EMGE NEWSPRINT FORECASTS OF DEMAND, TRADE AND SUPPLY MAY 2012 WORLD NEWSPRINT MARKETS. Paper Industry Consultants

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1 EMGE Paper Industry Consultants NEWSPRINT FORECASTS OF DEMAND, TRADE AND SUPPLY MAY 2012 WORLD NEWSPRINT MARKETS

2 EMGE WORLD NEWSPRINT MARKETS - MAY 2012 Page i TERMS & CONDITIONS Our products are supplied under the following terms and conditions, which cover material in all forms including paper, electronic, etc.: CONFIDENTIALITY All information provided is strictly confidential unless otherwise stated. The Client is responsible for safeguarding this confidentiality. The information contained in our publications is provided only for legitimate commercial purposes; it is not to be used in legal or anti-trust action against others. COPYRIGHT At EMGE we aim to assist clients in using our information, however it is your individual responsibility as well as that of your company to abide by the rules and regulations as set out under European & International copyright law. Terms for standard usage Making copies of our work is not permitted. No part of any EMGE publication may be reproduced in any form, for external or internal use, without prior written permission from EMGE. You do, however, have permission to replicate small samples of non-sensitive information as required, on the condition that you clearly acknowledge the source. If you have any doubts as to the legitimate use of our information, please contact EMGE. Terms for Groupwide Distribution Licence holders only Copies of EMGE publications purchased under a Groupwide Distribution Licence may be distributed internally within the group only. Normally licences are granted under a regional basis, unless specified as a Global Groupwide Licence. None of the material provided may be copied or shown to other companies, industry consultants, finance companies or investment houses, under any circumstances. You do, however, have permission to replicate small samples of non-sensitive information as required, on the condition that you clearly acknowledge the source. If you have any doubts as to the legitimate use of our information, please contact EMGE. DISCLAIMER While we aim to ensure that the information contained in our publications is as reliable as possible, we cannot accept responsibility for actions or decisions taken by the client, other company or person arising from our work. EMGE & Co. Ltd. PO Box 200 Truro Cornwall TR1 1FN United Kingdom Tel: +44 (0) Fax: +44 (0) post@emge.com URL:

3 Page ii EMGE WORLD NEWSPRINT MARKETS MAY 2012 Table of Contents Page Introduction 1 1. FORECAST SUMMARY 3 2. Demand Short-Term Outlook 9 3. Demand Long-Term Outlook Demand - Caveat Supply Base Capacity Supply Forecast Capacity Supply Demand Forecast Trade Prices Value 59 A. Leading Suppliers A.1. M&A s W. Europe still watchful on market shares 61 A.2. Leading Suppliers 63 A.3. Leading Suppliers Notes on M&A Activity 65 B. Supply-Demand Forecasts 67 B.1. Newsprint Demand 67 B.2. Trade Flows 68 B.3. Newsprint Output 68 B.4. Capacity Assumptions 70 B.5. Capacity and Operating Rates 71 C. Country Data Worldwide 73 D. Supply Outlook 77 D.1. Base Capacity Standard Newsprint 78 D.2. Unspecified Capacity Changes 81 D.3. Forecast Capacity 82 E. Machine Investment Plans 83 E.1. New Machines 83 E.2. Machine Closures & Conversions to Other Grades 84 E.3. Investment Listings 86 APPENDIX - SUPPLEMENTARY CHARTS 89

4 EMGE WORLD NEWSPRINT MARKETS - MAY 2012 Page iii List of Figures Page 1. World Newsprint Demand vs.leading Indicators 1 2. Market Summary World Newsprint Markets 3 3. World Demand - Historical and Forecast Trends 3 4. Demand Forecast, World by Region, Newsprint 4 5. Newsprint Demand, Developed vs.developing Nations 5 6. Capacity Growth Trends Base Capacity 7 7. Demand Growth Outlook - Newsprint 8 8. World Demand-Supply Overview, Newsprint 8 9. Forecast Demand Growth, by Region 2011 to Purchasing Managers Index USA Newspaper Adspend Historical Newsprint Demand - USA Newspaper Adspend W.Europe Japanese Advertising Expenditure Japanese Newspaper Circulation China/HK Newsprint Demand Indian Newsprint Demand Australian Newspaper Circulation Brazilian Newspaper Circulation Brazilian Newspaper Adspend Eastern Europe Newsprint Demand vs. Newspaper Adspend Demand Growth Outlook - Newsprint EMGE Global Demand Growth Forecast Share of Demand Emerging vs. Mature Markets Regional Demand Growth Outlook, Newspaper vs. Internet Adspend - USA Indian Readership / Users by Medium ONP Waste Paper Prices by Region Base Capacity Changes by Region Capacity Increase Forecast by Region Base Capacity Capacity Growth Trends Base Capacity Global Newsprint Operating Ratios Base Capacity Operating Rates If No New Capacity Closures Capacity Forecast by Region ( ) Regional Supply-Demand Outlook,

5 Page iv EMGE WORLD NEWSPRINT MARKETS MAY 2012 List of Figures (continued) 36. Capacity Growth Forecasts Unspecified Capacity Capacity Forecast Assumptions 2011 to Capacity Forecast Changes, by Region Global Newsprint Operating Ratio Forecasts Net Trade Forecast, 2011 vs Price Declines About To End? Demand, Prices and Value Newsprint Industry Consolidation 1990 vs Leading Suppliers Capacity, Newsprint Leading Newsprint Suppliers - World and Regions Newsprint Producers - Top 5 Share Leading Suppliers Notes on M&A Activity Demand Forecast, World by Region, Newsprint Trade Forecast, World by Region, Newsprint Output Forecast, World by Region, Newsprint Output Growth, World by Region, Newsprint World Demand-Supply Overview, Newsprint EMGE Capacity Assumptions, Newsprint Operating Rates, Forecast vs. Base Base Capacity, World by Region, Newsprint Base Operating Rates, World by Region, Newsprint Forecast Capacity, World by Region, Newsprint Forecast Operating Rates, World by Region, Newsprint Demand, Trade, Output & Capacity by Country 2011e Capacity Increases by Country Base Capacity by Region Capacity Unspecified Changes Forecast Capacity - by Major Producing Regions New Machine Capacity Investments - Details Machine Closures & Conversions - Details Forecast Capacity Calculations ( ) Investment Listing Europe Investment Listing Asia Investment Listing North & Latin America World Newsprint Demand vs. Leading Indicators Newsprint Regional Demand Per Capita 89

