UFS Market Dynamics April 2018 Nor orth th Am Americ erican an - - PowerPoint PPT Presentation

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UFS Market Dynamics April 2018 Nor orth th Am Americ erican an - - PowerPoint PPT Presentation

Jan 24, 2024 116 likes •229 views

UFS Market Dynamics April 2018 Nor orth th Am Americ erican an UFS M FS Mar arket et Upda pdate te Improvi Imp ving ng mar market et co cond nditi ition ons s driv driven en by by str stron onge ger r de deman mand d

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SLIDE 1

UFS Market Dynamics

April 2018

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SLIDE 2

www.domtar.com

Nor

  • rth

th Am Americ erican an UFS M FS Mar arket et Upda pdate te

Imp Improvi ving ng mar market et co cond nditi ition

  • ns

s driv driven en by by str stron

  • nge

ger r de deman mand d an and r d red educ uced ed supp supply

  • UFS demand forecast returns to historical decline levels
  • PPPC 2018 demand forecast decline -3.3% (1% = 80K tons)
  • Improved economic activity offsetting some of per capita consumption decline
  • Capacity reductions are adding up
  • IP and Boise/PCA strategic focus on containerboard growth, leads to conversion of UFS machines
  • Rising costs and low selling prices lead to poor profitability, closures of marginal producers
  • Coated producers shifting focus back to coated paper, reducing UFS production
  • Imports of UFS have declined due to weak USD, global paper price increases,

rising transportation costs

  • Increased pulp pricing, input costs of raw materials and transportation lead to

rising pulp and paper prices across the globe

  • UFS operating rates are increasing, inventories are down reflecting tighter market
  • Domtar remains firmly committed to UFS in North America
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SLIDE 3

www.domtar.com

Nor North th Ameri America can n Ca Capa pacity R city Red educ uctions tions

  • Capacity reductions of 20% in CFS market will result in operating rates exceeding

100%. CFS producers are less inclined to manufacture UFS as their primary market tightens. Announced closures and conversions will reduce UFS capacity by nearly 11%

Capacity Reductions Date UFS Reduction % of UFS Capacity Glatfelter Chillicothe Q3 2017 60,000 .7% Appleton Coated Q4 2017 80,000 1% GP Camas Q1 2018 237,000 3% Boise/PCA Wallula Q4 2018 190,000 2.3% IP Riverdale (Selma) Q3 2019 220,000 2.7% Displaced Uncoated Volume (Coated Mills) Various *100,000 1.2% *Domtar Estimate 887,000 10.9%

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SLIDE 4

www.domtar.com

Ca Capa pacity city/Dema /Demand nd Histo History y & & Pr Projec

  • jection

tion

70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% 7,000 7,500 8,000 8,500 9,000 9,500 10,000 10,500 11,000 11,500

Thousands of short tons

  • Adj. Demand

Capacity

  • Oper. Rate

IP Courtland 750K A64 360K Glatfelter 60K Boise/PCA 190K IP Selma 220K GP Camas 250K Appleton 80K

Source: PPPC, Fisher, RISI, Domtar estimates

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SLIDE 5

www.domtar.com

Key Factors:

  • Imports have declined

50% since 2015

  • Back to historic levels of

8% of demand

  • Weakening USD
  • Global demand

increase

  • Price increases

continue in Europe, Latin America and Asia

Imports 90,000 tons/ mth

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

  • 20,000

40,000 60,000 80,000 100,000 120,000 Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Jan 2016 Apr 2016 Jul 2016 Oct 2016 Jan 2017 Apr 2017 Jul 2017 Imports Imports % of Demand

Imports 60,000 tons/ mth

Imp Impor

  • rts

ts of

  • f UFS

UFS Ha Have e Dec Decli line ned

Cop

  • py

y Pape per Impo r Imports I ts Into nto N.A N.A. . (to (tons/mo ns/mo.) .)

Source: PPPC

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SLIDE 6

www.domtar.com

Pricing Pricing Histor History y – Key ey UC UCFS FS Gr Grades ades

$800 $850 $900 $950 $1,000 $1,050 $1,100 Copy Offset Rolls Forms Bond Envelope

Source: RISI

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SLIDE 7

www.domtar.com

Mar Market et Pu Pulp lp Price Prices C s Con

  • ntinue

tinue to In to Incr crea ease se

No North th America merican n List List Pricing Pricing pe per r RISI ISI (AD (ADMT) T)

Source: RISI

March 2018

Source: RISI

$500 $600 $700 $800 $900 $1,000 $1,100 $1,200 $1,300

Softwood Hardwood

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SLIDE 8

www.domtar.com

Inp Input Costs ut Costs Continu Continue to e to Inc Increa ease se

MANUFACTURING

  • Pulp
  • Primary Chemicals/Caustic

Soda

  • Specialty Chemicals
  • Packaging
  • Boxes and Ream Wrap

TRANSPORTATION

  • Carrier capacity constraints
  • Freight increases expected to

continue

  • Hurricane impact long term
  • Electronic Log Device (ELD)
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SLIDE 9

www.domtar.com

Domta Domtar is r is the the Cl Clea ear r Nor North Americ th American an Le Lead ader er

DOMTAR 37%

IP 22% BOISE 12%

G-P 8%

GLATFELTER

7%

ALL OTHERS

15% 7% 7% 14% 60%

IP G-P BOISE(PCA) DOMTAR

% OF SALES IN PAPER¹

CAPACITY SHARE

As a percentage of business, we are by far the most focused on paper.

¹ NA production, estimated based on current capacity announcements

8,200K tons

Source: Company reports, Fisher, RISI, Domtar estimates

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SLIDE 10

www.domtar.com

Do Domt mtar ar is is Co Committ mmitted ed

To The Future of Paper

EDUCATION ADVOCACY INVESTMENT INNOVATION

Marketing & promoting the benefits of paper to end users Providing tools to help customers sell product & “print” to their customers Advocating for the interests of domestic paper producers Publically refuting misconceptions about the paper industry $600M+ invested annually to maintain world-class assets and ensure best-in-class products Research & Development at our mills Support for new land-owner initiatives that drive responsible forestry management practices

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SLIDE 11

www.domtar.com

Gr Growing Y wing Your

  • ur Busines

Business

LONG-TERM COMMITTED PARTNERSHIP

MOST RELIABLE

& ADAPTABLE SUPPLY CHAIN

BROAD RANGE

OF BEST-IN-CLASS

PRODUCTS

PROTECT &

STRENGTHEN BRAND

REPUTATION