1. 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 6th December 2018

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

4. 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
OCC over-priced
Chinese imports fell starting August 2017 – dragged prices down
Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

5. Hard to ignore the pulp price increases of 2017
Rises up to 47% in 2H’17 – driven by demand as RCP shipments slumped
UKP prices are the clue
Substitution an option for all grades, to some extent – except for dissolving pulp
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
Chinese Pulp Price Index: Jan ‘17 – Nov ‘18 (Base: Jan ‘17 = 100)
Source: Hawkins Wright, Brian McClay & Associates & industryEdge

6. SECOND 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
January 2018
China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute
China’s prohibitions commence
OCC prices had fallen already – pulp prices stabilised
Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

7. THIRD 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
January 2018
China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute
April 2018
RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply
Market begins to adapt
Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

8. 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
January 2018
China’s quality prohibitions commence – National Sword coincides with beginning of China-US trade dispute
April 2018
RCP suppliers begin to adapt. Chinese buyers re-enter market for ‘quality’ supply
Specific market commences for best quality OCC supply
Specific prices for quality OCC
Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

9. Australia’s RCP exports fell early 2018 – stabilised since
Australian RCP Exports by Grade (ktpm & ktpa)
Source: ABS

10. China was not the only country to participate in changes
Australian RCP Exports by Country (ktpm)
Indonesia decreased imports from Australia in 2017, but there was no recovery
Supplies to China recovered, but not entirely – its all about quality
Source: ABS

11. OCC exports down, USD price recovered
Australian Monthly OCC Exports (ktpm, AUDFob/t & USDFob/t)
US Dollar price has returned to its price of a year ago
USDFob165/t
Quantity is down one-third
Quality is on average higher
Source: ABS

12. NZ exports rose and appear very stable, but...
NZ RCP Exports by Grade (ktpm & ktpa)
Source: Statistics NZ

13. ... OCC prices have fallen more than 40% along the way
NZ Monthly OCC Exports (ktpm, NZDFob/t & USDFob/t)
Source: Statistics NZ

14. OCC prices show key differences for Australasian supply
Australian & NZ Monthly OCC Exports (ktpm & USDFob/t)
April 2018
Australia’s OCC price began to rise
NZ’s price flatlined
All about quality for export
Source: ABS, Statistics NZ, RBA, RBNZ & IndustryEdge

15. RCP’s turbulent year – volatility must still be expected
OCC Import Price Index to China: Jan ‘17 – Nov ‘18
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...
Market begins to adapt
China’s prohibitions commence
OCC over-priced
Specific prices for quality OCC
Source: ABS, RBA, Statistics NZ, RBNZ & IndustryEdge

16. Impact on pulp prices seems clear
Pulp v RCP Prices Index: Jan ‘17 – Nov ‘18 (USD/t)
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

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

18. Further information and to stay up to date
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19. Additional charts NZ Monthly RCP Exports (ktpm, NZDFob/t & USDFob/t)
Australian Monthly RCP Exports (ktpm, AUDFob/t & USDFob/t)