Global Outlook for Graphic Papers October 2019 John Maine VP, - - PowerPoint PPT Presentation

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Global Outlook for Graphic Papers October 2019 John Maine VP, - - PowerPoint PPT Presentation

Feb 22, 2024 210 likes •597 views

Global Outlook for Graphic Papers October 2019 John Maine VP, Global Graphic Paper Global P&W demand dropped 2.5% in 2018 130,000 8% 6% 2.6 120,000 4% 2% 110,000 Thousand tonnes Million tonnes of demand decline in 0% 2018

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SLIDE 1

Global Outlook for Graphic Papers

October 2019 John Maine VP, Global Graphic Paper

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SLIDE 2

Global P&W demand dropped 2.5% in 2018

2.6

Million tonnes of demand decline in 2018

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 12%
  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% 70,000 80,000 90,000 100,000 110,000 120,000 130,000 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Thousand tonnes World P&W demand %ch

12%

Smaller global market in 2018 versus 2010

1.6

Millions tonnes of average demand declines in 2011-2017

2

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SLIDE 3

Is global graphic paper demand accelerating downward?

TONNAGE DECLINES STILL NOT SHRINKING DESPITE GREATLY DIMINISHED MARKETS

2019 | Fastmarkets | Global Graphic Paper Outlook

40% 50% 60% 70% 80% 90% 100%

  • 3,500
  • 3,000
  • 2,500
  • 2,000
  • 1,500
  • 1,000
  • 500

Thousand tonnes

Printing & writing

Tonnage decline % of 2010 demand level 40% 50% 60% 70% 80% 90% 100%

  • 2,500
  • 2,000
  • 1,500
  • 1,000
  • 500

Thousand tonnes

Newsprint

Tonnage decline % of 2010 demand level

3

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SLIDE 4

P&W demand growth in 2019-2021

2019 | Fastmarkets | Global Graphic Paper Outlook 4

Thousand tonnes, percentage per year

  • 6.7

Million tonnes

  • 2.4%

Average percent change

Three-year total global growth

  • 7.1%
  • 1.6%
  • 6.2%
  • 3.5% -3.7%

17 18 19 20 21

NORTH AMERICA

0.0% -0.8%

  • 1.9%
  • 0.9%

0.5% 17 18 19 20 21

LATIN AMERICA

  • 5.3% -4.9% -5.2% -5.5%
  • 4.7%

17 18 19 20 21

OCEANIA

1.6%

  • 2.1%
  • 0.6% -0.9% -0.4%

17 18 19 20 21

ASIA

0.2% 0.8% 0.5% 0.6% 0.5% 17 18 19 20 21

AFRICA

3.2%

  • 7.4%
  • 3.5%
  • 0.1% 0.2%

17 18 19 20 21

MIDDLE EAST

  • 1.5%
  • 4.5% -5.7% -5.3% -3.9%

17 18 19 20 21

EUROPE

4

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SLIDE 5

Newsprint demand growth in 2019-2021

2019 | Fastmarkets | Global Graphic Paper Outlook 5

Thousand tonnes, percentage per year

  • 3.8

Million tonnes

  • 7.0%

Average percent change

Three-year total global growth

  • 11.2%
  • 11.0%
  • 14.6%
  • 11.6%
  • 9.8%

17 18 19 20 21

NORTH AMERICA

  • 12.0%
  • 12.2%
  • 8.6% -5.0% -3.5%

17 18 19 20 21

LATIN AMERICA

  • 16.4%
  • 10.6%
  • 7.5% -7.8% -7.3%

17 18 19 20 21

OCEANIA

  • 7.2%
  • 11.0%
  • 7.6% -7.1% -6.7%

17 18 19 20 21

ASIA

  • 13.1%

3.3%

  • 3.4% -3.3% -3.2%

17 18 19 20 21

AFRICA

  • 20.4%
  • 6.6% -6.8% -4.9% -4.7%

17 18 19 20 21

MIDDLE EAST

  • 7.4% -8.9% -7.5% -8.6% -8.2%

17 18 19 20 21

EUROPE

5

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SLIDE 6

Uncoated woodfree demand much more stable than total P&W

GLOBAL UWF DEMAND DECLINED ONLY 0.2% PER YEAR IN 2011-2018 AND WAS FLAT IN 2017-2018

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% 42,000 44,000 46,000 48,000 50,000 52,000 54,000 56,000 Thousand tonnes Demand %ch 95% 96% 97% 98% 99% 100% 101%

