Chile Arauco Eyes New Pulp Plant To Fuel Regional Expansion

SANTIAGO -(Dow Jones)- Chilean wood pulp producer Celulosa Arauco y Constitucion SA seeks to continue its regional expansion as it develops plans for a new pulp mill in Uruguay, Arauco's corporate director, Franco Bozzalla, said Tuesday.

Arauco, through a joint-venture company with European pulp producer Stora Enso Oyj (SEOAY, STERV.HE), is moving forward in its plan to build a pulp plant in southern Uruguay, Bozzalla told reporters on the sidelines of a forestry sector seminar.

Arauco, a subsidiary of fuel and forestry conglomerate Empresas Copec SA (COPEC.SN), would have access to 50% of the plant's production, while Stora Enso would have access to the rest.

"We are doing all the technical studies, working with the government, working on getting permissions, and we are going to be ready before the end of the year to present the project to the board of directors," Bozzalla said.

The investment of around $500 million would be a major step in increasing Arauco's role as a global pulp producer. The plant would have a capacity of 1.3 million metric tons per year, and its port's location would allow immediate transportation of products to Arauco's markets in Europe and elsewhere, the executive said.

"It's a plant that is not only large, but modern, and equipped with the best technology," Bozzalla added.

Initially, the mill's production would be largely destined for Europe, a major source of pulp demand, but export destinations could expand, given the capacity of the potential plant, he noted.

Within Chile, the firm is still waiting for authorities to approve its optimization plan for its Valdivia plant in southern Chile, which would increase capacity potentially by 2011 or 2012. Still, the process is on schedule, Bozzalla said.

In addition, Arauco expects to see one of its biggest production lines operating again by next February, after it was severely damaged by a massive earthquake earlier this year, he said.

An 8.8-magnitude earthquake rocked south-central Chile on Feb. 27, halting operation of a 500,000-ton capacity production line at its Arauco plant.

While the company is currently operating at 84% production capacity, it has yet to finish repairs on the line, "the heart of the plant," according to Bozzalla.

"We expect to have it producing again within 12 months after the earthquake occurred," he said.

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