Chilean Pulp Industry Update

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As aftershocks continue to rattle Chile, "we are attempting to sort out details on the country's battered forest products sector," says Deutsche Bank Senior Analyst Mark Wilde. Wilde notes that Chile produces nearly 5 million metric tpy of market pulp, roughly 8% of world supply. Nearly 80% of that capacity is located with 100 - 150 miles of Concepción. All major pulp mills remain down, and optimistic reports suggest they will be out for 30 days. More cautious assessments are 60 - 90 days.

Aftershocks could easily push the restarts back even further if firms are forced to redo partially-completed inspection regimes. Careful inspection will be required as companies such as Arauco and CMPC prepare to restart large and potentially-dangerous pieces of equipment like digesters and recovery boilers. Reports earlier this week suggested that electricity has just been restored at some of the largest mill sites. If the entire Chilean industry is out for just two months, an optimistic assessment, this implies a loss of 800,000 metric tons, Wilde points out.

The restart at other mills will be even more complicated. For example, Arauco's 355,000 metric tpy Constitucion mill (located on the coast north of Concepcion) was reported flooded by the tsunami. Salt, sand, and other debris will force a more complex cleaning and repair. "We've heard estimates of 4 - 6 months for repairs at the Constitucion mill. We wouldn't be surprised to see it take even longer," Wilde says.