“PAPER The Future Beckons”

Anoop M SugathanOfficer Marketing [Mktg]The West Coast Paper Mills Ltd.,

V.SubbiahVice President [Mktg]The West Coast Paper Mills Ltd.,

“PAPER - The Future Beckons”

Paper industry - @ a glancePaper industry - @ a glance

India Ranks 15th largest Pulp and Paper producer / consumer in the world.Total number of Pulp & Paper Mills 650 + Units

Wood Based 34

Agro Based 150 +

Recycled Fiber Based Mills 450 +Pulp & Paper Mills in Operation 600Pulp & Paper Mills Closed 98Operating Capacity of Mills 8.5 million tonnes Per-capita consumption 8.3-8.5 kg (Paper & Paperboard)Production 6.5 million tonnes – P&B

0.8 million tonnes - Newsprint

Turnover Rs. 16000 Crores

Exchequer Rs. 2500 Crores

Employment Direct-3 Lacs / Indirect-10 Lacs

The industry is fragmented with capacities ranging from 2 to 800 tonnes per day

Indian EconomyIndian Economy

GDP Growth : 9%

Ranks : Amongst 15th countries

History - Indian Paper Industry….History - Indian Paper Industry….

In the 1970s excise concessions were given to small agro based mills, which

resulted in a rapid increase of small mills and capacity.

In the late 1980s the industry was in a severe oversupply situation, capacity

utilisation rates being around 60 %.

In early 1990s the government reversed the policy, making large units more

competitive (e.g. by removing excise concessions for agro based mills).

First mill in the country was commissioned in 1812 in Serampur (W. Bengal).

The initial development & growth of industry in the 19th century was affected by

shortage of wood (soft wood) in the country.

In 1914 the development of pulp making processes based on bamboo lead to

rapid growth of the industry and by the end of the 1950’s installed capacity

increased to 137000 tonnes.

Growth of Paper Industry….Growth of Paper Industry….

Nearly 1.25 million tones of capacity is closed

Technological obsolescence

Environmental issues

Reasons for Closed Capacities

Issues before Paper Industry….Issues before Paper Industry….

Low scale of operationInferior pulp & paper quality

High cost of transportation and power

Low capacity utilisation

High capital costs

High costs of raw materials

Issues & Challenges

State of art equipment & machineries

Emerging Environmental issues

Only 20% of the total used paper is recycled in India compared to a global recycling average of 40%

Indian paper industry – in global perspectiveIndian paper industry – in global perspective

PERCENTAGE OF WORLD PAPER PRODUCTION

World Paper & Board consumption is dominated by three major regional blocks- North America, Western Europe & Asia.

The Paper & Board production in India is nearly 7.3 – 7.5 million tons as against world paper production of 380 million tons.

India consumes nearly 5% of the Asian and 1.6% of the worlds consumption of paper and paper board.

North America, 31.0%

Rest, 9.0%Europe, 28.0%

India, 1.6%Asia, 30.4%

Competitiveness of the sectors.Competitiveness of the sectors. As compared to USA, Europe, the paper industry in India is far below the

quality standards of the products.

It is not as competitive as in other Asian countries such as ; Japan, Indonesia, Thailand, Malaysia & China.

The paper industry in India is less competitive as compared to similar sectors such as; cement and capital goods.

The possible reasons which makes paper industry less competitive compared to other similar sectors are –

(i) Availability of good fibrous raw materials;

(ii) Level of technology.

Quality Standards.Quality Standards.

The quality standards in other countries are maintained as per customer

preferences

In India we still go by BIS norms which are much below the international

standards.

General perception about the quality of products produced in India is poor.

As far as Printing papers and the Newspaper segment also by & large

gives preference to the imported Newsprints.

The Indian paper industry uses 20 – 30% more raw materials; about 30%

more energy, 200% more water & 10% more chemicals.

The Social Life of Paper

Computer technology was supposed to replace paper. But that hasn’t Happened.

Every country in Western world uses more paper today

Consumption of uncoated free-sheet paper – most common kind of office

Paper – rose almost 15%.

Paper has many advantages over computers

The dismay people feel at the sight of a messy desk – or the spectacle of

Air-traffic controllers tracking flights through notes scribbled on paper strips

Arises from a fundamental confusion about the role that paper plays in our

Lives

The Social PaperThe Social Paper

The case of paper is made most eloquently in “The Myth of the Paperless Office” by two social scientists, Abigail Sellen & Richard Harper

Without paper, this kind of collaborative, iterative work process would be muchmore difficult

According to Sellen & Harper, paper has a unique set of “affordances”- that is, quality that permit specific kinds of uses

Paper enables certain kind of thinking, picture.

