Outlook for the Asian Graphic Paper Market...Company Mill//PM# Country Capacity Grade Start Date Kohinoor Paper and Nit Matia India 100,000 UWF 2014 Newsprint NR Agarwal Industries

Outlook for the Asian Graphic pPaper Market

D Li MDr. Li Meng Economist, Asian Graphic Paper

June 2015June 2015

© Copyright 2015 RISI, Inc. | Proprietary Information1

Dr. Li Meng, Economist

• Covers Asian graphic paper market

• With RISI for four years

• Works out of RISI’s Beijing office

• Co-author of the monthly Asian Pulp & y pPaper Monitor and RISI graphic paper forecast products

• Lead role in producing numerous single- and multi-client studies on gAsian graphic paper


Asian Graphic Paper Demand by Grade, 2014

Graphic Paper Demand • Graphic paper faces heavyGraphic Paper Demand 57.5 million tonnes (% of total)Change 2013-2014: -2.0%

Graphic paper faces heavy competition from digital media, with newsprint demand stuck in permanent Newsprint pdecline

• First year of negative growth of P&W demand

11.5 mt(20%)

PW Uncoated Mechanical

2 3%

Newsprint-6.8%

growth of P&W demand since the global economic recession of 2009, mainly due to negative growth in

12.4 mt(22%)

3.0 mt(5%)

(20%) Coated Woodfree

-1.7%

-2.3%

due to negative growth in China.

• Uncoated woodfree is the l d t li ht

2.8 mt(5%)

27 8 tPW Coated M h i l only grade to see a slight

improvement in demand, due to stable support from school materials

27.8 mt(48%)

Mechanical-3.4%

Uncoated Woodfree

school materials+0.1%


Regional per Capita Graphic Paper Consumption in Asia, 2014Kilograms per Capita

SingaporeJapan

TaiwanHong Kong

South Korea

ThailandChina

Malaysia

IndiaPhilippines

Indonesia

PakistanOther Countries

IndiaP&W

NW

0 20 40 60 80 100 120


Asian Newsprint Demand Has Entered the fRealm of Permanent Decline

In permanent decline since 2013

12%15 0

9%

12%

14.0

15.0Volume (L)Percent Change (R)

3%

6%13.0

nes

3%

0%11.0

12.0

illio

n To

nn

-6%

-3%

10.0

M

-12%

-9%

8.0

9.0

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16


More Asian Newsprint Markets Shift into Long-Term DeclineTotal market dropped 6.8% in 2014 as countries accounting for 45% of demand suffered double digit lossesdemand suffered double-digit losses

20,000IndiaOth

15,000

s

OtherIndonesia, Malaysia, Philipines, Pakistan, ThailandJapan, South Korea, Taiwan, Hong Kong, SingaporeChina

10,000

and

Tonn

e

5,000

Thou

sa

002000 2002 2004 2006 2008 2010 2012 2014 2016


Basis Weight Shift Contributed to 2014 Decline in Indian Demand

25%3 000

15%

20%

25%

2,500

3,000Demand

Percent Change (R)

5%

10%

15%

2,000

onne

s

5%

0%

5%

1 000

1,500

hous

and

To

15%

-10%

-5%

500

1,000Th

-20%

-15%

0


Indian Newsprint Imports by SourceNorth American share dropped 5% in 2014, while Asian share climbed 8%

1,400

1,600Rest of World Asia Western Europe North America

1 000

1,200

es

800

1,000

sand

Ton

ne

400

600

Thou

s

0

200

2006 2007 2008 2009 2010 2011 2012 2013 2014


Strong US Dollar Helps Explain Supply Changes and Weak Newsprint PricingDepreciation of currencies against US dollar for select Asian ne sprint markets and s ppliers

