Pulp prices the RCP situation opportunities outlooks This

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 6 th December 2018

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Topics 1. Timeline of key moments in RCP supply to China 2. Australian experience 3. NZ experience 4. Outlook for RCP and Pulp prices

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 140 Index (Base: Jan-17 = 100) 130 120 110 100 90 80 70 OCC over-priced 60 OCC (Aust) OCC (NZ) Nov-18 Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 Apr-18 May-18 Month Feb-18 Jan-18 Dec-17 Oct-17 Nov-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 50 OCC (USA) Chinese imports fell starting August 2017 – dragged prices down Source: ABS, RBA, Statistics NZ, RBNZ & Industry. Edge

Hard to ignore the pulp price increases of 2017 • Chinese Pulp Price Index: Jan ‘ 17 – Nov ‘ 18 (Base: Jan ‘ 17 = 100) 165 Rises up to 47% in 2 H’ 17 – driven by demand as RCP shipments slumped 155 – UKP prices are the clue 145 – Substitution an option for all grades, to some extent – except for dissolving pulp 135 125 115 105 95 BCTMP Hardwood (Canada) Dissolving Pulp Hardwood Viscose UKP NBSK Nov-18 Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 85 • 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 BEK Source: Hawkins Wright, Brian Mc. Clay & Associates & industry. Edge

SECOND critical point in RCP supply to China OCC Import Price Index to China: Jan ‘ 17 – Nov ‘ 18 140 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 China’s prohibitions commence 130 Index (Base: Jan-17 = 100) August 2017 120 January 2018 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute 110 100 90 80 70 60 OCC (Aust) OCC (NZ) Oct-18 Nov-18 Sep-18 Aug-18 Jul-18 Jun-18 Apr-18 May-18 Month Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Feb-17 Mar-17 Jan-17 50 OCC (USA) OCC prices had fallen already – pulp prices stabilised Source: ABS, RBA, Statistics NZ, RBNZ & Industry. Edge

THIRD critical point in RCP supply to China OCC Import Price Index to China: Jan ‘ 17 – Nov ‘ 18 140 Compared to pulp prices, OCC is over-priced, having grown 30% since January 2017 Market begins to adapt 130 January 2018 120 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute 110 100 90 April 2018 80 70 RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply 60 OCC (Aust) OCC (NZ) Oct-18 Nov-18 Sep-18 Aug-18 Jul-18 Jun-18 Apr-18 May-18 Month Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Feb-17 Mar-17 50 Jan-17 Index (Base: Jan-17 = 100) August 2017 OCC (USA) Source: ABS, RBA, Statistics NZ, RBNZ & Industry. Edge

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 140 January 2018 120 China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute 110 100 90 April 2018 80 70 Specific prices for quality OCC 60 OCC (Aust) OCC (NZ) Oct-18 Nov-18 Sep-18 Aug-18 Jul-18 Jun-18 Apr-18 May-18 Month Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Feb-17 Mar-17 50 Jan-17 Index (Base: Jan-17 = 100) 130 RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply Specific market commences for best quality OCC supply OCC (USA) Source: ABS, RBA, Statistics NZ, RBNZ & Industry. Edge

Australia’s RCP exports fell early 2018 – stabilised since 40 1200. 0 20 1150. 0 0 1100. 0 p. Se l-1 Ju ay M ar M n. Ja No p. Se l-1 Ju ay M ar M n 1 ktpa 1250. 0 18 60 8 1300. 0 -1 8 80 -1 8 1350. 0 18 100 v 17 1400. 0 17 120 7 1450. 0 -1 7 140 -1 7 1500. 0 7 160 Ja ktpm Australian RCP Exports by Grade (ktpm & ktpa) Month OCC Bleached ONP Unsorted Annual Total Source: ABS

China was not the only country to participate in changes Australian RCP Exports by Country (ktpm) 160 140 • 120 100 • 80 Indonesia decreased imports from Australia in 2017, but there was no recovery Supplies to China recovered, but not entirely – its all about quality 60 40 20 China/HK India Indonesia Korea Malaysia Thailand Vietnam Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 0 Other Source: ABS

