Global Pulp &

Paper Market

Outlook & Prospects

April 2017

Hernán Rodríguez W.,

CEO Empresas CMPC

-

50

100

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Newsprint Printing & Writing Containerboard Tissue Other Paper and Board

329 322333

343363 369

384395 392

371

395 400 402 406 409 411 412

Source: CMPC and RISI, World Bank Database

2

Mill

ion

to

ns

Pulp & Paper Global Paper Demand Evolution

Global Paper Demand

412 million tons

Average Growth Rate

+1.5% / year

Per Capita Consumption 2015

USA LATAM China World

Paper and Board 221 45 77 56

Newsprint 9 2 2 3

Printing & Writing 54 9 17 14

Containerboard 87 20 33 21

Tissue 25 6 5 5

Other Paper& Board

45 8 20 13

Source: RISI

Pulp & Paper Paper consumption growth by category

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100

Gro

wth

in a

pp

aren

t co

nsu

mp

tio

n 2

00

6-2

01

5 (

%)

Share of Total Consumption 2015 (%)

Newsprint

Uncoated Woodfree

Coated Woodfree

Uncoated Mechanical

Coated

Mechanical

Containerboard

Tissue

Boxboard Wrapping

Other Paper

& Board

1.1% average growth 10 years

Total Consumption 2015: 411 million tons

3

425 million tons

of total fibers 64 million tons

of market pulp 32 million tons

of BHKP

FIBER WORLD CONSUMPTION

required to produce 412 million tons of

Paper&Board

VIRGIN FIBER

used to produce Paper&Board

(M tons)

MARKET PULP

consumed to manufacture

Paper&Board (M tons)

Dynamics of the Pulp Market

Source: CMPC, RISI 15-year Forecast (2016-2031) & PPPC- Dec 2016

I

4

Recover Paper 244 million tons

(57%)

Virgin

Pulp 181 million

tons

(43%)

Integrated

117

million tons

(65%)

Market

Pulp

64 million

tons

(35%)

Sulphite

Hardwood

32

million tons

(50%)

Softwood

25 million

tons

(40%)

High

Yield

(7%)

UKP

(3%)

5

Packaging • Primary food packaging • Trade & E-commerce

Tissue • Per-capita income • Cultural habits • Degree of development

Less availability of recycled paper

Lower P&W consumption Higher tissue consumption

Less recycled paper usage

Higher primary food packaging Higher quality of tissue paper

Pulp & Paper Virgin Fiber vs. Recycled

DEMAND DRIVERS

Higher virgin fiber demand

6 6 Source: Hawkins Wright, July 2016

NORTH AMERICA

OCEANIA/AFRICA

NORDICS

LATAM

WESTERN EUROPE

EASTERN EUROPE

CHINA

OTHER ASIA

BSKP Market Pulp Flows

→ 12,860 → 8,675 → 25

→ 2,215 → 1,745 → 765

→ 1,470 → 310 → 4,135

→ 1,580 → 1,380 → 785

→ 30 → 0 → 7,275

→ PRODUCTION → EXPORTS → IMPORTS

→ 170 → 15 → 3,690

→ 5,630 → 4,730 → 5

→ 400 → 230 → 405

7 7 Source: Hawkins Wright, July 2016

NORTH AMERICA

NORDICS

LATAM

WESTERN EUROPE

EASTERN EUROPE

CHINA

OTHER ASIA

BHKP Market Pulp Flows

→ 2,135 → 815 → 2,030

→ 17,375 → 15,285 → 90

→ 2,510 → 575 → 6,225

→ 865 → 355 → 640

→ 1,460 → 0 → 7,760

→ PRODUCTION → EXPORTS → IMPORTS

→ 4,290 → 2,330 → 2,430

→ 855 → 495 → 650

OCEANIA/AFRICA

→ 310 → 155 → 185

-4,000

-3,000

-2,000

-1,000

-

1,000

2,000

3,000

4,000

5,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(th

ou

san

d t

on

s Y

oY

)

China

Rest of World

Market Pulp Demand Growth

Source: PPPC 8

Growth Rate 2016 vs. 2006

China: +182.3% Rest of the world: -3.3%

8,037

8,336

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(th

ou

san

d m

etr

ic t

on

s)

BSKP BHKP

China BKP Market Pulp Imports

Source: Hawkins Wright Database

Average Growth Rate

2000-2016

BSKP: +14.8% / year BHKP: +14.2% / year

Growth 2016 vs. 2015

equivalent

to +1.2 million

tons/year 1 New efficient pulp mill/month

9

China Paper & Paperboard Production

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

Newsprint Printing & Writing Containerboard Tissue Other Paper & Pbd.

Source: RISI Database & World 15 Years Forecast

1995-2007 2008-2016 2017-2031

Paper and Board 10.1% 4.8% 2.6%

Newsprint 15.9% -6.1% -5.5%

Printing & Writing 9.2% 3.0% -0.9%

Containerboard 15.5% 6.1% 3.4%

Tissue 10.2% 8.5% 5.9%

Other Paper & Pbd. 5.9% 5.5% 2.7%

(th

ou

san

d t

on

s)

10

11

Demand Strong P&B production in China ↑ Packaging ↑ Tissue ↑ Specialties Modernization of Chinese P&B industry ↑ More intensive in market pulp

Inventories ↑ Low level of inventories in China

Supply ↑ Low capacity utilization ↑ Delays in new supply

450

500

550

600

650

700

750

ene-

15

feb-

15

mar

-15

abr-

15m

ay-1

5ju

n-1

5ju

l-15

ago

-15

sep

-15

oct

-15

nov

-15

dic

-15

ene-

16

feb-

16

mar

-16

abr-

16m

ay-1

6ju

n-1

6ju

l-16

ago

-16

sep

-16

oct

-16

nov

-16

dic

-16

ene-

17

feb-

17

mar

-17

BHKP BSKP

Market Pulp Prices FOEX China

What happened?

12

WORLD-20 BHKP PRODUCERS INVENTORIES & BEKP

PRICES IN CHINA

450

470

490

510

530

550

570

590

610

630

2.5

2.6

2.7

2.8

2.9

3.0

3.1

en fe ma ab my jn jl ag se oc no di en fe ma ab

2016 2017

(US$

/to

nn

e c.

i.f. C

hin

a p

ort

s)

Pro

du

cers

sto

cks

BH

KP

(m

illio

n t

on

nes

)

← W-20 producers inventories (dot line)

CHINA BEKP prices →

Source: PPPC

Pulp Prices vs. Inventories

13

Market Pulp Cash Costs US$/Tons c.i.f China Ports

0

100

200

300

400

500

600

700

0 5,000 10,000 15,000 20,000 25,000 30,000

(US$

/To

n c

.i.f

. Ch

ina

Po

rts)

(Thousand metric tones)

0

100

200

300

400

500

600

700

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

(US$

/To

n c

.i.f.

Ch

ina

Po

rt)

(Thousand metric tons)

BHKP BSKP

+ SUSTAINABILITY

Forest Management (FSC® and PEFC™ Certifications) Green Energy Production

Source: Hawkins Wright Database

What’s Next...

14

Driver Forces 1) Demand from China 2) Europe 3) New pulp supply