THE PULP AND PAPER INDUSTRY IN CANADA

THE PULP AND PAPER INDUSTRY IN CANADA

Canada is a leading producer of pulp and paper products Canada is the world's largest producer of newsprint 28 % of world market * Second largest producer of market pulp 15 % of world market * In 2004, Canada produced 30.2 million tonnes of paper, paper-board and market pulp 16 % of world market * Total sales value in 2004 was CA$ 21.5 billions *Source: Pulp and paper international 1

Newsprint and printing papers are dominating shipments Newsprint, 8.5 Printing and writing paper, 6.3 Paperboard, 5.2 Market pulp, 10.5 Million tonnes Source: Canadian pulp and paper industry key facts 2002 2

Mapping the pulp and paper industry in Canada Quebec, 2 nd Largest production British Columbia, Largest production Ontario, 3 rd largest production 3

Paper recovery has slightly improved since 2001 Percent 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% Recovery Rate 1999 2000 2001 2002 2003 2004 Year Canada World average Sweden Source: PPI, CEPI, Swedish Forest Industries Federation 4

Big volumes, but low profit Problems: High production costs Increased transportation costs to mills for raw material Increased energy cost Old technolgy Stronger Canadian dollar compared to the US dollar Increased competition from offshore producers Source: Canadian pulp and paper industry key facts 2004 5

Mills are closing down Governments step in 1. Abitibi Consolidated Inc. threatens to shut down mill in Stephenville, Newfoundland Provincial government gives CA$10 to keep the mill operational for at least three years 2. Weyerhaeuser Inc. Prince Albert, British Columbia, threatens to close after profits are almost down by 50% Federal government steps in to save parts of production 3. Tembec and Aditya Birla Group. Restarts closed mill in Nackawick, New Brunswick New Brunswick government contributes CA$ 70 million to save the Nackawick community 4. Ontario mills threaten to close down mills (Kenora, Thunder bay) Ontario government commits CA$330 to revive the industry 5. Domtar Inc. suspends division in wake of worse then expected quarter. 6

Capital and repair expenditures are expected to be high Provincial Governments Ontario government CA$ 330 million to revive the paper industry in Ontario Quebec government CA$ 450 million in aid over three years to the forest industry and to the regions hurt by mill closures Federal government CA$ 50 million for the Quebec pulp and paper industry Private sector Technology partnership Canada CA$ 29 million investment to help develop environmentally friendly pulp and paper manufacturing technologies Capital investments in the pulp and paper sector in Canada as a whole are about CA$ 1.8 billion per annum on average. 7

Business Opportunities As the industry adapts to new realities, there are opportunities for suppliers of technology and equipment within areas such as: Improvement of product quality & product mix Improvement of productivity Energy savings Environmental compliance Biomass and cogeneration projects Rebuilding outdated machines Production of chemicals and fuels 8

There are several key players in each sub-sector Boxboard Cascades inc. Fraser Papers Inc. Kruger Inc. Minas Basin Pulp & Power Co. Ltd. Norampac Inc. Cascades Boxboard Group Inc. Smurfit-Stone Container Corp. Sonoco Canada Stadacona Inc. Tembec Inc Containerboard Atlantic Packaging Products Ltd. Kruger Inc. Lake Utopia Paper Minas Basin Pulp & Power Co. Ltd. Norampac Inc. NorskeCanada Smurfit-Stone Container Corp. Sonoco Canada Tembec Inc. Kraft Papers Canfor Corporation Cascades inc. Domtar Inc. Kruger Inc. Norampac Inc. Tolko Industries Recycling Abitibi- Consolidated Inc. Atlantic Packaging Products Ltd. Bowater Pulp and Paper Canada Inc. Cascades inc. Domtar Inc. Kruger Inc. Norampac Inc. Smurfit-Stone Container Corporation Newsprint Abitibi- Consolidated Kruger Inc. Tembec Inc Domtar Inc Tembec Inc. 9

STC s core competence Create and develop business in Canada EVALUATE ENTER ESTABLISH EXPAND Marketopportunities Go / no go Select establishment strategy and develop market plan Implementation of selected strategy Growth From the first step our focus is to develop your business 10

Why work with STC? BUSINESS FOCUS LOCAL PRESENCE HANDS ON We are dedicated to help you do business - we will walk the extra mile! We are established locally with skilled staff and well developed local networks - we know local and Swedish business! We do not only give strategic recommendations we do the job! TRACK RECORD We have extensive experience of international establishment and expansion. as our customer you can feel confident! The STC creates and develops international business fast and cost effective 11

Swedish Trade Council in Canada Åke Ryhagen Trade Commissioner Hamid Shirazi Project Leader Christina Keighren Consultant Klas Robinson Project Leader Forest Industries, Mining Manufacturing (Aerospace, Automotive, Robotics), Life Science Environmental Technology & Renewable Energy IT & Telecom, Offshore & Gas Swedish Trade Council 2 Bloor St. W. Suite 2120 Toronto, Ontario, Canada M4W 3E2 Tel. +1 416 922-8152 Fax +1 416 929-8639 canada@swedishtrade.se 12