  • 600
  • 400
  • 200

200 400 600 Thousand tonnes Tonnage decline % of 2010 demand level

6

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SLIDE 7

Largest global P&W declines in mechanical papers

  • 4.2%

Annual demand decline for mechanical papers in 2014-2018

2019 | Fastmarkets | Global Graphic Paper Outlook

20,000 40,000 60,000 80,000 100,000 120,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tonnes Uncoated woodfree Uncoated mechanical Coated woodfree Coated mechanical

  • 3.3%

Annual demand decline for coated papers in 2014-2018

54%

Share of total P&W market for UWF after flat performance in 2014-2018

7

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SLIDE 8

Few pockets of P&W demand growth left in the world

INDIA IS ALMOST THE ONLY MAJOR MARKET STILL GROWING

  • More and more Asian markets

joining ranks of secular decline.

  • Western European and North

American demand declines may be worsening. .

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 2,500-2,300-2,100-1,900-1,700-1,500-1,300-1,100 -900
  • 700
  • 500
  • 300
  • 100

100 300 500 North America Western Europe Eastern Europe Middle East Africa China India Other Asia Oceania Latin America Thousand tonnes

P&W demand growth in 2019 and 2020

8

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SLIDE 9

US printing & writing end-use markets

2019 | Fastmarkets | Global Graphic Paper Outlook 9 9

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SLIDE 10

North American magazine circulation per issue

  • 1%

Rate of decline in subscriptions

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 280 300 320 340 360 380 400 420 Millions Circulation % Change (R)

Source: Alliance for Audited Media & Fastmarkets RISI; includes consumer, farm, religious, paid & verified and analyzed nonpaid; excludes digital.

  • 16%

Drops for single-copy sales

10%

Free magazines surge to 10% share of all magazines printed

10

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SLIDE 11

Magazine ad pages continue sharp losses in 2019

WORST PERFORMANCE IN AD PAGES SINCE THE GREAT RECESSION IN 2008/2009

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 30%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5%

QUARTERLY

  • 30%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5%

ANNUAL

Source: PIB & Fastmarkets RISI; includes Sunday magazines and the effect of discontinued print editions. 11

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SLIDE 12

US catalog circulation

CATALOG MAILING DROPPED 1.7% IN 2018, BUT OFF SHARPLY IN 2019 DUE TO COST OF PAPER AND POSTAGE

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 20%
  • 15%
  • 10%
  • 5%

0% 5%

QUARTERLY

%Ch year ago

  • 20%
  • 15%
  • 10%
  • 5%

0% 5%

ANNUAL

12

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SLIDE 13

4 5 6 7 8 9 10 11 45 55 65 75 85 95 105 115 Billions of pieces First class Marketing mail Periodicals (R)

US postal mail volumes

MARKETING MAIL GETTING THINNER AND LIGHTER

Pieces dropped 1.4% in both FY2018 and FY2019 YTD, but weight declined 3.1% in 2018 and 5.8% in 2019, indicating less paper usage per piece.

2019 | Fastmarkets | Global Graphic Paper Outlook USPS PIECES OF MAIL FORECAST 2019 FY ENDING SEPT 30, 2018 First class

  • 3.2%
  • 3.9%

Marketing mail

  • 1.4%
  • 1.4%

Periodicals

  • 8.1%
  • 5.8%

Total mail

  • 2.4%
  • 2.6%

13

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SLIDE 14

Real dollar sales for US commercial printing

PRINTING SALES ARE STABLE, BUT PAPER USAGE IS DOWN AS PRINTERS DIVERSIFY TO SERVICES

2019 | Fastmarkets | Global Graphic Paper Outlook

5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 Millions of real 2003$ per month

MONTHLY

  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4%

ANNUAL GROWTH

Recession

14

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SLIDE 15

Unit sales of printed books

1.3%

Growth in 2018

2019 | Fastmarkets | Global Graphic Paper Outlook

  • 3.0%
  • 2.0%
  • 1.0%

0.0% 1.0% 2.0% 3.0% 580 600 620 640 660 680 700 720 2013 2014 2015 2016 2017 2018 2019 (9 mo est) Unit sales in thousands Unit sales Percentage change (R)

Source: NPD Bookscan, covers 80-85% of print sales.

