Market and product

Leuna, Germany — Finnish company UPM has begun operations at a biorefinery in Leuna, Saxony-Anhalt, Germany — a facility considered the only one of its kind in the world. The plant uses European beech as feedstock to produce industrial chemicals, partially replacing conventional fossil-fuel-derived raw materials.

Scale and Technology

The plant represents a total investment of approximately $1.6 billion, with infrastructure comprising 1,000 km of electrical cable, 40,000 valves, and 180 km of piping. Once full operating capacity is reached in 2027, the facility is expected to consume around 220,000 metric tons of beechwood per year, transported by rail and truck.

From this wood feedstock, the plant produces three main product groups: functional fillers, industrial glycols, and industrial sugars. The production process begins with an enzymatic hydrolysis step that separates wood into three components — cellulose (50%), hemicellulose (25%), and lignin (25%). This is a technically demanding step that many other companies have not been able to execute at industrial scale.

Cellulose and hemicellulose are converted into industrial sugars, a portion of which is then catalytically transformed into ethylene glycol and propylene glycol. Lignin is processed separately to enhance its functional properties, targeting applications such as tire fillers and plastics.

Feedstock Sourcing and Sustainability

UPM plans to source beechwood from within a 200 km radius of the plant. Rather than large-scale concentrated harvesting — which carries the risk of ecosystem degradation — the company employs a dispersed harvesting model with replanting at each site. UPM's wood procurement operations hold sustainability certification, and its carbon emission calculations are subject to independent audit.

According to Harald Dialer, UPM's Chief Technology Officer, one advantage of using a single wood species is the homogeneity of the feedstock, which contributes to more stable plant operations. Within five years, the company plans to expand to agricultural and forestry residues as additional raw materials.

On environmental performance, UPM offers the following comparison: one metric ton of PET plastic produced using their wood-derived ethylene glycol carries a carbon footprint of approximately 800 kg CO₂ equivalent, compared with 1.5–2.2 tonnes for mechanically recycled PET, 1.6–2.6 tonnes for chemically recycled PET, and 3.0–3.4 tonnes for PET made from fossil-fuel-derived ethylene glycol.

Cost and Market Challenges

The economic case remains the central challenge. Dialer acknowledges that bio-based chemicals currently carry higher production costs than their fossil-fuel-derived counterparts, and cost parity has not yet been achieved. The company expects to offset this gap through a "biopremium" that sustainability-conscious customers are willing to pay.

UPM reports that it has begun selling products to a number of key customers, though broader market uptake is expected to proceed gradually, as sectors such as tire manufacturing and PET bottle production require time-consuming qualification processes for new input materials.

The company recently signed an agreement to acquire intellectual property related to the production of ethylene glycol and propylene glycol from technology firm Avantium — a move that signals a long-term commitment to wood-derived glycols.

Industry Context and Outlook

The path from biomass to industrial chemicals is not without precedent for failure. In 2023, Swiss firm Clariant shut down its straw-to-ethanol business, posting losses of more than $200 million.

The current energy environment, however, is generating certain favorable conditions for UPM. Recent volatility in oil prices stemming from the conflict in Iran has narrowed the cost gap between bio-based and fossil-fuel-derived chemicals. The question of raw material supply security — long dependent on oil imports — has also grown in prominence among European businesses and governments, while locally sourced biomaterials are insulated from geopolitical supply disruptions.

The European Commission is currently developing a regulatory framework to promote the use of bio-based chemicals. The European Chemical Industry Council (Cefic) is advocating for the framework to include mandatory bio-based content requirements for finished products, which would establish a stable demand base for the sector.

UPM expects to complete its production ramp-up by 2027. The plant's performance during this period is considered a meaningful reference point for the broader European chemical industry, at a time when many regional producers face compounding pressures from high energy costs, carbon pricing, and competition from low-cost imports.