Chances are that you have a keyboard and a computer monitor off to one side, & a clear space roughly 18 inches squire in front of your chare. What covers rest of the desktop is probably piles – piles of papers, journals, magazines, & all othe other artifacts of the knowledge economy.

The messy desk is not necessarily a sign of disorganization. It may be a signof complexity: those who deal with many unresolved ideas simultaneously cannot sort & file the papers on their desk, bcos they haven’t yet sorted & filedthe ideas in their head.

The Social PaperThe Social Paper

      

ELECTRONIC PAPER

YES REALLY……

• Concept of Electronic Paper has been with us for ages

• Fast forward 15 or so years, & electronic paper is still not an everyday

• Thing, not as a small compact book, yet alone a wall-sized product

• Its finally changing – E-Ink technology is coming to market with several very interesting products, predominantly e-book readers.

• Image & Font clarity is quite impressive

• If you are looking to replace books, newspapers & magazines, why do you need a backling?

Electronic PaperElectronic Paper

1. Reserving is inherently uncertain because it reflects the uncertainty in the business.

2. The future is uncertain, and the past is not always a reliable guide to the future – there can be a lot of variability in this by type of business and size of account.

Electronic PaperElectronic Paper

(Electronic) information(Electronic) information

News

School,Work & Science

Entertainment

NewspaperPC

Books

Books

DocumentsReferenceDictionnary

BooksMagazinesComics

NewsInternetRSS

Most of it is still on paper!

The West Coast Paper Mills Ltd.,

The start of the chain is promising: Content creation is done

electronically Indexing and searching is done

electronically (bulk) transport is done electronically

But then things are different…. Books and newspapers are printed Personal content is printed We read most of it on paper!

WHY?? Readers: Ease of use, readability,

history Publishers: Copyright Distributors & Printers: Livelihood

Why on Paper?Why on Paper?

The West Coast Paper Mills Ltd.,

Lack of a useable e-reader

Most reading devices use LCDs, which use backlights High power, hence low battery life Fatigue due to screen flicker

Most reading devices are small. Difficult to read Can not maintain original content layout

If not, they are heavy. Web tablets, laptop computers

Most reading devices are restricted with regard to content DRM systems limit accessibility

& More so…..& More so…..

The West Coast Paper Mills Ltd.,

Paper has not changed. People have.

More mobile, fast contacts, fast update

Professional users Maintenance engineers Lawyers, pharmacists Physicians Business-travellers

Newspaper industry Costly distribution “rejuvenating” newspapers Complementary material: Books

Education Library use Schoolbooks

Readers : Increasing demandReaders : Increasing demand

The West Coast Paper Mills Ltd.,

E-readerPaper

ReadabilityMobility

Phone

Actuality/interactivity

Phone

PDA

Paper

Paper

Laptop

PC

E-reader

E-reader

+

+

+BB

BB

PDA

LaptopPC

PhonePDALaptop

PCBB

3 Important characteristics: 3 Important characteristics: ““readability, mobility, actuality”readability, mobility, actuality”

Objectives of Paperex 2007Objectives of Paperex 2007

• The Paper Industry plays an important role on the Indian economy.

• Currently the paper industry is growing @ 7.8% annually and poised for a substantial expansion from the present annual output of 6.7 million tonnes to

meet a projected demand of 10 million tonnes by 2010 (approx.).

• The potential for per capita increase on account of :

1. economic growth, 2. literacy increase, 3. growing purchasing power and 4. emerging exports,

• The industry attracts companies to invest and modernize to attracts companies to invest and modernize to face the challengers.

Global competitionGlobal competition

1. competition in global pulp & paper is intensifying.

2. This is likely to have an increasing impact on the Indian Market.

3. For modernization, productivity improvements and building new capacity, an investment of US$ 7,500 million is needed. 

3 Types of Business Preassures3 Types of Business Preassures

Market Pressures:

1. The Global Economy and Strong Competition

2. The Changing Nature of the Workforce

3. Powerful Customers

To what degree, or how fast, these impacts will be felt in five years, ten and twenty years.

The future of paper – productsThe future of paper – products1. High-definition paper : ideal solution for high end digital colour projects

2. Zero Carbon Paper

3. E-paper innovations:

1. Full-colour, bendable e-paper could be available as early as 2009, after Japanese corporation Bridgestone revealed its latest product developments.

