Suzano Cerrado project: Cost benchmarking boosts competitivity with costs under $100 p/tonne

Ribas do Rio Pardo, MS, Jan 2, 2024 (PPI Latin America) – Brazilian company Suzano, the world’s largest bleached eucalyptus kraft (BEK) pulp producer, is approaching the final stages of its Cerrado project, a new greenfield mill in Ribas do Rio Pardo city, Mato Grosso do Sul state, designed to produce 2.55 million tonnes per year at full capacity with the lowest cash cost in the world.

Announced in 2021, construction on the project reached 80% completion in December, with more than 10,000 workers in the field, visited by Fastmarkets on December 12.

The breakthrough mill was announced with the clear focus of becoming one of the most competitive in the world, with cash production cost of pulp (not including scheduled maintenance downtimes) of less than 400 Reais per tonne and maintenance investments (sustaining capital expenditure) of approximately 270 Reais per tonne.

The cash cost value represented $72 per tonne when the project was announced on November 5, 2021, with currency variations moving it to $82 per tonne on December 29, 2023.

That is less than half compared with the current lowest cash cost mill in the world, which is the Suzano-owned Três Lagoas unit that has a $244 cash cost per tonne, according to Fastmarkets’ cost benchmarking tool better known as Analytical Cornerstone.

Learn how our cost benchmarking tool can help to improve your competitive pricing strategy in the forest product industry. Learn more.

Cost benchmarking regional pulp production

The average cash cost of BEK Latin American mills is $263 per tonne, putting the Cerrado project at another level of competitiveness.

To reach this goal, Suzano housed the project in a new frontier for pulp production, in the small town of Ribas do Rio Pardo, which is still catching up with the 22.2 billion Reais ($4.5 billion) being invested there.

With around 25,000 inhabitants, Ribas still lacks basic infrastructure such as mobile coverage a few kilometers from the downtown, housing and street paving, in addition to social well-being necessities, including education and health.

Suzano offered millions of Reais in counterparts for the state and the municipality, including the duplication of the local hospital, the construction of more than 900 houses for future workers, the construction of police stations and support to local entrepreneurs, among other initiatives.

In return, the company will be able to take advantage of a region with vast pastures that can be converted into forests with a flat topography, combined with an extremely favorable climate for eucalyptus plantations.

“More and more big mills are being constructed inside the forest. This one with an average distance of 65km has a great differential for competitiveness. In the Cerrado project, we have a network of internal roads, tunnels that pass under highways and we will use six-trailer trucks, making it extremely competitive to bring wood to the mill,” the project’s engineering director, Maurício Miranda told Fastmarkets.

Industrial advances improve competitive pricing prospects

Miranda said that the first wood shipment for the mill was made at the end of November, with tests in the wood chipping line coming following in the next few days.

“With that we will start to produce woodchips as biomass, generating vapor to test and clean all production lines, commissioning and warming up systems for a smooth start-up, planned for June,” he said.

According to Miranda, other highlights of the new mill include the surplus generation of 180 megawatts of green power, with two condensing turbines that allow energy generation even with variations in the pulp production process.

Energy production is key for lowering pulp cash costs, with revenue directly affecting the mill’s balance sheet.

“Of the total energy produced, around 80MW will be consumed by the mill and 50MW were already traded in an auction at 2.8 billion Reais in 2022. Today, revenue from utilities is very significant for a pulp mill, while this model of industrial facility is totally adherent to our goals of having a totally clean and renewable energy matrix,” Miranda noted.

Clean energy consumption vs. low-cost production

The Cerrado project will also count on a gasification line to produce Syngas, a mixture of carbon monoxide and hydrogen, which can be used as a clean alternative to fossil fuels. The mill will not have any natural gas pipe connections and will only use fossil fuel during the start up of the lime kiln.

On the industrial side, the low cost is assured by a single line mill, with one recovery boiler and one digestor.

“Only in the drying sections will the production be divided in two. We were more conservative in the washing sections with two lines with three washers each, but the bleaching line is a single one as well, with four stages,” Miranda said.

For water, the executive said that consumption is secured with the objective to use less than 24m³ for one air dried tonne produced, with the premise that water is always a limiting factor.

“We included preventive measures to protect the riverbed and any water use is registered and reported to the environment secretary. We conducted studies for hydric use in the region and even in a stress situation we would not require 5% of the total flow of the river. At the same time, we have protection as only 24km away there is a hydroelectric plant,” Miranda added.

On the logistics side, however, the mill had to adapt to the inefficient infrastructure and will transport pulp around 230kms by road to the railway then on to Santos port, located around 1,000km from the mill.

Despite there being a western railway network located 1 kilometer away from the project, it did not present adequate conservation due to its narrow-gauge railway.

“We have decided to export using the northern network, which is more competitive and has a broad-gauge railway,” the executive said.

Targeting such a low cost to produce pulp, Suzano wants to put the small and unknown Ribas to Rio Pardo in the center of global production looking forward.