other pulp lines are underway in Brazil (including MWV Corporation).

Long-term projections all agree the world will need this pulp. It is the coming on line and start-up curves that will be interesting to watch. Flood the world too soon, before demand is in place, and two things will happen. Prices will dip and more colder climate, old pulp mills will disappear. These colder climate mills are destined for the scrap heap anyway -- they just cannot compete with eucalyptus long-term, but their demise may be faster than would be otherwise expected if the supply/demand curves become unbalanced.

This demise has been going on for a long time. Starting in the near polar regions, mills have been shutting down, based on local political, environmental, and economic conditions for nearly 30 years (remember when there were two pulp mills in Alaska?). Long-term, pulp, especially for bleached applications, will be a tropical and sub-tropical product only.


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