2. World’s largest full-colour e-paper with an A3 offering.

3. E-paper : the image does not break up when the paper is bent.

4. A3 product will also be used for large-size information displays

4. Smart Paper for Better Microwave Meals

1. Billerud has developed a new packaging paper

2. Specially designed for frozen food that is heated in a microwave oven with a built-in crisping function where the packaging is an important part of attractive the customers.

3. Better printing surface suitable for food that requires a crisp function built into the packaging materials

5. Tissue Paper

The future of paperThe future of paper

1. The digital revolution has been beneficial to the paper industry on the whole

2. With every new technological advance, the amount of information has multiplied, and the volume of paper has risen as well

3. Paper remains the best, most cost-effective, and most prevalent way to view and store many kinds of information, from novels to transaction records to catalogues

4. Nonetheless, many technology advances in the areas of printing, distribution, display and storage have had an enormous effect on the volumes of different grades of paper

How large & where the growth opportunities are for paper

The future of paperThe future of paper

5. Further, every major paper application is developing along a unique path, affected by core technology developments, economic factors favoring or opposing the use of paper, and cultural issues promoting or inhibiting change. Some applications actually offer opportunities for increased use of paper, and other cause changes in demand for different grades of paper.

6. These trends include opportunities as well as threats, and total demand for printing and writing papers continues to rise

7. Nonetheless, the second half of the Nineties saw a dramatic slowdown in annual growth rates for many key grades despite being a period of exceptionally strong economic growth. Nor have the first years of the new century been especially positive (although economic performance may be more responsible than technology-based threats).

What grades of paper will be displaced by paperless technologies?

ReasonReason

1. Population & Workforce

2. Business size, type & structure

3. Use of computers, connectivity & bandwidth

4. Long-term expectations for economic growth

5. Regulatory issues such as archiving & acceptance of electronic signatures

When Emerging Electronic Technologies will impact demand for specific grades of paper

Markets, Applications & EnvironmentsMarkets, Applications & Environments

▼ Application attributes identified & related for potential impact

▼ Key technologies prioritized for time frame & extent of impact

▼ Detailed analysis of the applications by technological, economic regulatory & cultural factors

▼ Paper tonnage forecast by application & grade, covering a twenty-year forecast period in five- year increments

FUTURE OF PAPER 20-YEARS TONNAGE & TREND FORECAST

FUTURE OF PAPER 20-YEARS TONNAGE & TREND FORECAST

ENVIRONMENT GRADE APPLICATIONS

OFFICE

HOMKE

TOTAL TOTAL TOTAL

Uncoated Free SheetCoated Free SheetUncoated Ground woodCoated Ground woodBristolNewsprint

CatalogsDirect MailOther promotionalInserts / CouponsNewspapersTransactionalMagazinesDirectoriesBooksProcessional & Reference publishingGeneral Office PrintingRecreational Printing

Demand of Paper & Board IndustryDemand of Paper & Board IndustryThe demand for paper and board shows no slackening. Indeed the growth now of advertising, communications, personal care and international trade are all contributing to the demand for paper.

1. Electronic age has brought with it the need for more, not less, graphic paper.

2. Office photocopiers, computer printers & desktop publishers all require paper.

3. Travel & trade catalogues call for more colour printed paper

4. Rigid, lightweight & printable paper & board materials have gained predominance in packaging.

5. Printing press technology, wider education & demand on news fuel the expansion of newspaper

6. Growth of consumer & industrial goods fuels packaging needs

7. Protective cardboard, tough cartons & printed wrapping papers are in demand.

8. Demand for hygiene & sanitary papers has surged.

9. Growth in world commerce & development of international postal services demand more writing & business papers.

Demand of Paper & Board IndustryDemand of Paper & Board Industry& it is growing faster than most industries

1. Graphic paper remains one of the most convenient ways to convey information.

2. It enables knowledge, education and culture to spread and so the consumption of graphic papers has increased by 35%.

3. Packaging paper is the natural partner for food & products to be safely transported, sold and exported and it avoids wastage efficiently.

4. Consumption of packaging papers has increased by 27% & hygiene papers by 51%

Paper Generates wealth….