E-book share of total book publishing has flattened at 20%

20%

  • 1.5%

Decline in first eight months of 2019

15

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SLIDE 16

Paper supply and demand balance

2019 | Fastmarkets | Global Graphic Paper Outlook 16

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SLIDE 17

2019 | Fastmarkets | Global Graphic Paper Outlook

No more safe havens for graphic paper mills

China no longer the growth engine it used to be Packaging papers are becoming oversupplied Tissue and specialty papers offer little volume for sufficient growth

17

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SLIDE 18

Global coated paper machine shuts/conversions, 2019-2020

COMPANY MILL COUNTRY CAPACITY (TONNES/YR) DATE COMMENTS Arctic Paper Grycksbo Sweden

  • 45,000 CFS

Q1 2019 Shut PM7 Feldmuehle Uetersen Germany

  • 80,000 CFS

Q1 2019 Shut PM2 Lecta Condat France

  • 230,000 CFS

Q2 2019 Convert a PM to specialty Stora Enso Oulu Finland

  • 1,080,000 CFS

Q4 2020 Shut PM6, convert PM7 to kraftliner Arjowiggins Bourray, Besse-sur-Braye France

  • 348,000 CFS/CME

Q1 2019 Mill closure UPM Plattling Germany

  • 155,000 CME

Q3 2019 Shut PM10 Burgo Verzuolo Italy

  • 400,000 CME

Q4 2019 Convert PM9 to packaging ND Paper Biron USA

  • 103,000 CME

Q3 2019 Shift PM25 to packaging Verso Luke USA

  • 408,000 CFS

Q3 2019 Shut by June 30 Nippon Paper Ind. Fuji Japan

  • 33,000 CME

2019 Shut PM11 Gold Huasheng Jiangsu China

  • 150,000 CWF

2020 New carbonless/thermal production to reduce CWF APP Tijwi Kimia Indonesia

  • 245,000 CFS

2019 Convert PM10 to packaging Hokuetsu Niigata Japan

  • 161,000 CFS

2019 Close by end of June Nippon Paper Ind. Yufutsu Japan

  • 88,000 CFS

2020 Mill shut Daio Paper Mishima Japan

  • 150,000 CFS

2019 Conversion to kraft papers and paperboard

  • 774,000 CME
  • 2,912,000 CFS
  • 3,686,000 total

2019 | Fastmarkets | Global Graphic Paper Outlook

Note: There are currently no major coated paper capacity expansions occurring globally other than restart of West Linn.

18

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SLIDE 19

Global coated paper operating rates

OPERATING RATES DECLINE IN 2019 DESPITE MAJOR CAPACITY CUTS

2019 | Fastmarkets | Global Graphic Paper Outlook

US MARKETS NOW EASING AFTER MAJOR SHUTS CAUSED TIGHT MARKETS AND RISING PRICES IN 2018

75% 80% 85% 90% 95% 100%

Coated freesheet

  • N. America
  • W. Europe

Asia 70% 75% 80% 85% 90% 95% 100%

Coated mechanical

  • N. America
  • W. Europe

19

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SLIDE 20

American/European uncoated woodfree capacity changes, 2019-2021

COMPANY MILL COUNTRY CAPACITY (TONNES/YR) DATE COMMENTS Georgia-Pacific Port Hudson, LA USA

  • 573,000

Q1 2019 Shut mill; G-P exited UWF business Flambeau River Papers Park Falls, WI USA

  • 62,000

Q4 2019 Shutting last two small PMs and closing mill Willamette Falls West Linn, OR USA 45,000 Q4 2019 Restarting CFS mill, 1 PM making some UFS Domtar Ashdown, AR USA

  • 160,000

Q4 2019 Shut PM63 and shifting to fluff pulp Domtar Port Huron, MI USA

  • 25,000

Q45 2019 Shut PM6 International Paper Selma, AL USA

  • 213,000

2021 Convert PM15 to white top liner UPM Nordland Germany

  • 200,000

Q3 2019 Conversion of PM2 to glassine Arctic Paper Kostryzn Poland 30,000 Q2 2019 Rebuild Delfortgroup Olsany Czech Republic 7,000 2020 New PM for specialty thin papers COPAMEX Anahuac Mexico

  • 171,000

2019 Shift to containerboard Total net reductions Americas/Europe

  • 1,322,000

2019-2021 7% reduction in USA/European capacity 2019 | Fastmarkets | Global Graphic Paper Outlook 20

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SLIDE 21

Asian/Middle East uncoated woodfree machine startups/closures, 2019-2021

COMPANY MILL COUNTRY CAPACITY (TONNES/YR) DATE COMMENTS Ittihad Paper Abu Dhabi United Arab Emirates 325,000 July 2019 Installed, but did not reach full production Shandong Bohui Shandong China 480,000 Aug 2019 PM6 started Q1 2019 on containerboard, switched to UWF in

  • August. Might eventually switch back to containerboard.

