Market outlook from a Swedish producer’s perspective Carl Johan Petersson - Setra Group Cambridge 2016

Strong summer season – balanced situation starting up autumn business Good delivery pace during summer months Stock decreased slightly more than normal Whitewood especially strong but also redwood has developed well delivery and stock is under control. Order intake has been good – and at somewhat higher level than seasonally normal, but slightly lower than lasts year record summer figures. UK – Brexit dip in July France/Germany – recovery continues US and China stable at higher levels than 2015 MENA markets fall back

Development production and sawn wood stock

Stable production in Sweden Source: Swedish Forest Industries Federation

Source: Swedish Forest Industries Federation More whitewood, less redwood – a production adapted to market situation Redwood production in Sweden and Finland Jan – Jul 2016: -220 000 m3 (-3%) Whitewood production in Sweden and Finland Jan – Jul 2016: +420 000 m3 (+5%) Sweden Sweden Source: Swedish Forest Industries Federation

Stock decreased during the summer more than normal Swedish whitewood stock decreased significantly over the summer. Also redwood stock down a bit more than normal Producer’s stock of sawn goods – seasonally adjusted Whitewood Redwood Swedish whitewood stock decreased significantly over the summer. Also redwood stock down a bit more than normal Source: Swedish Forest Industries Federation

Outlook - Supply Europe & Russia - UK/Brexit

Relatively controlled supply in Europe and Russia Million m3 Germany Austria Finland Sweden Russia Source: Swedish Forest Industries Federation

Increase of delivery pace higher than increase of production pace 2016 Estimate of delivery volume of European softwood to different markets Million m3 Change Europe 90,1 +2,3% Middle East 3,7 -5% Africa 6,3 -2% Japan 2,8 +11% China 2,1 +47% South east Asia , other 1,3 +8% USA 0,6 +21% Other 0,5 +13% Total 107,3 +2,8% Africa EUROPE Right axis EUROPE Right axis Middle East Million m3 Million m3 Japan Estimate of delivery volume of European softwood to different markets China Southeast Asia, Other USA Source: Swedish Forest Industries Federation

Russian export to China increases dramatically Un-changed to Europe & Egypt Decrease to Central Asia Change: Jan-Jun 16 / Jan-Jun 15: -10% *Afghanistan, Kazakstan, Uzbekistan, Tadzjikistan, Kirgizistan, Turkmenistan Russian export: we can expect a high supply of Russian goods to China and Egypt. Export is prioritised due to weak domestic demand The value of the Rubel has been halfed since 2014 to the SEK, and weakened even more to USD and EUR. Total Russian production is estimated to 33 million m3 2016 Total export increased by 20% 2016 Jan – June compared to same period 2015 Source: Swedish Forest Industries Federation

Source: Swedish Forest Industries Federation Brexit – leading indicators for business (incl. construction) have recovered Brexit – leading indicators for business (incl. construction) have recovered from low levels directly after brexit referendum. No effect at all for indicators for the retail trade However dramatic development for the Pound Sterling, but vis a vis SEK less dramatic change BREXIT BREXIT Source: Swedish Forest Industries Federation

Consumption

Sweden’s construction sector increases wood consumption by 4% 2016 – risk for decrease 2017 New housing Renovation New professional building Renovation professional building Source: Prognoscentret AB

Continued growth in small steps for the European countries +13% or 200 000 units ~ +4% 1 Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,, United Kingdom, Czech Republic, Hungary, Poland, Slovak Republic Source: EUROCONSTRUCT, June 2016

HOUSING PERMITS, millions USA – New residential construction drives wood consumption – Detached Housing represent 35-40% of consumption Positive forecast HOUSING PERMITS, millions HOUSING STARTS, ‘000 In July +1% comp. to 2015 Increase flattens Till July 2016

USA – residential renovation Represents ~35% of US wood consumption. Activity develops positively, ~ 5% growth per year Residential renovation (USD), right axis Billion USD Residential renovation (%-change), left axis

Germany – wood consumption is estimated to improve Construction activity is high and wood construction is advancing Source: Ifo, aug 2016

Summary market development Sweden UK Germany China Japan MENA USA

Summary

Summary + Asia + USA + Europe + Wood as a material Mena especially Egypt low grade Hand to mouth buying Round-wood cost

Thank you for your attention!