1. Paper adds wealth – and not only as bank notes & securities

2. From forestry to retail tradres & subsequent recovery for recyling, paper generates wealth & employment.

3. There is direct employment, but many find employment in upstream, downstream & supporting activities.

4. Exports of value – added grades generate revenue.

Product Life CycleProduct Life Cycle

Initial MarketPenetration

GrowingDemand

MarketSaturation

MarketDecay

SlowingDemand

TimeTime

Dem

and

Dem

and

Demand SummaryDemand Summary

• Demand in Developed economies is stagnant and may be declining

• Demand in Developing economies will grow with expansion in GDP

• Developing economies represent the future demand growth

Supply side basisSupply side basis

Return onReturn onInvestmentInvestment ==

(1- Tax Rate) X(1- Tax Rate) X

Capital TurnoverCapital Turnover X X

Operating MarginOperating Margin

Where:Where:

Capital Turnover =Capital Turnover =

Operating Margin =Operating Margin = ProfitProfitSalesSales

SalesSalesCapital EmployedCapital Employed

Printing Industry looks to the futurePrinting Industry looks to the future

o In a constantly evolving world of technological change and consumer choice, the printing industry is at the forefront of innovation to meet customer needs.

o Printed communications are still the preferred choice by consumers but now co-exist with other forms of communication to produce a rich mix of communication options.

o Printing companies are fully aware that an innovative offer is the best ally to ensure the long-term competitiveness and the adaptability of a whole sector to new market trends.

o Only few sectors experienced over a very short period of time as many technological and structural challenges as printing.

o Work in the pre-press area particularly benefits from many new developments, such as electronic imaging, and constant improvements in the treatment of electronic data.

Most obvious examples are:Most obvious examples are:

> The introduction of personalization features in print

> The management of databases

> The production of short runs and electronic storage for later runs

> The production of electronic versions

> Cross-media publications

> Comprehensive communication solutions

> Web-based communication solutions

> E-business solutions

> Routing and dispatch, storage facilities, etc.

Priorities for the future:Priorities for the future:

The future policy areas to which printing companies will devote attention include a maximum of efforts towards sustainability objectives and the encouragement of further innovation.

Printing companies are keen to co-operate with suppliers in both areas.

In the field of environmental protection, printing companies will further commit themselves towards proving, for instance, performance in the field of custody chains, carbon footprint for printed products, energy efficiency of their buildings etc.

Regarding the print offer, innovations can be expected from new materials enhancing printed communication as well as from further digitalization.

Printers feel confident that these objectives will contribute to enhance their image and ensure the satisfaction of their customers.

The Role of Paper in Future Information SocietyThe Role of Paper in Future Information Society

- Clear division between

Economical mass products (cheap printing surface) &

Special paper with functional properties

- Sensory properties such as touch, feel sound and odour will be used for brand building

- Paper can have a personality!

- Publishers continue to develop existing printed products

Paper will have a role in the future information society but this role will be different from today:

The Role of Paper in Future Information SocietyThe Role of Paper in Future Information Society

- Advertiser driven paper end-uses will grow driven by

The change in marketing mix from advertising to direct marketing

Increase in on-line printing

.- Consumer driven paper end-uses will co continue to grow at the present speed

Copies are / will be made at home.

- Circulation driven end-uses will diminish driven by:

Digital distribution of magazines and news papers.

Consumers spending both more time and money online.

The Role of Paper in Future Information SocietyThe Role of Paper in Future Information Society

The empowered consumer will sit on the driver’s seat.

Print and electronic media will co-exist but the role will diversify:

PRINT will build on comfort, mobility, flexible design and environment

ELECTRONONIC will rely on effective delivery and interactivity.

Paper & Paper Board DemandPaper & Paper Board Demand

R o W

6 4 %

A S IA

3 6 %

World Consumption : 380,280 thousand tones

In 2006, Asia represents 36% of global demand for paper & paper board with China accounting for nearly 30% of the Asian demand, thus emerging as the 2nd Largest market in the world

Asia 36%

RoW 64%

Paper & Paper Board DemandPaper & Paper Board Demand

64837

32020

138348484

0

10000

20000

30000

40000

50000

60000

70000

China Japan ASEAN5 India

World – Paper Demand & Compound Annual GrowthWorld – Paper Demand & Compound Annual Growth

 1990 1999

CAGR (1990-1999)

2000 2006CAGR (2000-2006)

2007 2010CAGR (2007-2010)

ASIA 60594 95131 5.1% 101331 136465 5.1% 143201 164951 4.8%

China 14604 35483 10.4% 37833 64387 9.3% 69159 85012 7.1%

Japan 28311 30595 0.9% 32104 32020 -0.04% 32097 32116 0.02%

India 2486 5074 8.2% 5415 8484 7.8% 9047 11205 7.4%

ASEAN5 4285 8292 7.6% 9292 13834 6.9% 14404 17019 5.7%

Other Far East 10908 15687 n.a. 16687 17740 n.a. 18494 19599 n.a.

