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Chile's wood resources business supported by its lush forests

January 2012

Eucalyptus Plantation on spacious land cultivated over 10 years

People often praise Chile for its 3 W's—Wine (delicious wine), Weather (diverse and varied weather) and Woman (beautiful woman). However, people in the forest industry often talk about another W—Wood (rich wood resources). Sumitomo Corporation has deepened its relationship with Chile in the field of "Wood" since the 1980's.
As part of its wood business in Chile, Sumitomo Corporation has implemented both eucalyptus plantation and chip manufacturing businesses.

This small seedling will grow into a large 25 meter tree in 10 years.

The eucalyptus plantation, consisting of approx. 13,000 hectares, lies about 650 km South of the capital, Santiago. Eucalyptus globulus trees are planted in an enormous swath of land more than twice the size of the area inside the Yamanote Line. The trees grow very fast, so they can be harvested in about 10 years. When they are sufficiently mature, they are cut down, processed at a factory into chips for papermaking, and exported to Nippon Paper Industries Co., Ltd., a Japanese paper manufacturer.
In 1991, Sumitomo Corporation, Nippon Paper Industries (then Sanyo-Kokusaku Pulp Co., Ltd.) and a local company jointly established Volterra S.A., and began the plantation the following year. They waited until 2002 for the eucalyptus trees to mature and then began harvesting and chip manufacturing. The products were exported to Japan for the first time in 2003. Now, 20 years after the launch of the project, the business is going well, with an annual production volume of about 600 thousand tons (including water contained in the wood).

Volterra's plantation lies near Concepcion, a city located in the middle of the narrow land of Chile.

Harvested eucalyptus trees are carried from the mountain to the factory and processed into chips for papermaking materials. The processing work is carried out by local residents, including indigenous inhabitants and therefore these activities significantly contribute to the regional economy.
The project deals with products originating from the natural environment, so various risks may arise, such as the unexpected death or poor growth of young trees, the presence of wildfires, and other unpredictable events. We have grown these eucalyptus trees with extreme care in order to avoid such risks to the extent possible. When our "hard-to-raise sons"—eucalyptus trees—finally grew up, were converted into fine chips and shipped for the first time, a ceremony was held which was attended by past and present Volterra presidents, who observed the first shipment.

With the rapid increase in demand for paper in China and other emerging countries, it is ever-more likely that chips for papermaking materials will become scarce. Therefore, this project is also important to ensure a stable supply of papermaking materials in Japan.

Carlos Costa, chairman of Volterra and president of Sumitomo Corporation (Chile) Limitada, giving a speech at a ceremony to celebrate Volterra's 20th anniversary.

The wood pellet project that created its own market

The wood pellet project, on the other hand, utilizes wood resources and is targeted to general Chilean households rather than for export.
Wood pellets are a fuel produced by drying and pressing the sawdust that is generated from a wood-processing factory. The material generates less thermal power than fossil fuels, but is highly important because it generates less exhaust and is therefore more environmentally friendly. Significantly, this fuel makes effective use of resources by utilizing wood scrap.
The soaring international price of crude oil is a concern for Chile because of its poor oil resources. Wood is often burned for heating, however, pollution from the smoke is seen as a significant problem. In considering that wood pellets would help solve this problem, Sumitomo Corporation (Chile) Limitada established a joint venture, Ecomas S.A., with a local wood processing company. The venture began production of wood pellets in 2006.

At that time, wood pellets were completely unknown in Chile and there was no market for them. Then, Ecomas focused on the dissemination of wood pellet stoves, raising public awareness through demonstrations at do-it-yourself stores and promotions to schools, hospitals and other public organizations, thereby gradually gaining recognition. Currently, the company holds a 90% market share, with an annual production volume of about 20,000 tons. It is an extremely aggressive business model that created its own market from scratch.

Penetration rate for wood pellets is high in Western countries. Ecomas uses German machinery and technology for the manufacturing of wood pellets.

Delivering delicious bread to household tables through the utilization of wood scraps

The Chilean people love bread and per capita bread consumption is said to be the second largest in the world. There are as many as 800 bread factories operating in Santiago alone, which emit smoke throughout the year. Factories have traditionally used imported diesel fuel, however, bread store owners are greatly concerned about the cost, which may account for as much as 60% of the total bread manufacturing outlay. Wood pellets are expected to present an effective solution to the problem. Consumers have welcomed bread baked with wood pellets for its old-fashioned taste and flavor, therefore, the demand for wood pellets from bread factories is steadily increasing. Many other locations have begun using wood pellets, such as heated swimming pools, ham manufacturing factories, and others.

A bread factory in Santiago. Wood pellets are placed in the upper part of the stove shown in the back.

Interestingly, the company name “Ecomas” originates from “eco,” derived from ecology and economy, and “mas,” a Spanish word meaning “more”. The name also refers to ecology and economy biomass. We are not planning to export this fuel, in accordance with the concepts that environmental loads caused by transportation of biomass fuels should be avoided, and that local production for local consumption should be promoted. We will utilize Chile's forest resources for the benefit of the Chilean people.

The project pursues new possibilities of the Chilean forest industry through the manufacturing of chips from the eucalyptus plantation and wood pellets that utilize sawdust, a forestry by-product. Over time, Sumitomo Corporation plans to further strengthen the basis of these projects.

Skyscrapers standing in central Santiago, with the Andes Mountains in the background

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