2024 was a pivotal year for the pulp, paper, and forest products industry, navigating an evolving landscape defined by global challenges, regulatory milestones, and emerging opportunities.

From supply chain disruptions due and natural disasters to regulatory changes like the EU Anti-Dumping Ruling and EUDR amendments, 2024 was a year of significant change for the industry. For professionals planning ahead, understanding the key events and trends of the year is crucial. Let’s take a look at the major moments of 2024 that influenced the industry and what they mean for 2025.

Pulp Mill Additions in Latin America

Latin America is solidifying its role as a key player in the global pulp industry, driven by significant investments and expansion projects that are reshaping the market. The region’s favorable climate for eucalyptus plantations, abundant resources, and cost-effective operations have made it a hub for new developments.

Here are some of the major pulp mill projects underway:

• Arauco’s Sucuriú Project in Brazil – Chilean pulp producer Arauco is expanding into Brazil with its ambitious Sucuriú project. The company plans to obtain all necessary licenses by late 2024. This greenfield project will boost Arauco’s production capacity and reinforce Brazil’s position as a global pulp leader.  

• CMPC’s Investment in Brazil – CMPC is moving forward with a $4.6 billion pulp mill in Brazil, expected to start operations by mid-2029. This project is part of a broader growth cycle in Brazil’s forest-based industry and is projected to contribute R$105.4 billion by 2028, meeting the growing demand for sustainable pulp products like packaging and hygiene materials.  

• Paracel’s Greenfield Mill in Paraguay – Paracel is progressing with Paraguay’s first large-scale pulp mill, set to launch in 2027. The mill will be supplied by the company’s 103,000 hectares of eucalyptus plantations, marking an important step in diversifying Latin America’s pulp production.  

• Bracell’s Expansion in Mato Grosso do Sul – Singapore-based Bracell is conducting feasibility studies for a third pulp mill in Brazil, with a planned production capacity of 2.8 million tons annually and an investment of over R$20 billion.  

• Eldorado Brasil’s Expansion in Mato Grosso do Sul – Eldorado Brasil, owned by J&F Investimentos, is investing R$25 billion in a new pulp mill in Três Lagoas. This will increase the company’s capacity from 1.8 million to 4.4 million tons annually, reinforcing Mato Grosso do Sul as a growing hub for pulp production and creating significant economic opportunities.  

These projects highlight a transformative period for the global pulp industry. Brazil, the world’s largest pulp producer, is further cementing its dominance through massive investments.

The focus on sustainability in these developments aligns with the rising global demand for eco-friendly products. Thanks to faster growth cycles and lower costs, Latin America’s competitive edge in eucalyptus-based pulp production positions the region as a key supplier to meet this demand.

However, this rapid expansion raises concerns about market dynamics. Increased supply could drive down pulp prices if demand doesn’t grow at the same pace. Environmental and social impacts of large-scale projects will also require careful management to ensure long-term sustainability.

Latin America’s new pulp mills represent both opportunities and challenges, with companies like Arauco, CMPC, Paracel, Bracell, and Eldorado Brasil leading the way. The region’s growing dominance will continue to shape the global pulp market for years to come.

Significant US Tariff Hike on Candian Lumber

In August 2024, the US Department of Commerce announced a significant increase in tariffs on Canadian softwood lumber imports, raising the combined duty rate from 8.05% to 14.54%. This decision is part of a longstanding trade dispute between the two nations. The US alleged that Canadian lumber benefits from government subsidies, leading to unfair competition in the American market.

The increased tariffs are expected to have several implications for the industry:

• Impact on Canadian Producers: The higher duties placed additional financial strain on Canadian lumber producers, who are already contending with a weak market characterized by low demand and prices. This could lead to further mill curtailments and closures, exacerbating economic challenges in Canada's forestry sector.  

• Shift in Production Dynamics: The US South is poised to surpass Canada in softwood lumber capacity for the first time since at least 1970. This shift reflects how US trade policies and other challenges, including wildfires and insect infestations, have impacted Canadian production.  

• Market Prices and Supply Chains: The increased tariffs may lead to higher lumber prices in the US, affecting construction costs and the housing market. Additionally, supply chains could experience disruptions as importers seek alternative sources or negotiate new terms with Canadian suppliers. 

The Canadian government has strongly opposed the tariff hike, labeling it "unfair and unwarranted." Efforts are underway to challenge the duties through various trade mechanisms, aiming to resolve the dispute and mitigate its impact on the industry.