Yuanjiang Yiyang City China

  • 130,000

Q1 2019 Close mill due to government environmental action plan Shandong Bohui Shandong China 600,000 Q4 2020 PM8 ordered from Valmet, startup expected in late 2020 Shandong Bohui Shandong China

  • 140,000

Q1 2019 Closure of 12 small PMs to make room for new PM Sun Paper Yanzhou China 450,000 Q4 2020 New Voith PM purchased in August 2019 Shandong Aohai Rizhao, Shandong China 200,000 2021-2022 Gold Huasheng Jiangsu China 95,000 2020-2021 Net change; includes 280k tonnes of new carbonless, thermal and closure of 150,000 tonnes of CWF Various Indian companies Various India 420,000 2019-2020 Sirpur Paper, Dsg Paper, Ruchira Papers APP Karawang, Mojokerto Indonesia

  • 150,000 Karawang
  • 30,000 Mojokerto

2019 Conversions to packaging at Pindo Deli and Tjiwi Kimia (PM10) Malaysia Newsprint Industries Mentakab Malaysia 250,000 2018-2020 Conversion from newsprint machine APP Tijwi Kima, Mojokerto Indonesia

  • 350,000

2019-2020 Conversion of PM11 to packaging, delayed Various Japanese companies Various Japan

  • 62,000

2019-2020 Total net additions Asia/Middle East 1,958,000 2019-2021 2019 | Fastmarkets | World P&W Paper Outlook 21

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SLIDE 22

Global uncoated woodfree operating rates

5

Years in a row of sub-85% operating rates for Latin America

2019 | Fastmarkets | Global Graphic Paper Outlook

81% 83% 85% 87% 89% 91% 93% 95%

  • N. America
  • W. Europe

Asia Latin America

92%

Operating rates expected for North America in 2020 due to announced closures and crackdown on trade protection

22

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SLIDE 23

Global uncoated mechanical paper machine shuts/conversions, 2019-2020

COMPANY MILL COUNTRY CAPACITY (TONNES/YR) DATE COMMENTS UPM Rauma Finland

  • 265,000 SC UME

Q4 2019 Shut PM2 Norpac Longview USA

  • 73,000 MF UME

2019-2020 Shift to packaging Nippon Fugi Japan

  • 77,000 UME

Q1 2019 Shut PM 12

  • 415,000 total

2019 | Fastmarkets | Global Graphic Paper Outlook 23

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SLIDE 24

Global uncoated mechanical operating rates drop sharply in 2019

86%

Operating rates expected for North America in 2019

2019 | Fastmarkets | Global Graphic Paper Outlook

75% 80% 85% 90% 95% 100%

  • N. America
  • W. Europe

24

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SLIDE 25

Trade issues

2019 | Fastmarkets | Global Graphic Paper Outlook 25

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SLIDE 26

Strong dollar makes UWF imports very competitive in North American market

UWF XEROGRAPHIC PAPER CASH COSTS DELIVERED TO CHICAGO (EXCLUDING TARIFFS), US DOLLARS PER TONNE, Q1 2019

  • Weaker pulp prices will reduce

advantage for low-cost integrated producers.

2019 | Fastmarkets | Global Graphic Paper Outlook

  • N. American

median: $701/tonne 26

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SLIDE 27

US offshore imports of P&W paper are supplying a growing share of US demand

15%

Share of US P&W demand supplied from offshore

2019 | Fastmarkets | Global Graphic Paper Outlook

6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 1,000 2,000 3,000 4,000 5,000 6,000 Thousand tonnes Offshore imports Share of US demand (R)

0%

Decline in US offshore imports since the recession ended in 2009, despite numerous tariffs

52%

Share of US market for coated sheets supplied from offshore, despite tariffs on China and Indonesia

27

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SLIDE 28

Effect of 2015 tariffs on US cut size imports

IMPORTS FROM NON-TARIFF COUNTRIES

2019 | Fastmarkets | Global Graphic Paper Outlook

IMPORTS FROM FIVE TARIFF TARGET COUNTRIES

0% 5% 10% 15% 20% 25% 100 200 300 400 500 600 700 800 900 Share of US demand Thousand tonnes Portugal Indonesia China/Hong Kong Brazil Australia Five-country import share 0% 1% 2% 3% 4% 5% 6% 7% 8% 50 100 150 200 250 Share of US demand Thousand tonnes Israel Germany Finland Thailand France All others Import share