EUROPE 75542 86458 1.5% 91831 99883 7.6% 102355 108032 1.8%

Nordic Countries 3924 4679 2.0% 5056 5084 1.4% 5165 5291 0.8%

Eastern Europe 15001 9330 -5.1% 10482 16172 0.1% 17253 19728 4.6%

Other Western Europe 56617 72449 2.8% 76293 78627 7.5% 79937 83013 1.3%

NORTH AMERICA 83110 102340 2.3% 100442 98512 -0.3% 99221 101095 0.6%

United States 77388 94739 2.3% 92637 90717 -0.3% 91151 92823 0.6%

Canada 5722 7601 3.2% 7805 7795 0.0% 8070 8272 0.8%

Developing Asian economies of China, India & the SEAN5 (Singapore, Malaysia, Indonesia, Philippines, Thailand) promise consistently high demand for paper and paper board right until 2010

Source : RISI

Paper & Paperboard – Per Capita ConsumptionPaper & Paperboard – Per Capita Consumption

Source : RISI

25

94

49

117

66

149

1996 2006 2010

CHINA ASEAN 5 INDIA

Asia

28

311

174

38

301

210

45

297

220

1996 2006 2010

Asia USA W.Europe

Region Wise

Per Capita consumption of Paper & Paperboard in Asia continues to grow

Printing Growth in Emerging MarketsPrinting Growth in Emerging Markets

…..however coming from a very low base

NorthAmerica

CentralEurope

Asia / Pacif ic EasternEurope

LatinAmerica

Middle East /Africa

2006

2010

+1.5%CAGR:0.4%

+8%CAGR:1.8%

+12%CAGR 2.9%

+24%CAGR 5.4%

+17%CAGR 4.1%

+22%CAGR 5.1%

Print Production Volume (PPV)By regionActual 2006: Forecast 2010

Source :BM-DI-Estimate-April 2007

Industry statistics 2006PIRA 2006

Jakkoo Poyry V2005Primir (GAMIS)2006

Printing Growth in Emerging MarketsPrinting Growth in Emerging Markets

265

447

347 332

13 40 7 13

0

100

200

300

400

500

Total Germany China Iindia

Emerging markets do offer enormous upside potential for print.

However reaching western levels will take time.

Source :BM-DI-Estimate-April 2007 Industry statistics 2006 PIRA 2006 Jakkoo Poyry V2005 Primir (GAMIS)2006

INDIA – Printing & Writing Market Forecast by 2010INDIA – Printing & Writing Market Forecast by 2010

thousand tones 2006 e 2010f% pa

2006-10

Coated Woodfree - Total 293 437 11%

C2S Paper 140 220 12%

C2S Board 56 82 10%

C1S 72 100 9%

Other Spec. Ctd 25 35 9%

Uncoated Woodfree - Total 586 850 10%

High Bright (Offset) 385 540 9%

Copier 188 290 11%

Business Stationery 13 20 11%

Total Woodfree (Wood-based) 879 1287 10%

Other Coated paper & board - low quality 87 105 5%

Cream Wove & other uncoated 1250 1400 3%

Other uncoated P&B from RCF & agri-fibres 622 700 3%

TOTAL 2838 3492 5%

Source : Hawkins Wright

Wastepaper Recovered Volumes – Global Wastepaper Recovered Volumes – Global

  2005 2004

Western Europe 52258 49509

North America 50873 50253

Japan 22315 21507

China 18200 15894

Australia 2553 2122

Amounts in 000’s of MT

Source: EU Consulting, Moore & Assocktes

PopulationPopulation

– Population growth rates for developed economics – Japan, N.America & Europe observed to be stagnating below world average.

– Population in developing economies of India & the ASEAN5 grows at rates higher than the world average.

– China emerges as the next single largest consumer market, even though population growth stagnates below world average due to one child policy.

– India emerging as the largest back-office service provider and growing consumer market as the retail concept rolls out.

– Among the ASEAN countries, Indo – China holds good promise

W ww.westcoastpaper.com

Thank you for your attention.

V.SubbiahVice President [Mktg]