Chile Earthquake Shocks World Pulp Market Supply

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Preliminary reports suggest that the recent 8.8 magnitude earthquake in Chile may rattle the supply/demand balance in world pulp markets, according to Mark Wilde, senior analysts with Deutsche Bank. The epicenter of the quake was just off the coast and about 200 miles south of Santiago. This is near the center of Chile's commercial forestry region, where most of the country's pulp mills are located, Wilde notes. Arauco, the largest pulp producer in Chile, has four of its five mills in that country within 150 miles (˜241 km) of the epicenter.

Those four mills have a combined capacity of about 2.15 million metric tpy. CMPC, the other large Chilean pulp producer, has two of its three mills within 150 miles of the epicenter, with a combined annual capacity of about 1.65 million metric tpy. The two companies also have one mill each with about 500,000 metric tpy capacity farther from the epicenter. In all, the two companies have about 3.8 million metric tpy of capacity within 150 miles of the epicenter and another 1.0 million metric tpy of capacity farther away. The total of 4.8 million metric tpy represents about 8% of the global chemical paper grade market pulp capacity.

All pulp mills in Chile are down at the moment, Wilde says. "We understand that some of the plants have been flooded and that access to them has been restricted by the local authorities. Reports indicate that there is also damage to highways, railroad tracks, and port infrastructure near production facilities. CMPC has declared force-majeure for an initial period of 30 days due to the earthquake. However, with its key mills located farther from the epicenter, CMPC's damage is likely to be less severe than for Arauco's," Wilde says.