28

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SLIDE 29

Indonesia shifting US exports to rolls after tariff hike

45%

Share for rolls for Indonesian exports to USA in 2019

2019 | Fastmarkets | Global Graphic Paper Outlook

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 50 100 150 200 250 Thousand tonnes Cut size Offset rolls Other (rolls or sheets) Rolls share of total (R)

Note: 2019 estimated based on seven months of US customs data. 29

Share for rolls for Brazilian exports to USA in 2019

35%

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SLIDE 30

Industry financial outlook

2019 | Fastmarkets | Global Graphic Paper Outlook 30

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SLIDE 31

Energy costs are down

OIL AND GAS PRICES AFFECT MILL COSTS AND TRANSPORT COSTS

  • Oil significantly cheaper than 2018
  • Natural gas at $2.37/mcf after

spiking above $5/mcf in late 2018

  • Overall mill energy and

transportation costs have declined relative to 2018

40 45 50 55 60 65 70 75 80 Dollars per barrel

West Texas Intermediate Crude

WTI

2019 | Fastmarkets | Global Graphic Paper Outlook 31

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SLIDE 32

Transportation cost inflation has stopped

RUNUP IN TRANSPORTATION COSTS COOLING IN 2019

  • Trucking and rail costs up 10-12%
  • ver last two years, but flat in 2019
  • Spike in costs due to regulation

changes has stopped

100 110 120 130 140 150 160 170 180 190 200 Rail transportation index General freight trucking index

2019 | Fastmarkets | Global Graphic Paper Outlook 32

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SLIDE 33

Market pulp costs down 35-40% from peaks

$450 $650 $850 $1,050 $1,250 $1,450 $1,650 2016 2017 2018 2019 NBSK - USA MBHK - USA NBSK - China BEK - China

2019 | Fastmarkets | Global Graphic Paper Outlook

US dollars per tonne (US list price, China pre-discount price)

33

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SLIDE 34

Mill cash costs jumped in 2018, but will decline in 2019/2020

  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 2012 2013 2014 2015 2016 2017 2018 2019 2020

% Change in mill cash costs in US dollars for average of all existing North American mills

UFS Offset CFS Rolls UME

2019 | Fastmarkets | Global Graphic Paper Outlook 34

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SLIDE 35

US versus world paper prices

US PRICES HIGH RELATIVE TO OTHER GLOBAL MARKETS

  • Somewhat protected by tariffs
  • Strong dollar, less than 1.10 EUR/USD
  • Drawing in more imports
  • $100
  • $50

$0 $50 $100 $150 $200 $250 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Difference between paper prices in the USA and Europe

LWC 40 lb. Cut size copy paper Newsprint

2019 | Fastmarkets | Global Graphic Paper Outlook 35

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SLIDE 36

US Graphic Paper price history

SHARP RISE IN PRICES DURING 2017 TO 2018 IS NOW OVER

  • Falling costs
  • Rising imports and strong dollar
  • Weak demand/low operating rates
  • Falling prices in offshore markets

$450 $550 $650 $750 $850 $950 $1,050 $1,150 2011 2012 2013 2014 2015 2016 2017 2018 2019 US dollars per ton

SC-A

  • Ctd. No. 5 40 lb
  • Ctd. No. 3 60 lb
  • Unc. offset 50 lb

Cut size copy

Newsprint

2019 | Fastmarkets | Global Graphic Paper Outlook 36

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SLIDE 37

Price to mill cash cost margins

MILL PROFITS PEAKED IN EARLY 2019 AND WILL NOW TREND DOWN

  • Strong dollar and rising imports a

key factor

  • Becoming more difficult to shift

capacity to packaging to balance market

  • Will drive more capacity closures

2019 | Fastmarkets | Global Graphic Paper Outlook

1.1 1.2 1.3 1.4 1.5 1.6 1.7 2014 2015 2016 2017 2018 2019 2020 2021 Price/mill cash costs

Average for all existing North American mills

Newsprint CME, 40 lb CFS-, 60 lb. rolls Copy paper Ume-SC

37

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SLIDE 38

Thank you

WORLD GRAPHIC PAPER FORECAST, 5-YEAR

www.risi.com/worldgraphic

GLOBAL CUT SIZE UNCOATED FREESHEET STUDY

www.risi.com/cutsize

THE IMPACT OF E-COMMERCE ON NORTH AMERICAN PAPER PACKAGING MARKETS

www.risi.com/e-commerce_study

For more information, contact:

Derek Mahlburg

Senior Economist Email: dmahlburg@fastmarkets.com

2019 | Fastmarkets | Global Graphic Paper Outlook 38