1. 1 ITTO MARKET DISCUSSION Libreville - Gabon | November, 2013 Ivan Tomaselli www.stcp.com.br

2. 2 CONTENTS FORESTS AND RAW MATERIAL SUPPLY INDUSTRIAL DEVELOPMENTS MARKETS AND TRADE PERSPECTIVES

3. 3 FORESTS AND RAW MATERIAL SUPPLY

4. 4 BRAZIL (2012) - 8 million sq. km - 60% Forests 4.5 million sq. km PLANTATIONS - 7 million ha - 1% country area - 90% pine/eucalyptus

5. 5 FORESTS AND RAW MATERIAL SUPPLY BRAZIL (2012) TROPICAL TIMBER (Natural Forest) - 52 million m³/year PLANTATIONS TIMBER (pine and eucalyptus) - 178 million m³/year Source: IBGE 2013, compiled by STCP

6. 6 FORESTS AND RAW MATERIAL SUPPLY LOG PRODUCTION BRAZIL Source: IBGE 2013, compiled by STCP Annual Growth Rate Natural Forest- 6% / year Plantation+ 5% / year

7. 7 INDUSTRIAL DEVELOPMENTS

8. 8  HISTORY OF FOREST SECTOR 1500-1800 Log Exports 1800-1900 Timber Imports 1900-1960 Araucária (Parana Pine) Industry 1960-1900 Tropical Timber Industry 1980-... Plantation Timber / Based Industry Colonial Period USA/Finland/Canada Lumber/Plywood/Pulp Lumber/Plywood Pulp/Lumber/ Wood Panels

9. 9 INDUSTRIAL DEVELOPMENTS  CURRENT PRODUCTION (2012) LUMBER - Natural Forest (Tropical)6.0million m³ - Plantation9.2million m³ PLYWOOD - Natural Forest (Tropical)480thousand m³ - Plantation2.1million m³ RECONSTITUTED PANELS (MDF/Particle Boad/Hardboard) - Plantation7.3 million m³ PULP - Plantation14.0million tons Global Ranking MDF3º Pulp4º Eucalyptus Pulp1º Source: ABIMCI, IBGE, FAO (2013), compiled by STCP

10. 10 MARKETS AND TRADE

11. 11 MARKETS AND TRADE PRODUCT MARKET SHARE (2012) DOMESTICINTERNATIONAL LUMBER - Tropical94%6% - Conifer (plantation)92%8% PLYWOOD - Tropical88%12% - Conifer (plantation)53%47% RECONSTITUTED PANELS (plantation)98%2% PULP (plantation)42%58% Source: ABIMCI, MDIC (2013), compiled by STCP

12. 12 MARKETS AND TRADE  MARKET TRENDS - Tropical Lumber Exports Unit Value (2000) US$ 278/m³ Unit Value (2012) US$ 511/m³ Volume ↓ x Unit Value ↑ Volume declined 76% in the last 10 years Source: ABIMCI (2013), compiled by STCP

13. 13 MARKETS AND TRADE  MARKET TRENDS Tropical Lumber - Tropical Lumber Export Price Source: STCP Database. Prices increased in the last 10 years: - Jatoba 148% - Cambara 70% - Angelim Pedra 216%

14. 14 MARKETS AND TRADE  MARKET TRENDS Tropical Plywood - Tropical Plywood Export Unit Value (2000) US$ 344/m³ Unit Value (2012) US$ 622/m³ Volume ↓ x Unit Value ↑ Volume declined 93% in the last 10 years Source: ABIMCI (2013), compiled by STCP

15. 15  DECLINE IN EXPORTS OF TROPICAL TIMBER PRODUCTS IS A GLOBAL TREND MARKETS AND TRADE Source: ITTO (2012), compiled by STCP Tropical Lumber - Tropical Lumber Export Volume (2008-2012)

