UPM Accelerates Decarbonization Strategy as Energy Markets Surge and European Paper Industry Consolidates

UPM reported a strong start to 2026 driven by record performance in its energy business, continued progress in renewable fuels and biochemicals, and advancing consolidation efforts in the European graphic paper industry amid mounting geopolitical and cost pressures.

The company said UPM Energy delivered its strongest first-quarter performance on record as cold winter conditions and exceptionally high electricity demand in Finland sharply boosted power prices. UPM’s average electricity sales price rose 30% year-over-year, benefiting from elevated Nordic power market conditions and reinforcing the strategic importance of the company’s zero-carbon energy portfolio.

At the same time, UPM warned that geopolitical tensions in the Middle East are increasing global energy, logistics and raw material costs across the pulp and paper industry. The company noted that disruptions in oil, LNG and commodity markets are creating broader supply chain uncertainty and contributing to inflationary pressure throughout global manufacturing and transportation networks.

Against this backdrop, UPM continued to advance its long-term transformation toward decarbonization and renewable material businesses. The company’s €1.335 billion biochemicals refinery in Leuna, Germany, moved further toward commercial-scale production during the quarter. Commercial deliveries of industrial sugars are ongoing, renewable functional filler production is expected to begin shortly, and bio-based glycol production is scheduled to start in 2026. UPM said customer interest in the refinery’s wood-based biochemical products remains strong across multiple end markets seeking alternatives to fossil-based materials.

UPM also reported continued progress in the development of sustainable aviation fuel (SAF) through its biofuels business. The company said qualification work for CTO-derived SAF is advancing following successful aircraft and engine trials, alongside positive stakeholder and technical reviews within the ASTM certification process. Renewable fuels and renewable chemicals remain central pillars of UPM’s long-term growth strategy in decarbonization solutions.

Meanwhile, UPM and Sappi are moving forward with plans to combine their European graphic paper businesses into a 50/50 joint venture with a combined enterprise value of approximately €1.42 billion. The proposed transaction, currently under Phase II review by the European Commission, is expected to generate around €100 million in annual synergies through production optimization, sourcing efficiencies and logistics improvements. UPM said the transaction would help address structural overcapacity and declining demand in the European graphic paper market while improving industry resilience and sustainability.