1 2

Index of Local Currencies to US DollarJanuary 2012 = 1

newsprint markets and suppliers

1.0

1.1

1.2

0.8

0.9

0 5

0.6

0.7 Korean Won Chinese Renminbi

Euro Indian Rupiah

Canadian Dollar Russian Ruble

0.4

0.5

n-12

ar-1

2

y-12

ul-1

2

p-12

v-12

n-13

ar-1

3

y-13

ul-1

3

p-13

v-13

n-14

ar-1

4

y-14

ul-1

4

p-14

v-14

n-15

ar-1

5

Canadian Dollar Russian Ruble

Jan

Ma

May Ju Sep

Nov Jan

Ma

May Ju Sep

Nov Jan

Ma

May Ju Sep

Nov Jan

Ma

9 © Copyright 2015 RISI, Inc. | Proprietary Information

Index of 45 gsm Hong Kong Newsprint

I d f L l C t US D ll

Price in Local Currency of Supplier

1 61.7

Index of Local Currency to US DollarJanuary 2012 = 1

US Dollar - Hong Kong Price

1.41.51.6 g g

Russian RubleCanadian DollarEuro

1.11.21.3 South Korean Won

0 80.91.0

0.70.8

an-1

2

ar-1

2

ay-1

2

ul-1

2

ep-1

2

ov-1

2

an-1

3

ar-1

3

ay-1

3

ul-1

3

ep-1

3

ov-1

3

an-1

4

ar-1

4

ay-1

4

ul-1

4

ep-1

4

ov-1

4

an-1

5

ar-1

5

Ja Ma

Ma Ju Se No Ja Ma

Ma Ju Se No Ja Ma

Ma Ju Se No Ja Ma


Asian P&W Demand: Improving Market Situations in 2015 and 2016CWF papers will experience more challenges especially in China

10.0%

12.0%

45,000

50,000

6.0%

8.0%40,000

45,000

2.0%

4.0%

30,000

35,000

-2.0%

0.0%

20 000

25,000UWF 1.0%* Ume 2.4%*

-6.0%

-4.0%

15,000

20,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CWF 0.4%* Cme 1.1%*Total Growth% 1.0%*

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


* Annual growth rate, 2015-2016

Most Asian P&W Markets Are Growing But the More Mature Markets Will See Continued Decline

15%

20%

5%

10%

10%

-5%

0%2004 2006 2008 2010 2012 2014 2016

-15%

-10%

IndiaOtherIndonesia, Malaysia, Philipines, Pakistan, ThailandJapan, South Korea, Hong Kong, Singapore


China

No New CWF Projects, But Limited Demand Growth Means Gap Will Persist

60 000

55,000

60,000 Demand

Supply

50,000

45,000

35,000

40,000

30,000 2009 2010 2011 2012 2013 2014 2015 2016


CWF Net Exports Increase Gradually and Absorb Some of Regional Excess Supply

1 600

1,800

2,000

1 200

1,400

1,600

nnes

800

1,000

1,200

usan

d To

n

400

600

800

Tho

0

200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


CWF Prices Started to Decline in 2010 and Have Trended Lower due to Oversupplied Market

100%$1,000

Price

95%$900

Price

Operating Rate

90%$800

85%$700

80%$6002009 2010 2011 2012 2013 2014 2015

Note: 105-157g/m2 Sheets in Hong Kong


China Expanded Its Coated Woodfree Exports to Other Asian Countries and the Middle East when the USA and Europe pImposed Duties on Its Coated Shipments

1 600

1,400

1,600All Others NA EU ME Asia

1,3271 243

1,380 1,4131,324

1 000

1,200

d To

nnes

1,2431,130

800

1,000

Thou

san

400

600

4002009 2010 2011 2012 2013 2014


Exports Patterns for Major Asian CWF Producing CountriesChina and Japan aimed at Other Asian Countries, South Korea benefitted more from North America and E ropebenefitted more from North America and Europe

