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Pulp prices, the RCP situation, opportunities & outlooks

This presentation discusses the current situation and future opportunities in the pulp industry, with a focus on market volumes, prices, competitor analysis, and supply chain analysis. It also explores the impact of China's quality prohibitions on pulp prices.

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Pulp prices, the RCP situation, opportunities & outlooks

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  1. Pulp prices, the RCP situation, opportunities & outlooks This presentation, in slightly amended form, was delivered to the Fibre Value Chain Conference, in Rotorua, New Zealand, on Thursday 6th December 2018

  2. Plantations & forests • Wood & timber • Wood products • Pulp & fibre resources • Paper & paperboard • Energy & non-fibre resources www.industryedge.com.au • Market volumes & prices • Market analysis • Demand, supply, shares • Competitor analysis • Imports & exports • Trade situations & reviews • Supply chain analysis • Due diligence activities Customised Market Price & Volume Data Sets Monthly Analysis Annual Review Monthly Data … when you need to know, you need IndustryEdge

  3. Topics • Timeline of key moments in RCP supply to China • Australian experience • NZ experience • Outlook for RCP and Pulp prices

  4. FIRST critical point in RCP supply to China OCC Import Price Index to China: Jan ‘17 – Nov ‘18 August 2017 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 OCC over-priced Chinese imports fell starting August 2017 – dragged prices down Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

  5. Hard to ignore the pulp price increases of 2017 • Rises up to 47% in 2H’17 – driven by demand as RCP shipments slumped • UKP prices are the clue • Substitution an option for all grades, to some extent – except for dissolving pulp • Price increases commenced August 2017 – another clue • January 2018 – pulp prices plateaued • Perfect time to introduce prohibitions on alternative fibre –top of the commodity cycle Chinese Pulp Price Index: Jan ‘17 – Nov ‘18 (Base: Jan ‘17 = 100) Source: Hawkins Wright, Brian McClay & Associates & industryEdge

  6. SECOND critical point in RCP supply to China OCC Import Price Index to China: Jan ‘17 – Nov ‘18 August 2017 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 January 2018 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute China’s prohibitions commence OCC prices had fallen already – pulp prices stabilised Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

  7. THIRD critical point in RCP supply to China OCC Import Price Index to China: Jan ‘17 – Nov ‘18 August 2017 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 January 2018 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute April 2018 RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply Market begins to adapt Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

  8. FOURTH critical point in RCP supply to China OCC Import Price Index to China: Jan ‘17 – Nov ‘18 August 2017 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 January 2018 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute April 2018 RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply Specific market commences for best quality OCC supply Specific prices for quality OCC Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

  9. Australia’s RCP exports fell early 2018 – stabilised since Australian RCP Exports by Grade (ktpm & ktpa) Source: ABS

  10. China was not the only country to participate in changes Australian RCP Exports by Country (ktpm) • Indonesia decreased imports from Australia in 2017, but there was no recovery • Supplies to China recovered, but not entirely – its all about quality Source: ABS

  11. OCC exports down, USD price recovered Australian Monthly OCC Exports (ktpm, AUDFob/t & USDFob/t) • US Dollar price has returned to its price of a year ago • USDFob165/t • Quantity is down one-third • Quality is on average higher Source: ABS

  12. NZ exports rose and appear very stable, but... NZ RCP Exports by Grade (ktpm & ktpa) Source: Statistics NZ

  13. ... OCC prices have fallen more than 40% along the way NZ Monthly OCC Exports (ktpm, NZDFob/t & USDFob/t) Source: Statistics NZ

  14. OCC prices show key differences for Australasian supply Australian & NZ Monthly OCC Exports (ktpm & USDFob/t) April 2018 • Australia’s OCC price began to rise • NZ’s price flatlined • All about quality for export Source: ABS, Statistics NZ, RBA, RBNZ & IndustryEdge

  15. RCP’s turbulent year – volatility must still be expected OCC Import Price Index to China: Jan ‘17 – Nov ‘18 • Recent volatility is obvious and continuing – all prices moving down • But quality recovered fibre is clearly higher priced • So, what does that mean for pulp prices... Market begins to adapt China’s prohibitions commence OCC over-priced Specific prices for quality OCC Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

  16. Impact on pulp prices seems clear Pulp v RCP Prices Index: Jan ‘17 – Nov ‘18 (USD/t) • Quality requirements for RCP created a ‘new’ quality OCC product at a higher price • That price is sustaining pulp prices at historic highs for an historically long period • Theoretically, the quality OCC products will trade at a discount to virgin pulp, but it is not yet clear how large that will be • Expect the pulp floor price to be higher in future

  17. Fibre market outlook is very good – true for all fibre • Quality RCP will find a home • Suppliers will be sorting to supply quality • Source separation becomes more likely • RCP prices are likely to remain higher – better average quality • Pulp floor price should be higher – supported by quality RCP prices • Other trends: • New countries will receive RCP and ship packaging papers to China • RCP pulp shipments will continue to grow • Collected but unused proportion (eg. Australia) still has to find a home

  18. Further information and to stay up to date www.industryedge.com.au You can subscribe to the monthly Pulp & Paper Edge at https://industryedge.com.au/pulp-paper-edge/ Confidential discussions on your needs Tim Woods tim@industryedge.com.au +61 (0) 3 5229 2470

  19. Additional charts Australian Monthly RCP Exports (ktpm, AUDFob/t & USDFob/t) NZ Monthly RCP Exports (ktpm, NZDFob/t & USDFob/t)

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