Outlook for Book Publishing Papers John Maine, VP World Graphic Paper BMI Management Conference April,

US Economy Gaining Some Momentum Quarterly Real GDP and Personal Consumption Growth, Annualized Percent Change GDPAnnual % % % %

Media Tablet Ownership Expanding Rapidly, Could Reach 40% of Adults by 2014 Percent of Adults Who Own Tablet Computers and E-readers Source: pewinternet.org 4

Adult Trade Book Sales by Format Billion US Dollars Source: BISG and some RISI Estimates 5

North American P&W Demand by Grade Million Tonnes 6 Average Annual Growth CWF-2.9% UWF-3.2% Cmec-5.2% Umec-0.9%

Projected Change in North American P&W Demand by Grade Percent 7

Total Paper Usage in US Books Declining (000 tons)

Book Publishers Moving Toward Coated Freesheet (much of which is imported) and Uncoated Mechanical (substituting for more expensive uncoated freesheet) 9 US Consumption of Paper by Grade in Book Publishing (percentage)

Uncoated Mechanical Bulky Book Market Cut in Half by Decline of Mass-Market Paperback (N. American Shipments to all End-Uses,000 tonnes) Source: PPPC

Combined North American Demand for Uncoated Freesheet Offset and Uncoated Mechanical Superbrite – Trends towards substitution of cheaper papers plateaus 000 tonnes

North American Imports of Printed Books – Trending Down As Asia Loses its Appeal Million Real 2012 Dollars 18

U.S. Imports of Printed Products from China – Printing Of Books in China Has Abated For Environmental and Economic Reasons Million Real 2012 Dollars 18

North American Demand for Coated Woodfree Started Trending Down in 2007 Million Tonnes 14

US Market for Coated Woodfree Sheets versus Rolls 15 US Demand, Thousand Short Tons Includes coated bristols and imports of coated mechanical sheets

US Market Share for Coated Sheets by Source of Supply – Imports Are Critical Tariff applied to China and Indonesia in 2010 Note: Includes coated bristol sheets and coated mechanical sheet imports 16

US Market Share for Coated Rolls by Source of Supply – Imports Actually Lost Share Note: Includes coated bristol 17

Supply and Trade Trends for Printing & Writing Papers 18

Announced Net Capacity Changes for vs RISI Forecast of Demand Growth for the Same Period 19

Coated Woodfree Operating Rates Lack of announced capacity expansion to cause operating rates to improve in

Announced Net Capacity Changes for vs RISI Forecast of Demand Growth for the Same Period 21

Coated Mechanical Operating Rates Decline in North America leads to weaker markets, Europe forecast assumes shuts 22 With assumed shuts

Announced Net Capacity Changes for vs RISI Forecast of Demand Growth for the Same Period 23

Uncoated Woodfree Operating Rates More shuts are likely to occur to balance global demand and supply over the next two years 24

Announced Net Capacity Changes for vs. RISI Forecast of Demand Growth for the Same Period 25

Uncoated Mechanical Operating Rates Massive shuts in Europe cause global markets to tighten despite restarts in North America 26

Costs for Virgin and Recycled Fiber Will Likely Increase Over the Next Two Years US$/ton Data sources: RISI and Letsrecycle.com 27

Demand and supply are seeing widely different growth rates and this will create upward pressure on high grades –Demand: fast-growing paper sectors, such as tissue, will request more high grades of recovered paper –Supply: printing and writing paper, the major supply of high grades, however, will see significant decline in consumption Costs are forecast to move upward through 2014 along with the strengthening virgin pulp market, after a weak year in High Grade Recycled Paper in the US Market 28

Period of Relative Cost Stability to End as Costs Rise for Fiber, Energy, and Transport N. American Mill Delivered Cash Costs for Producing 34 lb. LWC 29

Historical Publishing Paper Prices ($US/cwt) …Trending down while the rest of the world is starting to increase 30

World Graphic Paper 5-Year Forecast Global Newsprint Risk of Closure Study Chinas Influence on World Graphic Paper Markets in the Coming Decade Thank you for your attention! For more information: 31