16. 16  DECLINE IN EXPORTS OF TROPICAL TIMBER PRODUCTS IS A GLOBAL TREND MARKETS AND TRADE Source: ITTO (2012), compiled by STCP Tropical Plywood - Tropical Plywood Export Volume (2008-2012)

17. 17 PERSPECTIVES

18. 18 PERSPECTIVES TRADE IS EXPECTED TO CONTINUE TO DECLINE… The international trade of tropical timber products has been affected by: -Competition with other timber products (plantations); -Development of new competitive products and finishing materials; -Increase in the logistics costs for tropical timber; -Increase in transaction costs (local and international- EU FLEFT, United States’ Lacey Act, Australia’s Illegal Logging Act, etc); -Market access: barriers and impediments; -Lack of market promotion and product image -Reduction and restrictions on supply; -Lack of investments on technology developments to increase competitiveness.

19. 19 PERSPECTIVES TROPICAL PLANTATION TIMBER IS AN ALTERNATIVE… There are successful tropical plantations that can enhance competitiveness of tropical timber products in the global market -Teak -Acacia -Eucalyptus -African Mahogany -Others Efforts are needed to maintain competitiveness : - Increase productivity of plantations and industrial operations - Develop and improve products performance

20. 20 PERSPECTIVES TO ENSURE THAT TROPICAL FORESTS ARE SUSTAINABLY MANAGED AND TROPICAL TIMBER INDUSTRY CONTINUE TO CONTRIBUTE TO IMPROVE THE SOCIAL-ECONOMIC CONDITIONS OF TROPICAL COUNTRIES IS FUNDAMENTAL A GLOBAL COORDINATED EFFORT TO INCREASE THE COMPETITIVENESS OF TROPICAL TIMBER PRODUCTS IN THE MARKET It is important to consider: -Reduction of transaction costs and market barriers / impediments -Technology developments to improve use of resources and products performance -Market promotion to improve image

21. 21 PERSPECTIVES LEARNING FROM OTHERS - The International Jute Study Group (IJSG) successor to the International Jute Organisation (IJO) www.jute.org www.jute.org Objectives: To provide an effective framework for international cooperation, consultation and policy development among members with regard to all relevant aspects of the world of jute economy; To promote the expansion of international trade in jute and jute products by maintaining existing markets and by developing new markets, including the introduction of new jute products and the development of new end-uses; To provide a forum for the active participation of the private sector in the development of the jute sector; To address the issues of poverty alleviation, employment and development of human resources, particularly women, in the jute sector; To facilitate the improvement of structural conditions in the jute sector through improvement of productivity and quality, and promotion of the application of new processes and technologies; To create and increase awareness of the beneficial effects of the use of jute as an environmentally friendly, renewable and biodegradable natural fibre; To improve market intelligence with a view to ensuring greater transparency in the international jute market in collaboration with other organizations, including the Food and

22. 22 PERSPECTIVES LEARNING FROM OTHERS - The International Coffee Organization (established in 1963) Private Sector Consultative Board The Private Sector Consultative Board (PSCB) is an ICO body which provides a platform for the representatives of private sector organizations of producing and consuming countries. Established in 1999, it consults with and advises the Council on issues relevant to the coffee sector, either on request or on its own initiative. The PSCB comprises 16 leading industry representatives from producing and consuming countries, along with their alternates and advisers. It generally meets at the time of the International Coffee Council meetings in March and September each year and its Chairperson reports to the Council on the outcome of its meeting. At the meetings, PSCB representatives review a range of coffee issues including sustainability initiatives, food safety aspects, quality and coffee and health.representatives The PSCB has agreed that its main mission and objective should be to increase the world coffee market in value and volume. One of the constraints for increasing coffee consumption was the misconception that coffee is bad for your health held by part of the population. On the contrary, there is significant scientific information available on various positive health benefits associated with coffee drinking. www.ico.org

23. 23 PERSPECTIVES WHY WE ARE WE MOVING TO ANOTHER DIRECTION?

24. 24 THANK YOU ! Presentation available in www.stcp.com.br