6 EMGE WORLD NEWSPRINT MARKETS - MAY 2012 Page v List of Figures (continued) 73. Estimated Regional Demand Growth 2012e Regional Demand Growth Outlook, Newsprint Demand W.Europe Net Capacity Changes Newsprint ( ) Annual Capacity Forecast Changes ( ) Total World Adspend Growth Newspaper Circulation Germany Newspaper Circulation UK Newspaper Demand vs Adspend World Newspaper Demand vs Adspend W. Europe Newspaper Demand vs Adspend Japan Newspaper Demand vs Adspend China GBP vs. USD$ EURO vs. USD$ European Economic Sentiment Indicator European Consumer Confidence Indicator Composite Leading Indicator W.Europe Composite Leading Indicator USA Unemployment EU German Printing Sentiment 99

7 Page vi EMGE WORLD NEWSPRINT MARKETS MAY 2012 Sources To compile these reports we have used an extensive range of sources, including all published information available to EMGE & Co. Ltd. In addition to published data, we have made reference to much industry data, which companies have been willing to share with us in a non-confidential manner. Furthermore, we have applied our own market research resources to gather additional information and market intelligence. This information and that in our databases are updated daily. We publish the revised World Newsprint Market forecasts twice a year.

8 EMGE WORLD NEWSPRINT MARKETS - MAY 2012 Page vii Report Contents This World Newsprint Markets report provides a critical review of the demand-supply outlook. Based on comprehensive historical information and extensive, up-to-date market knowledge, the report examines a valuable range of issues that are changing the structure of global markets for Newsprint. For this report, the base year is We have integrated statistical information up to March 2012 for the major regions and other countries where available. Market forecasts are to Individual country data are provided, and forecasts are grouped by region, as follows:- - Western Europe (EU, Norway and Switzerland) - Other Europe (Eastern Europe/Russia, Greece, Iceland, Cyprus, etc) - Total Europe (Western + Other Europe) - North America (USA & Canada) - Latin America - Japan - China/Hong Kong - Other Asia (All Asia and Oceania exc. Japan, China, Hong Kong & Middle East) - Total Asia (Japan + China/HK + Other Asia) - Africa/ME (All Africa & Middle East including Turkey & Israel) We provide a comprehensive database of Newsprint demand and supply, which includes a forecast of demand by region to 2016 and world capacity by individual country. Importantly, we include extensive tables showing the structure and the investment plans of the industry by company, as well as valuable listings of the Leading Supplier Rankings. A detailed analysis and forecast of the demand-supply balance is included, including a projection of expected, unspecified closures by region. The report assesses the outlook for the global Newsprint industry operating rates, international trade and self-sufficiency.

9 Page viii EMGE WORLD NEWSPRINT MARKETS MAY 2012 Definitions & Abbreviations The definition for Newsprint in this report is Standard Newsprint only. Improved Newsprint has been excluded from the report and is included in Uncoated Mechanical papers, in our World Graphic Papers forecast report. The Newsprint data herein are based on Volumes as sold, measured in metric tonnes. Newsprint as referred to in this study encompasses Standard Newsprint, between gsm, up to brightness 59 ISO (some regional differences in definition do exist): Demand / Consumption - calculated as Production + Imports - Exports Production / Output - paper mill saleable production Shipments / Deliveries invoiced mill sale Trade - Net Exports, i.e. Production minus Consumption, or Exports minus Imports Capacity - Annual Machine Capacity, based on technical, not market, conditions Operating Rate - Theoretical Ratio of Production to Capacity M/c Machine gsm grams per square metre (unit measure of paper weight) kt thousands of tonnes mt millions tonnes (all volumes are metric) tpy tonnes per year (measure of capacity) % pa percent increase per annum

10 EMGE WORLD NEWSPRINT MARKETS MAY 2012 Page 1 Introduction Global Analysis and Forecasts of the Newsprint Sector demand, trade and capacities FIGURE 1. WORLD NEWSPRINT DEMAND vs. LEADING INDICATORS % pa - 3MMA Growth 15% 10% World Newsprint Demand (LHS) (to Mar'12) 16% 12% 5% 8% 0% 4% -5% -10% Composite Leading Indicator (RHS) 0% -4% -15% -8% -20% -12% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 * CLI based on USA, Japan & W.Europe ONLY EMGE & Co. Ltd This report, the latest EMGE WORLD NEWSPRINT MARKETS (WNM) FORECAST, examines the key market issues and covers information and forecasts on the outlook for global demand-supply in the Newsprint sector to 2016, including demand, trade, output, capacity, investments and leading suppliers. A forecast analysis of paper prices, for Newsprint, SC and LWC is covered in the accompanying report EMGE S PUBLICATION PAPER PRICE FORECASTS. Furthermore, the sister forecast report EMGE S WORLD GRAPHIC PAPERS has recently been published, which covers demand, supply, trade and capacity for the Printing and Writing grades i.e. Coated Woodfree, Uncoated Woodfree, Coated Mechanical and Uncoated Mechanical (including Improved Newsprint).