This development adds another layer of complexity to the North American lumber market, influencing production decisions, trade flows, and economic conditions on both sides of the border.

Market Disruptions Defined 2024
Operating Amid Supply Chain Chaos
 
The pulp, paper, and forest products industry faced a tumultuous year. A mix of geopolitical tensions, labor strikes, and natural disasters significantly disrupted supply chain operations.

The year began with turmoil in maritime shipping. Attacks on vessels in the Red Sea prompted numerous container ships to bypass the Suez Canal, opting instead for the lengthier route around southern Africa.

GEP reported an astonishing 80% decline in maritime traffic through the Red Sea and Suez Canal, with 62% of global shipping capacity taking alternative routes. As a result, global shipping rates soared. For instance, Tim Denoyer, a senior analyst at ACT Research, observed that container shipping costs from Shanghai to New York tripled, rising from $3,000 to $7,800.

March brought additional difficulties with labor strikes in Finland that directly affected the country's freight and rail transportation sectors. Major companies like UPM and Metsä Group were forced to shut down several mills, including UPM's Kouvola, Rauma, and Kaukas facilities. The closings disrupted production schedules and caused widespread effects throughout the supply chain.

Furthermore, a major gas explosion at Metsä Group’s Kemi bioproduct mill further interrupted operations, intensifying challenges for downstream suppliers and partners.

The industry faced even more pressure in the fall as two major hurricanes struck the Southeastern United States within weeks of each other. With ports damaged, transportation routes disrupted, and timberland severely affected, the hurricanes inflicted unprecedented damage on forest-rich states like Georgia.

According to WSAV-TV, the Georgia Forestry Commission (GFC) estimates that Hurricane Helene caused a timber resource impact totaling $1.28 billion. The late September hurricane affected 8.9 million acres of forestland in Georgia.

Examining ResourceWise data at the beginning of November from Brooks, Echols, Lowndes, Ware, Jefferson, and Madison counties in Georgia following Hurricane Helene indicates these changes in stumpage product groups: 

• Pine Pulpwood: 72% drop in price per ton compared to YTD average pre-Helene. 

• Pine Chip-n-Saw: 57% drop in price per ton compared to YTD average pre-Helene. 

• Pine Sawtimber: 49% drop in price per ton compared to YTD average pre-Helene. 

• Hardwood Pulpwood: 72% drop in price per ton compared to YTD average pre-Helene. 

Lessons from Disruptions
These events underscore the importance of resilience and preparedness. Supply chain disruptions like these emphasize the critical need for dynamic planning, proactive risk management, and continuous monitoring of global developments. Professionals equipped with current market insights can anticipate changes and adapt to protect their operations in the face of unforeseen crises.

The EU’s Anti-Dumping Ruling & Opportunities for Forest Products Professionals

One of the major shifts in 2024 came from Europe, where the EU implemented anti-dumping duties between 23.7% and 36.4% on imports of Chinese biodiesel and HVO. This decision will disrupt Europe's largest source of biodiesel and HVO imports. As a result, several feedstocks are poised for renewed market interest, such as crude tall oil (CTO). This advanced biofuel feedstock, a by-product of the pulp and paper industry, may experience increased demand due to shifts in the biofuel sector.

As a result of this ruling, the biofuels market is expected to undergo swift changes in the EU and other regions like the US. This will likely lead to a significant increase in production demands to support the rising adoption of biodiesel, driven by mandates and regulations such as the Renewable Energy Directive (2018/2001) or RED II.

As the demand and value of CTO, a byproduct of the kraft pulping process, rises, producers can access a new revenue stream. By leveraging the increasing worth of CTO, companies can enhance their profitability and secure a competitive advantage in the industry.

The move to use CTO as a key feedstock for biofuel production offers a strategic edge for producers aiming to broaden their product range and maintain a competitive position in a swiftly changing market. With the increasing demand for biofuels, harnessing the potential of CTO can set producers up for enduring success and sustainability within the biofuels sector.

At the start of the previous year, FisherSolve reported that 187 mills were involved in extracting tall oil. Due to historically low prices and variations in yield and quality depending on wood species, not all pulp mills were producing crude tall oil. However, the growing interest in utilizing CTO for biofuel production has invigorated the tall oil market. We anticipate this trend will intensify further with the implementation of anti-dumping duties.

This trend presents long-term growth potential for producers. By integrating biofuel production into business operations, companies can diversify offerings, gain profitability, and support sustainability goals aligned with broader environmental priorities.

