According to RISI, Aracruz may be about to announce plans to install another pulp line at its Veracel pulp mill in Bahia. Veracel is a 900,000 t/yr pulp mill, built and run as a joint venture between Aracruz and Stora Enso.
“Just now, we are finalizing studies with our partner,” said Aracruz’s Chief Financial Officer, Isac Zagury. “It makes sense to have a second line and very soon we will have some news for the market.”
Zagury made these comments at a recent conference call to announce Aracruz’s earning for the third quarter of 2006: Net income was US$143 million, compared to US$72 for the same period last year. For the second quarter of the year, however, net income was down 36% compared to the previous year, at 56.4 million .
Zagury declined to answer questions about another increase in the price of hardwood pulp: “All we can say is that we are very confident about the market fundamentals.” Which sounds like Aracruz probably will hike the price of its pulp again.
This is all bad news. When the price of pulp is high, earnings are high and the pulp industry expands capacity. The impacts of the Veracel pulp mill on local communities are already serious. Increasing the capacity will mean a larger area of plantations. More communities will lose their livelihoods. More people will be forced to move to the cities. More forest will be cleared. More streams will dry up. More streams will be polluted by runoff of herbicides and pesticides from the plantations.
It doesn’t even make economic sense. Once the new capacity comes on stream the market is flooded and the price of pulp falls again.