OCC exports down, USD price recovered Australian Monthly OCC Exports (ktpm, AUDFob/t & USDFob/t) 100 300. 00 90 250. 00 80 70 • 200. 00 60 50 150. 00 40 • • US Dollar price has returned to its price of a year ago – USDFob 165/t Quantity is down one-third Quality is on average higher 100. 00 30 20 50. 00 10 Quantity AUDFob/t 8 18 p. Se l-1 Ju -1 8 ay M -1 8 M ar 18 n. Ja v 17 No 17 p- 7 Se l-1 Ju -1 7 ay M ar M n. Ja -1 7 0. 00 17 0 USDFob/t Source: ABS

NZ exports rose and appear very stable, but. . . NZ RCP Exports by Grade (ktpm & ktpa) 40 360 35 350 30 340 25 330 20 320 15 310 10 OCC Bleached ONP Unsorted Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 290 Mar-17 0 Feb-17 300 Jan-17 5 Annual Total Source: Statistics NZ

. . . OCC prices have fallen more than 40% along the way NZ Monthly OCC Exports (ktpm, NZDFob/t & USDFob/t) 14 400 12 350 300 10 250 8 200 6 150 4 100 Quantity NZDFob/t Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 0 Mar-17 0 Feb-17 50 Jan-17 2 USDFob/t Source: Statistics NZ

OCC prices show key differences for Australasian supply Australian & NZ Monthly OCC Exports (ktpm & USDFob/t) 100 90 80 70 60 50 40 30 20 10 0 300 250 200 150 100 April 2018 • Australia’s OCC price began to rise • NZ’s price flatlined • All about quality for export 50 OCC (Aust) OCC (NZ) Aust USDFob/t Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 0 NZ USDFob/t Source: ABS, Statistics NZ, RBA, RBNZ & Industry. Edge

RCP’s turbulent year – volatility must still be expected OCC Import Price Index to China: Jan ‘ 17 – Nov ‘ 18 140 130 • Market begins to adapt China’s prohibitions commence • 120 110 • 100 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. . . 90 80 OCC over-priced 70 Specific prices for quality OCC 60 OCC (Aust) OCC (NZ) OCC (USA) v 18 No 8 18 p. Se l-1 Ju -1 8 ay M -1 8 ar M 18 n. Ja v 17 No 17 Se p- 7 Ju l-1 -1 7 ay M -1 7 M ar Ja n- 17 50 OCC Double Sorted (USA) Source: ABS, RBA, Statistics NZ, RBNZ & Industry. Edge

Impact on pulp prices seems clear Pulp v RCP Prices Index: Jan ‘ 17 – Nov ‘ 18 (USD/t) • 175 • 155 135 • 115 95 75 • v 18 No p- 18 8 Se l-1 Ju -1 8 ay M -1 8 ar M 18 n. Ja v 17 No 17 p. Se 7 l-1 Ju -1 7 M ay -1 7 ar M Ja n- 17 55 BCTMP Hardwood (Canada) Dissolving Pulp Hardwood Viscose UKP NBSK OCC (Aust) OCC (NZ) OCC (USA) OCC Double Sorted (USA) BEK 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

Fibre market outlook is very good – true for all fibre 1. Quality RCP will find a home – Suppliers will be sorting to supply quality – Source separation becomes more likely 2. RCP prices are likely to remain higher – better average quality 3. Pulp floor price should be higher – supported by quality RCP prices 4. 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

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

Additional charts NZ Monthly RCP Exports (ktpm, NZDFob/t & USDFob/t) Australian Monthly RCP Exports (ktpm, AUDFob/t & USDFob/t) 40 160 300 35 250 30 140 200 120 200 25 20 15 100 10 100 150 80 100 60 40 Monthly Total NZDFob/t USDFob/t M M ar -1 7 ay -1 7 Ju l-1 7 Se p 1 No 7 v 17 Ja n 1 M 8 ar -1 M 8 ay -1 8 Ju l-1 8 Se p 18 0 17 0 n- 7 1 No 7 v 17 Ja n 1 M 8 ar -1 M 8 ay -1 8 Ju l-1 8 Se p 18 p- Se l-1 Ju -1 7 ay M ar M n- -1 7 0 17 0 50 20 Ja 50 5 Ja 250 Monthly Total AUDFob/t USDFob/t