Outlook for the World Paper Grade Pulp Market Kurt Schaefer, VP Fiber November 2015

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Ralf Eaton
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& Recovered Paper 5-Year and 15-Year Forecasts www.

2 This Forecast Presentation Is Based on Our Pulp and RCP Forecasts For more information: World Pulp & Recovered Paper 5-Year and 15-Year Forecasts World Pulp Monthly

3 Announcing Our Updated China Pulp Study---Available This Week. New Edition: The China Pulp Market in Transition: A Comprehensive Analysis and Outlook 3 Copyright 2015 RISI, Inc. Proprietary Information

4 Abbreviations and Grades BSK = Bleached Softwood Kraft Pulp ( long fiber) NBSK (northern), SBSK (southern), radiata BHK = Bleached Hardwood Kraft Pulp ( short fiber) BEK (eucalyptus), NBHK (northern mixed), acacia DP = Dissolving Pulp Primarily textile grade ( viscose pulp) P&W = Printing & Writing Paper Coated and uncoated; woodfree and mechanical Delivered Cash Cost = Mill Cost + Delivery Cost Includes: Fiber, chemicals, energy, labor, logistics Excludes: Depreciation, interest, SG&A TPY = Tonnes per year 4 Copyright 2015 RISI, Inc. Proprietary Information

6 World Production of Paper and Board: Accelerating Slowly Graphic, Packaging and Specialty and Tissue; Percent Change 8% 6% 5.7% 6.5% 4% 2% 0% 3.7% 3.3% 2.7% 2.1% 4.0% 3.0% 1.0% 0.2% 0.8% 0.9% 1.3% 1.6% -2% -2.0% -0.6% -4% -6% % 6 Copyright 2015 RISI, Inc. Proprietary Information

12 Even in a Weak Dollar Setting, China s Pulp Producers Have Competitiveness Problems Related to Fiber Supply Lack of woodfiber and available land Many plantations are on marginal sites with low yields Labor costs have been rising quickly Importing woodfiber is expensive Tighter enforcement of pollution and water use standards Eucalyptus in southern China 12 Copyright 2015 RISI, Inc. Proprietary Information

13 What Are the Sources of Incremental China s Pulp Demand? Tissue production is rising by about 600,000 tpy Predominantly based on virgin fiber Policy closures of backward pulp and paper capacity favors BHK consumption growth (at the expense of local fiber, including nonwood). Rising demand for higher quality paper also raises BHK demand Continuing move toward more BHK, less BSK, as new paper machines are installed. BSK demand for absorbent applications is growing Conclusion: Net imports of BHK into China will continue to show solid growth 13 Copyright 2015 RISI, Inc. Proprietary Information

16 In Indonesia, APP s South Sumatra BHK Project Will Open in 2016/Early million tonnes per year of BEK and BAK Acacia from plantations in South Sumatra May include paper machines eventually 16 Copyright 2015 RISI, Inc. Proprietary Information

17 In Brazil, Five Large BEK Lines Will Be Started Up in ; ~ 8 MTPY Suzano Maranhao 1.5 MTPY, 2014 CMPC Guaiba 1.3 MTPY, 2015 Klabin Ortigueira 1.1 MTPY, 1Q 2016 Fibria Tres Lagoas 1.85 MTPY, 4Q 2017 Eldorado Tres Lagoas ~2.2 MTPY, 2H Copyright 2015 RISI, Inc. Proprietary Information

18 2015 Capacity Developments Company (Mill) Location Country Grade Mkt. Cap Int. Cap Status Year Date Altri Constancia Portugal BHK -120 C Jari Monte Duardo Brazil DP/BHK 330 C 2015 January Paper Excellence (Chetwynd) British Columbia Canada BCTMP (hwd) 240 C 2015 May 1 Nanning Phoenix Nanning China BHK/BSK -150 C 2015 Q1 CMPC Guaiba Brazil BHK 1,300 C 2015 May 3 Yibin Paper Yibin China Bamboo 200 C 2015 Q2 Yinquant Paper Qing'an China Wheat Straw 90 C 2015 Q3 Portucel Cacia Portugal BHK 70 C 2015 Q3 Sun Paper Zoucheng China DP/BHK C 2015 Q4 Sun Paper Yanzhou China BHK 300 C 2015 Q4 Resolute Calhoun USA BHK C 2015 Q4 Tralin Jiamusi China Straw 95 C 2015 Q4 Heinzel Pols Styria Austria BSK 240 C 2015 Q4 Holmen Iggesund Sweden BSK 50 C 2015 Q4 UPM (Kymi) Kuusankoski Finland BSK 70 C 2015 Q4 UPM (Kymi) Kuusankoski Finland BHK 100 C 2015 Q4 Verso Androscoggin Maine BSK 225 C 2015 October Verso Wickliffe Kentucky BHK 200 C 2015 October Paper Excellence (Howe Sound) British Columbia Canada BSK 25 C 2015 Q4 Suzano Suzano Brazil BHK (fluff) C 2015 Q4 Waggeryd Vaggeryd Sweden BCTMP (swd) 20 C 2015 Rottneros Vallvik Sweden BSK 20 C 2015 Chenming* Nanchang China BCTMP 250 C Copyright 2015 RISI, Inc. Proprietary Information

