History of Aracruz Celulose S.A
Brazil-based Aracruz Celulose S.A.is the world's leading producer of bleached eucalyptus pulp for the paper industry and one of the world's largest wood pulpproducers. The company has an annual production capacity of 2.4 million tons, through two mill sites. Barra do Riacho, the company's main site located in Espirito Santo, produces two million tons of pulp with three full-scale production units, including boilers, digesters, and bleach and drying lines. The company also operates its own private port, Portocel, in Espirito Santo. Aracruz's other site, Riocell, was acquired in 2003; located in Rio Grande do Sul, it produces 400,000 tons of bleach eucalyptus pulp each year. The company is also constructing a third site, through its 50/50 Veracel Celulose joint-venture with Stora Enso, at Eunapolis, in Bahia, which will have a production capacity of 900,000 tons upon completion in 2005. Aracruz produces its own wood through its management of nearly 190,000 hectares of planted eucalyptus--a fast-growing hardwood not native to Brazil. The company has played an active role in developing new genetic varieties of eucalyptus to meet its production needs. As part of its longstanding commitment to sustainable development, the company's eucalyptus plantations are interspersed by native tree species. The company's eco-friendly policies extend to its production facilities, which are outfitted with chemical recovery systems, water treatment facilities, and biomass power generating systems making use of the company's own waste production. In addition to pulp, Aracruz has diversified, launching its own line of hardwood products. Aracruz is led by Luiz Kaufmann. Founder Erling Lorentzen and family remain major shareholders in the company.
Planting a Wood Pulp Giant in the 1960s
Born in 1923, Erling Lorentzen had been forced to flee his native Norway after that country was occupied by the Nazis during World War II. Lorentzen, part of a shipping family with interests in Brazil, joined the Norwegian resistance and was sent to Great Britain, where he received military training. Lorentzen then returned to Norway, and, undercover as a farmer, took command of some 800 resistance fighters.
Following the war, Lorentzen, who had not been able to complete high school, was granted the right to enroll in the M.B.A. program at Harvard University. Returning to Norway, Lorentzen began working for his father's shipping company, acting as a representative in Brazil. Lorentzen also found a wife--Princess Ragnhild Alexandra, daughter of then King Olaf Vand sister of the future King Haakon. The marriage marked the first time a member of European royalty had married a commoner.
Yet Erling Lorentzen proved no common businessman. The Lorentzens moved to Brazil during the 1950s and set up a gas distribution business in conjunction with the family's holdings. By then, interest was beginning to grow in developing a wood pulp industry in Brazil. The country offered a number of natural advantages, including plenty of space and low wages. But most importantly, Brazil boasted a climate of year-round sun and warm weather. Whereas the planting-to-pulping time span of trees planted for pulp production in northern climates ranged from 15 years to as much as 50 years in northern Europe, Brazil's climate offered the possibility to grow trees with a five-year turnaround rate.
Initial attempts by another company to begin wood pulp production failed, however, due to the poor choice of tree--although eucalyptus had been introduced to Brazil in the early part of the 20th century, Jari had chosen a different species, imported from Indonesia, that did not react well to Brazil's soil. In the meantime, Brazil's forest continued to be devastated. With no coal deposits of its own, the country cut down its trees in order to produce charcoal. The situation was particularly dire in the northern coastal state of Espirito Santo, where most of the forests had been destroyed, sinking the population further into poverty.
Lorentzen began gathering funding from private investors and government sources and began buying up land in Espirito Santo with the intention of developing new eucalyptus plantations. Lorentzen quickly decided on using a variety of eucalyptus, in part for its quick growth cycle of just seven years in Brazil's climate. Eucalyptus presented other advantages, particularly in that a tree will grow back from the stump after it has been cut down, enabling the same tree to be harvested up to three times, lowering the investment and reducing the length of the growth cycle.
By 1967, Lorentzen had formed Aracruz Florestal S.A. and begun planting its first eucalyptus forests using seed produced in Brazil. Because these trees were not geneticallydeveloped, the initial planting presented a number of difficulties, including a susceptibility to trunk rot and irregular growth and shape patterns. Nonetheless, by 1972, the company began its