1 400

1,600All Others

1 000

1,200

1,400

nnes

All OthersEUNAAsia

600

800

1,000

ousa

nd T

on

200

400

600

Tho

02012 2013 2014 2012 2013 2014 2012 2013 2014

China South Korea Japan


China South Korea JapanNote: Chinese CWF exports excluded Bristol

Major Announced Asian UWF Capacity Expansions, 2014-2016Tonnes

Company Mill//PM# Country

Capacity Grade Start Date

Guangxi Fangcheng Hongyuan Guangxi China 60,000 UWF 2014g g g gy g ,

Guangdong Guanhao Hi-Tech Guangdong, Zhanjiang

China 125,000 UWF Q2 2014

C 220 000 Q3 2014Yinge Industrial Inv. Luohe, Henan China -220,000 UWF Q3 2014Shandong Chenming Zhanjiang,

GuangdongChina 200,000 UWF Q4 2014

Shandong Chenming Zhanjiang China 190 000 UWF Q2 2015Shandong Chenming Zhanjiang, Guangdong

China 190,000 UWF Q2 2015

Shandong Tralin Gaotang, PM16 China 150,000 UWF Q1 2015Shandong Tralin Gaotang PM9 China 200 000 UWF NAShandong Tralin Gaotang, PM9 China 200,000 UWF NAUPM Jiangsu China 360,000 UWF Q4 2015APRIL Guangdong China 450,000 UWF Q4 2016


Major Announced Asian UWF Capacity Expansions, 2014-2016 (Cont.)Tonnes

Company Mill//PM# Country Capacity Grade Start Date

Kohinoor Paper and N i t

Matia India 100,000 UWF 2014NewsprintNR Agarwal Industries Unit-V (Sarigam) India 100,000 UWF 2014

Nagaland Pulp & Paper Mills Mokokchung India 66,000 UWF Q2:2015

Whitefield Paper Bayyavaram India 200,000 P&W Q1 2016

Surabaya Agung Kertas Driyorejo Indonesia -124,000 UWF Q3 2014

APRIL Kerinci mill Indonesia 250,000 UWF Q2 2016

Total UWF: 2,107,000 tonnes


Demand/Supply Gap Narrows Slightly in 2015-2016 Capacity increases from new machines assumed to be offset by closures in regionclosures in region

34 000

36,000 Demand

32,000

34,000 Supply

28,000

30,000

24,000

26,000

20,000

22,000


20,000 2009 2010 2011 2012 2013 2014 2015 2016

UWF Net Exports Will Fall in 2015 due to the ADD/CVD Case with the USA

1 600

1,800

2,000

1 200

1,400

1,600

nnes

800

1,000

1,200

usan

d To

n

400

600Thou

0

200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Shift in Who Supplies Which Region Likely If Tariffs Are Imposed on Chinese and Indonesian Cut Size Exports to the pUS Market

Others

2014 Chinese Cut Size Exports by Region

2014 Indonesian Cut Size Exports by Region

Europe4%

Others 5%

Africa9%

Others12%

Oceania17%

USA13%

12%

Asia54%USA

20%Asia52%

ME14%


UWF Prices Inched Up due to Seasonal Factors and Cost Pressure

98.0%$950

$1,000PriceOperating Rate

93 0%$850

$900p g

93.0%

$750

$800

88.0%

$650

$700

$ 50

83.0%$600

$650

2009 2010 2011 2012 2013 2014 2015

Note: 70-80g/m2 Sheets in Hong Kong


Thank you for your attention!

Asian Pulp and Paper Monitor

For more information:

Asian Pulp and Paper Monitorwww.risi.com/appm

Asian Graphic Paper 5-Year Forecastwww.risi.com/agp

China’s Influence on WorldChina’s Influence on World Graphic Paper Markets in the Coming Decade ( To be UpdatedComing Decade ( To be Updated in 2015)www.risi.com/chinagraphic


Documents

Outlook for the Asian Graphic Paper Market...Company Mill//PM# Country Capacity Grade Start Date Kohinoor Paper and Nit Matia India 100,000 UWF 2014 Newsprint NR Agarwal Industries