19 2016 Capacity Developments Company (Mill) Location Country Grade Mkt. Cap Int. Cap Status Year Date ENCE Navia Spain BHK 40 C Q2-Q1 Catalyst Paper Maine USA BHK -130 P Expera Old Town USA BSK/BHK -180 C 2016 Q1 WestRock Evadale USA BSK C 2016 Q1 Svetlogorsky Svetlogorsk Belarus BSK/BHK/DP 400 C 2016 Q1 Klabin Ortigueira Brazil BHK 1,100 C 2016 Q1 Klabin Ortigueira Brazil BSK 400 C 2016 Q1 SodraCell Morrum Sweden BSK 35 C 2016 Q1 IGIC (Woodland) Maine USA BHK C 2016 Q1-Q2 International Paper (Riegelwood) North Carolina USA BSK 360 C 2016 Q2 PT OKI/APP Sumatra Indonesia BHK 2,800 C 2017 Q3 Double A Alizay France BHK 130 C 2016 Q3 ITC Bhadrachalam India BCTMP 105 C 2016 Q3 SodraCell Varo Sweden BSK 275 C 2016 Q3 Domtar (Ashdown) Arkansas USA BSK C 2016 Q3 Domtar (Ashdown) Arkansas USA BHK -135 C 2016 Q3 UPM Kaukas Finland BSK/BHK? C 2016 End Columbia Pulp Washington USA UKP (Straw) 125 P 2016 Yongfeng* Xuyong China Bamboo 200 C 2016 Irving New Brunswick Canada BSK 30 C Copyright 2015 RISI, Inc. Proprietary Information

20 Key BHK Capacity Developments Sun Paper Yanzhou switch to BHK, Q4: k? Old Town closures, Q4/Q1: ~180k BHK/BSK Klabin Ortigueira, Q1: 1.1 million BHK APP OKI, Q3/Q4: million BHK 20 Copyright 2015 RISI, Inc. Proprietary Information

21 Key BSK Capacity Developments Svetlogorksy BSK/BHK/DP 1H2016: 400k Klabin Ortigueira 1Q16: 400k IP Riegelwood 2Q16: 360k Domtar Ashdown 3Q16: >300k Sodra Varo 3Q16: 275k 21 Copyright 2015 RISI, Inc. Proprietary Information

23 2016 Forecast Summary Continuing strong dollar, with upside risk in terms of dollar strength with acceleration of the US economy Putting downward pressure on production costs Modest acceleration in growth of paper and board demand, mostly b/c of packaging In the pulp market, supply-side changes remain more prominent than usual For BHK, given the new assumed timing for the South Sumatra project, profitability seems to be on a downward trend through the end of 2016 For BSK, 2 nd half of 2016 could see capacity growth > demand growth, esp. for SBSK/fluff 23 Copyright 2015 RISI, Inc. Proprietary Information

24 Announcing Our Updated China Pulp Study---Available Today. New Edition: The China Pulp Market in Transition: A Comprehensive Analysis and Outlook 24 Copyright 2015 RISI, Inc. Proprietary Information

World Pulp Monthly. Analysis and Forecasts of the International Pulp Market. January 15. RISI European Conference. Summary. Recent Developments

World Pulp Monthly. Analysis and Forecasts of the International Pulp Market. January 15. RISI European Conference. Summary. Recent Developments January 15 World Pulp Monthly Analysis and Forecasts of the International Pulp Market RISI European Conference Join us in Amsterwm from March 9-11! www.risi.com/euroconf Summary BSK and BHK prices in January