Aracruz suspends construction of new pulp mill in Guaiba

Posted: 26 October 2008 in


Aracruz has announced that it is to “temporarily suspend” the construction of its new pulp mill in Guaiba, Rio Grande do Sul province. Construction at the proposed new 1.3 million tons per year pulp mill started in August 2008 and the planned start of operations was 2010.

Aracruz is taking several other measures to save money, including stopping the buying of land and establishment of new plantations at the Veracel project in south Bahia. The company aims to reduce the amount of money it spends in 2009 by about US$900 million. In an announcement on the company’s website, Aracruz explains why it is trying to save money:

“Despite the solid fundamentals of its business – Aracruz is one the lowest-cost producers of market pulp – the company’s liquidity has been severely impacted by the low availability of credit and the high perception of risk of the financial market, which has intensified over the past few weeks with a reduction in global growth and widespread uncertainty regarding the future.”

Aracruz’s website also mentions that it is “implementing a series of measures to gradually reduce its exposure to derivative operations”. Earlier this month, Aracruz announced that it may lose about US$1 billion from derivative investments. As a result of this, Fitch Ratings downgraded Aracruz’s credit rating.

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