EUDR Amendments and Delays
Strides and Pushback in Regulation
While the European Union Deforestation Regulation (EUDR) was formally adopted in 2023, a series of significant developments took place in 2024. Initially scheduled to go into effect in December 2024 for larger operators, the implementation timeline was extended by one year for both large companies (to December 2025) and smaller enterprises (to June 2026).

The delay was a response to widespread international criticism. China expressed opposition to the EUDR, mainly due to concerns about the security risks associated with sharing geolocation data. The situation complicates compliance for Chinese exporters.

This issue is significant because China is a key player in global trade, especially in the forest products sector. It is a major supplier to the EU, offering products like furniture, plywood panels, and cartons.

Through its Belt and Road Initiative, China manages over 30% of the global forest products supply chain. Any deviation from the EUDR regulations could severely affect these supply chains. China's resistance to the EUDR could disrupt the global market for timber, paper, and pulp products, potentially leading to shortages and higher costs for businesses reliant on these materials.

China's opposition mirrored the position of the United States. Twenty-seven US senators called on the EU to postpone the EUDR's implementation, claiming it acts as a "non-tariff trade barrier." They cautioned that it could interfere with the $43.5 billion forest product trade between Europe and the US

Introducing the “No-Risk” Category
Amendments to the EUDR introduced a new “no-risk” country classification, designed to streamline compliance. Businesses sourcing materials from these countries are exempt from submitting due diligence statements or providing geolocation data, simplifying regulatory processes.

Critics, however, argue that the “no-risk” classification undermines the EUDR’s original intent to combat deforestation and safeguard forests. While easing burdens on businesses, the changes also place the regulation’s broader climate goals in question.

Looking ahead, forest product professionals must anticipate the evolving regulatory landscape. New amendments and ongoing debates around compliance will require businesses to remain adaptable and proactive as they prepare to meet stricter environmental standards.

Mergers, Acquisitions, and Divestments

• International Paper Announces Georgetown Mill Closure - International Paper announced its plan to review strategic options for its Global Cellulose Fibers (GCF) business, which includes the closure of its Georgetown mill. The Georgetown mill alone produces around 300,000 tons of fluff pulp, a crucial component for baby diapers and incontinence products.   

• Clearwater Paper to Divest Tissue Business to Sofidel America for $1.06 Billion - In July, Clearwater Paper revealed it had finalized an agreement to divest its tissue business to Sofidel America Corporation for $1.06 billion. According to Clearwater Paper, this transaction marks a significant step in its strategic shift towards becoming a leading independent supplier of paperboard to North American converters. 

• Asia Pulp & Paper to Acquire MSS Holding – Morgan Stanley PE signed a contract with Asia Pulp & Paper Group to sell 100% of its stake in MSS Holdings, the majority shareholder of Ssangyong C&B. MSS Holdings has toilet paper brands Cody and Mona Lisa under its wing. It manufactures and sells a wide range of household paper products such as tissue, wipes, sanitary pads, and diapers. The transaction value of the deal is KRW 420 billion.  

• International Paper's Acquisition of DS Smith: International Paper successfully bid to acquire DS Smith, a leading British packaging company, for $7.2 billion. This strategic move aimed to expand International Paper's footprint in the European market and enhance its packaging solutions portfolio. 

• Saica Group Announces Acquisition of Schumacher Packaging's Polish Subsidiary - This acquisition includes two state-of-the-art corrugated board plants, two paper mills, and three service centers, amounting to 440,000 tons of paper production capacity and 535 million square meters of corrugated board packaging capacity.  

• Ahlstrom's Divestment of Aspa Pulp Mill: Ahlstrom completed the sale of its Aspa pulp mill to Sweden Timber. This divestment aligns with Ahlstrom's strategy to focus on its core businesses and streamline operations. 

Shaping 2025 with Insights from 2024
The lessons learned from 2024’s disruptions, trends, and policy changes offer critical insights to inform strategies for 2025 and beyond. Key recommendations include:

• Strengthen Supply Chain Resilience: Consider diversifying suppliers and routes to minimize disruption risks. 

• Capitalize on Emerging Markets: For example, CTO as a biofuel feedstock remains an unexplored revenue stream for many companies. 

• Stay Regulatory-Competent: Invest in tracking evolving policies like the EUDR and develop strategies to achieve compliance efficiently. 

• Evaluate Sustainability Opportunities: Environmental mandates are redefining industry priorities. Integrating green practices into operations can enhance both brand reputation and profitability. 

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Source: resourcewise.com