New pulp mills, planned and under construction
The global expansion of the pulp industry is focussed on developing and transition countries, with massive new pulp mills planned or under construction in Uruguay, Brazil, Indonesia, South Africa, China and Russia. Associated with the expansion of pulp capacity is a huge increase in the area of industrial tree plantations, especially in South America, Asia and Southern Africa.
Table: New pulp mills, planned and under construction (Source: RISI)
The following section provides an overview of some of the countries in which the pulp invasion is taking place, the companies involved and the problems that these projects are creating for local people and their environments. Many of the planned ventures have already led to protests and thus pose considerable reputational risks for investors. While not all of the planned pulp mill projects are described in detail in the case studies, an indication is given of the seriousness of the problems to be awaited.
Overview of the planned pulp expansions
Brazil is currently the world leader in new pulp capacity, with 6.7 million tonnes new capacity planned over the next five to six years. In Uruguay, construction of Botnia’s one million tonnes a year pulp mill is nearing completion and Ence is planning another million tonne mill. Meanwhile Stora Enso is buying up land for plantations in Uruguay and is considering one more million tonne pulp mill. In Latin America, as a whole, about 4 million tonnes of new pulp capacity is currently under construction. This figure does not take into account the new pulp capacity that has recently come on line, such as the new 900,000 tonnes a year Veracel pulp mill and Aracruz’s recent expansions (an increase of 1.3 million tonnes since 2000). In Chile, CPMC started up its 780,000 tonnes a year Santa Fe mill at the end of 2006 and Arauco’s 856,000 tonnes a year Nueva Aldea pulp mill started up in September 2006.
In Australia, Gunns is planning a new pulp mill with a capacity of between 800,000 and 1.1 million tonnes a year. Protavia recently announced that it intended to combine plans for two proposed mills to build a single 700,000 tonnes a year mill in Victoria.
In South Africa, 200,000 hectares of new plantations are planned along with an increase of 565,000 tonnes a year pulp capacity. South Africa’s pulp industry also looks to benefit from Mozambique’s plans to establish up to seven million hectares of plantations. At a Forest Investment Forum organised by the World Bank in 2006, one presentation suggested that within 10 to 15 years “two (or even three) new world-scale hardwood pulp mills could be built in the region”. The Bank’s report of the meeting notes that “Mozambique, South Africa and Tanzania would be the most obvious target countries. 
Other massive plantation schemes are planned elsewhere in the world. The Vietnamese government has a 5 million hectare reforestation plan, of which one million hectares is to feed the pulp and paper industry. About 750,000 tonnes of new pulp capacity is planned or under construction in Vietnam. Three new pulp mills are planned in India, with a total capacity of 540,000 tonnes. In Laos, the Asian Development Bank has set a target of 500,000 hectares of plantations by 2015.
In Indonesia, the government (with the backing of the World Bank) aims to establish five million hectares of tree plantations. Meanwhile, about 4.4 million tonnes of new pulp capacity is currently planned or under study. Further possible projects include a US$ 1.3 billion plan from a group of Indian and Malaysian investors and plans by the South Korean Korindo Group.
Much of the pulp produced will be market pulp aimed at sales to China. But pulp production in China is also expanding rapidly. Although the Chinese government recently announced that it would order the closure of up to three million tonnes of small pulp mills, almost five million tonnes of new capacity is currently planned or under construction in China. The Chinese government aims to establish 5.8 million hectares of industrial tree plantations for the pulp industry by 2015.
Further competition for sales of pulp to China comes from Russia. Currently, about half of the pulp produced in Russia is exported to China. Almost two million tonnes of new pulp capacity is planned in Russia. This figure could increase considerably in the near future. International Paper is in negotiations about a joint venture with Russia’s Ilim Holdings. If the joint venture goes ahead, the companies plan to invest US$ 1.2 billion in new pulp and paper capacity in Russia.
 Eastern and Southern Africa Region Forest Investment Forum. Investment Opportunities: Constraints to Investments and Potential Solutions, The World Bank, Pietermaritzburg, South Africa, 13-16 June 2006.