Global Paper and Board Outlook

Alejandro Mata Economist, European Forest Products

October 2013

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Alejandro Mata, Economist, European Forest Products, RISI

• Bachelor degree in Engineering, MBA degree earned in 2007

• Worked in Business and Market Intelligence functions for one of Europe’s leading paper producers

• Has been analyzing and forecasting the industry since 2009

• Recently joined RISI team• Author of the Paper Trader Europe,

the European Graphic Paper 5-Year and 15-Year Forecasts

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Where is the industry right now?... And where is it going?

Tough Times?

World Paper & Board Demand…Is the Global Market in Decline?

96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 120

50

100

150

200

250

300

350

400

450

-15%

-10%

-5%

0%

5%

10%

15%

Volume (L)

Percent Change (R)

Million Tonnes

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Global State of the Industry

Are there any regional differences? Industry segment differences?

Forecast Change, 2012-2014: +5%

86 mt(21%)

32 mt(8%)

30 mt(8%)

109 mt(27%)

145 mt(36%)

-4% +9%

+1%

+6%

+7%

Printing & Writing

Newsprint Tissue

Cartonboard/ Other

Containerboard

Paper & Board Markets – Global

• US economy accelerating

• Euro area out of recession

• Emerging economies growing slower than before

• Newsprint papers declining globally

• Printing & writing: growth in emerging markets, contraction in mature markets

• Tissue and packaging driving growth

The global picture keeps growing!

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Paper & Board Markets – Comparison

Cartonboard

Containerboard

Tissue

Newsprint

P&W

Paper & Board

-10.0% -5.0% 0.0% 5.0% 10.0% 15.0%

AsiaL.Am.N.A.Europe

Paper & Board Markets – Europe

+3%

Forecast Change, 2012-2014: -0%

21 mt(21%)

8 mt (9%)

9 mt(9%)

29 mt(30%)

30 mt (31%)

-8% +7%

-5%+3%

Printing & Writing

Newsprint Tissue

Containerboard

Cartonboard/ Other

No growth for the P&B markets as a whole • Newsprint heavily impacted by new media

• Printing & writing grades showing mixed trends, UM doing better than coated grades

• Containerboard and cartonboard supported by economic recovery and inventory restocking

• Eastern Europe driving growing trends

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Paper & Board Markets – Europe

• Mature vs. growing segments

• Economy impacting segments differently

• New technologies impacting segments differently

• West vs. East

• Saturated vs. unsaturated markets

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Different Trends Emerging in the Region

Growing vs. Declining

• Demand growth in East vs. contraction in

West

• This applies not only to graphic grades, but also

to packaging and tissue

• Capacity base shifting

• East will become more relevant in defining

trends going forward

* Percent change reflecting 2012 vs. 2011 apparent consumption levels for all paper and board grades.

-3.4%2.4%

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While There Is Limited Growth in Western Europe…

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Newsprint Other Packaging Tissue P & W

Western European Apparent Consumption

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…Eastern Europe Keeps Showing Better Trends

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Newsprint Other

Packaging Tissue

P & W

Eastern European Apparent Consumption

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Graphic Papers

Total European Graphic Demand by GradeMillion Tonnes

14

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

10000

20000

30000

40000

50000

60000Uncoated WoodfreeUncoated MechanicalNewsprintCoated WoodfreeCoated Mechanical

Average Annual Growth 2013-2015

News -3.8%CWF -3.6%Cmec -3.7%UWF -1.6%Umec -0.4%

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07 08 09 10 11 12 13 14 1550%

60%

70%

80%

90%

100%

110%

120%

Pre-Crisis Average

Long-Term Average

Crisis Period Average

Profitability

Western European Profitability (All Grades)Price/Total Delivered Costs

Note: Total costs include mill operating costs, depreciation, interest, SG&A and delivery.

07 08 09 10 11 12 13 14 1560%

65%

70%

75%

80%

85%

90%

95%

100%

Pre-Crisis Average

LT Average

Crisis Period Average

OR (with Assumptions)

OR (w/o Assumptions)

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Western European Operating Rates(All Grades)Percent

Announced Net Newsprint Capacity Changes for 2013-2014 vs RISI Forecast of Demand Growth for the Same PeriodThousand Tonnes

Europe N. America Asia Latin America Global-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

600Capacity Growth

Demand Growth

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Announced Net P&W Capacity Changes for 2013-2014 vs. RISI Forecast of Demand Growth for the Same PeriodThousand Tonnes

Europe N. America Asia Latin America Global-2000

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000Capacity Growth

Demand Growth

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EU 27+2 China Latin America North America0

50

100

150

200

250

300

350

400

450Fiber Chemicals Fuels Electricity Labor Materials

Cash Manufacturing Costs* (Euro/Tonne) 2Q13 - Newsprint

*Capacity Weighted Average

EU 27+2 China Latin America North America0

100

200

300

400

500

600 Fiber Chemicals Fuels Electricity Labor Materials

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Cash Manufacturing Costs* (Euro/Tonne) 2Q13 – Printing & Writing

*Capacity Weighted Average

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Tough times?

World Graphic Paper 5-Year Forecast

Global Newsprint Risk of Closure Studywww.risi.com/gnr

China’s Influence on WorldGraphic Paper Markets in theComing Decadewww.risi.com/chinagraphic

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