Departed in Finland, arrived in Uruguay

Departed in Finland, arrived in Uruguay: UPM increases capacity in South America

    The Finnish timber company UPM has submitted an application to the Government of Uruguay to increase the production capacity of the UPM Fray Bentos pulp mill by 15%, from 1.3 to 1.5 million tons per year. Investments in South America were a direct response to high timber prices in Europe and the structural crisis of the Finnish forestry sector, which makes production in Finland unprofitable. While UPM's Finnish plants are shutting down for weeks, the Uruguayan plants are operating at full capacity and planning expansion.

UPM Fray Bentos: 15% growth without increased resets

    At the end of 2025, UPM submitted an official application for the expansion of its UPM Fray Bentos plant, which has been operating since 2007. The project involves an increase in production from 1.3 to 1.5 million tons of bleached eucalyptus pulp per year.

Key details of the project:

• - Additional capacity: 200 thousand tons per year (+15%).
• - Implementation period: 20-22 months of construction work.
• - Investments: will be aimed at eliminating production bottlenecks: a new chipmaking line, two additional evaporators, a new lime kiln with a 60-meter-high pipe.
• - Environmental parameters: the company emphasizes that discharges into the Uruguay River will not exceed the current limit of 71.5 thousand m3 per day.

    The Uruguayan Minister of the Environment, Edgardo Ortuño, said: "In general, the project that is being proposed can be implemented." The Government has also reinstated the work of the Plant's Monitoring Commission, which will hold regular meetings to monitor environmental aspects.

UPM in Uruguay: two plants form global dominance

    The expansion of Fray Bentos is not UPM's only move in Uruguay.

• - Paso de los Toros plant: launched in 2023, reached full capacity of 2.1 million tons per year, which increased UPM's total capacity by more than 50%.
• - Total capacity in Uruguay after expansion: 3.6 million tons of eucalyptus pulp per year.

    Uruguay has become a key node of UPM's global strategy, positioning the country as one of the largest exporters of pulp in the world.

Finland: bus stops as the new norm

    The contrast with UPM's Finnish operations is striking. The company announced temporary shutdowns at two Finnish plants.:

• - UPM Kaukas (Lappeenranta): full stop from August 3, 2026 for about six weeks.
• - UPM Pietarsaari: A potential temporary shutdown is planned for October 2026.

    The official reason is "optimization of production levels and procurement of wood, as well as ensuring profitability in the current market and cost conditions."

The root of the problem: the cessation of imports of Russian timber after 2022 led to a shortage of raw materials in Finland and a sharp increase in prices for local timber. The high cost of raw materials and energy resources makes the production of softwood and birch pulp economically unprofitable in Europe.

Key UPM indicators in Uruguay and Finland:

Market context: eucalyptus pulp vs coniferous

    The UPM strategy reflects global trends:

1. - The demand for eucalyptus pulp is growing: it is used in the production of toilet paper, sanitary products and packaging, segments with stable long-term demand.
2. - Structural demand: The market for BEKP (bleached eucalyptus kraft pulp) is estimated at $2.22 billion in 2025 and is projected to reach $3.98 billion by 2032 with a CAGR of 8.66%.
3. - South America vs Europe: Brazil, Uruguay and Chile are increasing their capacity using fast-growing eucalyptus plantations with a rotation period of 6-7 years. European plants with slow-growing coniferous wood (80-100 years old) are losing out in cost.
4.  

Importance for the global market

1. - Production shift: The mass production of pulp is finally moving to the Southern Hemisphere, where the climate and plantations ensure low cost.
2. - Europe is moving into niches: UPM's Finnish plants, which will survive, will focus on special grades and products with high added value.
3. - Pressure on competitors: The expansion of UPM in Uruguay will increase price pressure on manufacturers in Northern Europe, North America and Asia.
4. - China as a sales market: Uruguay will continue to increase exports of eucalyptus pulp to China, accounting for 46% of the country's total exports.
5.  

Result

    UPM votes with its feet and money: Uruguay gets an extension, Finland gets temporary stops. This is not an accident, but a natural result of the global restructuring of the pulp industry. High costs, expensive raw materials and weak demand in Europe make it uncompetitive in mass segments. South America, with its eucalyptus plantations and favorable investment climate, is becoming a global pulp production center.   For Russian pulp producers, this means increased competition in Asian markets and the need to look for niches where cheap South American pulp cannot compete — for example, special grades of softwood pulp or products of deep processing.

Tags: #UPM #Uruguay #Finland #cellulose_industry #eucalyptus cellulose #global production_investment #cellulose market_