UPM Invests in Biorefinery to Replace Fossil Raw Materials

Investment and Production

UPM is investing EUR 550 million in a biorefinery located in Leuna, Germany. This facility will produce 100% wood-based biochemicals, including bio-monoethylene glycol (BioMEG), lignin-based renewable functional fillers, bio-monopropylene glycol (BioMPG), and industrial sugars. The biorefinery will have an annual capacity of 220,000 tonnes and is expected to start operations by the end of 2022.

Market Potential

The biochemicals produced will serve various industries, such as textiles, packaging, deicing fluids, composites, pharmaceuticals, cosmetics, and detergents. The global glycols market, currently dominated by fossil-based raw materials, is over 30 million tonnes and is growing at approximately 4% annually. Lignin-based renewable functional fillers will offer a sustainable alternative to carbon black and silica in rubber applications, with the combined market for these materials exceeding 15 million tonnes and growing at about 3% annually.

Location and Infrastructure

The biorefinery will be situated in InfraLeuna GmbH, Saxony-Anhalt, Germany, a hub for the chemical industry. The location offers competitive conditions, including existing permitting processes, logistics, and infrastructure for various services and utilities. UPM plans to enter service agreements for wood handling, wastewater treatment, and other utilities, with lease assets and liabilities estimated between EUR 40-100 million under IFRS 16 Leases.

Next Steps

Engineering and planning are ongoing, with tendering for main equipment, project recruitment, and permitting processes starting immediately. Permitting will proceed in parallel with the investment project, in line with German legislation. Following this decision, UPM has increased its total capital expenditure estimate for 2020 to EUR 1.3 billion.