Transcript No Slide Title

RISI Outlook for North American Book
Paper Markets
John Maine
Vice President
May 2010

John Maine, VP World Graphic Papers, RISI, Inc.
–
–
–
–
Co-Founder of Resource Information Systems, Inc.
With RISI More Than 30 Years
Developed RISI P&W Models
Works With Over 200 Graphic Paper
Clients Worldwide
– Assisted by 5 Local Economist in
RISI Regional Offices
– Directs Numerous Multi and Single-Client
Studies on Graphic Paper
2
US Climbing out of Deep Recession
(Real GDP Growth, Annualized Percent Change)
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
Annual
2009
-2.4%
2010
3.0%
2011
3.2%
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
3
Key Paper End-Uses Have Collapsed

Newspaper Inserts
– Struggling to find alternative distribution outside of collapsing
newspaper market

Magazines
– Both circulation and ad pages declining
– Further losses coming due to e-readers

Catalogs
–
–
–
–
Circ will come back from 09, but still down long-term
Page counts falling
Postal costs will rise
Do not mail legislation to come?
4
US Paper Demand in Major Paper End-Uses
Collapsed in 2008 and 2009 (two-year loss)
Percent Loss
Tonnage Lost
(000 tons)
Inserts
-26%
-895
Magazines
-39%
-1,365
Catalogs
-31%
-1,112
Books
-23%
-380
5
Indexes of Circulation – 2000Q1=1.00
1.2
1
0.8
0.6
0.4
0.2
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 6 8 10 12 14
Newspapers
Magazines
Catalogs
6
US Magazine Ad Pages on Long-Term
“Stair-Step” Decline
(Quarterly PIB Magazine Ad Page Index, 1982=1.0)
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
7
Total Paper Usage in US Magazines, Catalogs,
and Newspaper Inserts Combined (000 tons)
11,000
10,500
10,000
9,500
9,000
8,500
8,000
7,500
7,000
6,500
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
6,000
8
Book Industry Sales Hold Up Well In Recession,
Dropping only 2% per Year in 2008 and 2009
$25,500 Book Industry Sales in Millions
6.0%
$25,000
5.0%
$24,500
4.0%
$24,000
3.0%
$23,500
2.0%
$23,000
1.0%
$22,500
0.0%
$22,000
-1.0%
$21,500
-2.0%
$21,000
-3.0%
-4.0%
$20,500
2002
2003
Souce: Amer. Publishers Assn.
2004
2005
Million $
2006
2007
2008
2009
%ch (rt scale)
9
Sales of E-Books Exploding (Millions of dollars)
$350
$300
$250
$200
$150
$100
$50
$0
2002
2003
2004
2005
2006
2007
2008
2009
Souce: Amer. Publishers Assn.
10
But Sales of E-Books are Still Tiny Relative to
Book Market (Millions of dollars)
$25,000
$20,000
$15,000
$10,000
1.3% of Sales
$5,000
$0
2002
Souce: Amer. Publishers Assn.
2003
2004
2005
E-Books
2006
2007
2008
2009
All Books
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US Imports of Printed Books Dropped 21% in
2009 to $2.0 Billion, but are Still up Sharply
Compared With $1.4 Bill. in 1996
Value of Books Imported into the U.S., Million $
8.4% of Book
Industry Sales
2009
2008
2007
10.6% of Book
Industry Sales
2006
1996
$0
$500
China
$1,000
Hong K.
$1,500
Sing.
$2,000
Other Asia
$2,500
Other
$3,000
Canada
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U.S. Imports of Printed Products from China
$1,200
Million Real 2009 Dollars
$1,000
$800
$600
$400
$200
$0
90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9
Books including Children's
Greeting Cards
all other
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Total Paper Usage in US Books (000 tons)
1,900
1,800
1,700
1,600
1,500
1,400
1,300
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1,200
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Paper Use in US Books in 2009 by Type of Paper
Coated Free
17%
Uncoated Mechanical
35%
Coated Mechanical
25%
Uncoated Free
23%
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Paper Demand Surging in 2010, Despite Weak
End-uses

All Major Measures of End-Use Activity are Down
–
–
–
–

Mag ad pages
Mail volumes
Catalog circulation
Commercial print activity
Yet, Paper Demand and Shipments are Recovering
– Inventory swing
– Gain in market share from imports
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US Producers Enjoyed a Rebound in Shipments in
Late 2009, and Year-Over-Year Numbers Will
Continue to Look Good in Early 2010, but Paper
Demand is Still Low
3,200
3,000
2,800
2,600
2,400
NA Coated Paper shipments, 000 tons per quarter
2,200
Currently Comparing This
2,000
To This
1,800
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
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North American P&W Demand by Grade
Million Tonnes, % Change
2007
2008
2009
2010
2011
Ctd. Freesheet *
%ch
6.1
-8%
5.3
-13%
4.0
-24%
4.1
2%
4.2
3%
Ctd. Mechanical
%ch
6.0
3%
5.1
-15%
4.0
-21%
4.1
2%
4.1
1%
Unc. Freesheet *
%ch
12.4
-5%
11.4
-8%
10.0
-12%
9.9
-1%
9.8
0%
Unc. Mechanical
%ch
6.2
2%
6.0
-4%
5.0
-17%
5.0
0%
5.1
3%
Total
%ch
30.7
-3%
27.7
-10%
23.0
-17%
23.0
0%
23.3
1%
*Includes bristols and cotton
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North American Operating Rates – Coming Off the
Lowest Ever Recorded for Coated Paper
100%
95%
90%
85%
80%
75%
Ctd. Paper
Unc. Mech.
70%
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
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U.S. Publishing Paper Pricing by Quarter
($/short ton)
$1,050
$950
$850
$750
$650
$550
0
1
2
3
4
Ctd. No. 3 60 lb.
Ctd. No. 5 40 lb.
5
6
7
8
9
10
Ctd. No. 4 50 lb.
50 Lb UFS Offset
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Cost Pressures Come to Bear on Non-Integrated
Mills (NBSK Market Pulp Price Delivered to Northern Europe $/tonne)
$1,000
$900
$800
$700
$600
$500
$400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Price Trends for LWC 40 lb. (60 gsm) ($US/short ton)
European Price
$1,000
$950
$900
$850
$800
$750
US Price
$700
$650
$600
Euro Price in Europe
$550
$500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Price as a Percentage of Fully Weighted Costs 1 for
Northern Mills Making 34 lb. LWC in Maine, Minnesota,
and Wisconsin
130%
125%
Including $100 revenue per
ton of paper from black
liquor credits
120%
115%
110%
105%
100%
95%
90%
85%
80%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1 Fully
weighted costs include delivery, SG&A, Interest, and Depreciation.
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