1. Presentation to: Tembec Marketing Group January 24, 2006 Montreal, Quebec, Canada Global Trends in Market Pulp Brian McClay Brian McClay & Associates Inc. www.pulpmarket.ca €UROPULP – UTIPULP meeting Nice, France 20 September 2012 20 September 2012

2. 2 Brian McClay & Associates Paper still a growth business, China 25% of total

3. 3 Brian McClay & Associates Purchased fibre gaining share of global paper furnish

4. 4 Brian McClay & Associates Paper still growing - packaging, tissue gaining share

5. 5 Brian McClay & Associates Huge capacity surge in China, 90% non-integrated

6. 6 Brian McClay & Associates Inc. Europe biggest market, China more impact on pricing

7. 7 Brian McClay & Associates Inc. BEK demand up 10%/year past decade, NBSK 1.7%

8. 8 Brian McClay & Associates Inc. Short-term: 4-quarter pricing rally

9. 9 Brian McClay & Associates Inc. Medium-to-Longer term outlook China continues to drive global wood fibre markets China continues to drive global wood fibre markets Peak Recovered Paper Peak Recovered Paper Softwood pulp shortage? NBSK a specialty pulp and priced as such. Softwood pulp shortage? NBSK a specialty pulp and priced as such. Good growth prospects for dissolving pulp - the cellulose gap. Mill conversions reduce paper pulp supply next few years Mill conversions reduce paper pulp supply next few years Purpose-built DP (flex) mills will be needed 2017+, add to market volatility Purpose-built DP (flex) mills will be needed 2017+, add to market volatility Nano-crystalline cellulose (NCC) Nano-crystalline cellulose (NCC) US$ 600 billion industry by 2020 US$ 600 billion industry by 2020

10. 10 Brian McClay & Associates Inc. China’s continued ascendancy China driving global fibre demand China’s continued ascendancy China driving global fibre demand

11. 11 Brian McClay & Associates Inc. China’s surging middle-class more paper-centric Should drive consumer packaging, tissue, printing & writing grades China’s surging middle-class more paper-centric Should drive consumer packaging, tissue, printing & writing grades

12. 12 Brian McClay & Associates Growing tissue output will need more softwood pulp

13. 13 Brian McClay & Associates Most fibre demand growth in China will be wood pulp

14. 14 Brian McClay & Associates Inc. Peak Recovered Paper Supply growth slows, quality declines, costs rise

15. 15 Brian McClay & Associates Inc. Graphic paper use down in U.S., Europe and Japan, big exporters Graphic paper use down in U.S., Europe and Japan, big exporters Already high recovery rates? U.S. 72%, Europe 77%, Japan 81% Already high recovery rates? U.S. 72%, Europe 77%, Japan 81% Raise recovery rates everywhere else Raise recovery rates everywhere else T issue demand growing fast (4%), potential recovery rate lower. T issue demand growing fast (4%), potential recovery rate lower. More specialty papers, food grades, composites, not recovered More specialty papers, food grades, composites, not recovered Marginal cost of collection rising Marginal cost of collection rising Quality of marginal supply declining. Quality of marginal supply declining. Peak Recovered Paper

16. 16 Brian McClay & Associates Inc. Peak Recovered Paper Supply growth slows, quality declines, costs rise

17. 17 Brian McClay & Associates Will India be another China?

18. 18 Brian McClay & Associates India growth to be fueled by market pulp, imports

19. 19 Brian McClay & Associates Softwood pulp shortage? Little new supply, rising demand from tissue, fluff, specialty products Softwood pulp shortage? Little new supply, rising demand from tissue, fluff, specialty products

20. 20 Brian McClay & Associates Inc. DP: 5 mm tonnes 2011 – 75% textile, 25% specialty

21. 21 Brian McClay & Associates Inc. Share of global textile business by fibre type

22. 22 Brian McClay & Associates Inc. Major Viscose Staple Fibre Producing Regions

23. 23 TerraChoice Market Services Inc. China, India surging consumer classes China, India surging consumer classes Peak cotton Peak cotton Sustainability–10 tonnes pulp/hectare vs. 1 tonne cotton, water use Sustainability–10 tonnes pulp/hectare vs. 1 tonne cotton, water use World demand for all textile fibres growing 3% per year World demand for all textile fibres growing 3% per year Dissolving pulp based fibres 4% of total, huge leverage Dissolving pulp based fibres 4% of total, huge leverage 10% per annum demand growth for textile grades 10% per annum demand growth for textile grades Limit - all textile growth > 2.5 million more DP capacity per year Limit - all textile growth > 2.5 million more DP capacity per year Growth prospects for dissolving pulp

24. 24 Brian McClay & Associates Inc.

25. 25 TerraChoice Market Services Inc.

26. 26 Brian McClay & Associates Inc.

27. 27 TerraChoice Market Services Inc. Longer term implications for the pulp business Converting existing mills no longer enough Converting existing mills no longer enough Need to build world-scale plantation based DP mills, ‘flex’ mills? Need to build world-scale plantation based DP mills, ‘flex’ mills? Flex mills reduce pricing volatility for DP, increase it for paper pulp Flex mills reduce pricing volatility for DP, increase it for paper pulp Significant pressure on wood chip supply Significant pressure on wood chip supply Adds to wood sustainability story – construction, paper/packaging, bio-energy, bio-chemicals, textiles. Adds to wood sustainability story – construction, paper/packaging, bio-energy, bio-chemicals, textiles. Overall, huge net positive. Overall, huge net positive.

28. 28 Brian McClay & Associates Inc. Nano-crystalline cellulose Very early stage of development Transparent, lightweight, 10 times stronger that stainless steel Domtar has pilot plant JV in Quebec US Forest Service funding similar plant Takes 2 tonnes of dried pulp to get 1 tonne of NCC US National Science Foundation - $600 billion business 2020 Very early stage of development Transparent, lightweight, 10 times stronger that stainless steel Domtar has pilot plant JV in Quebec US Forest Service funding similar plant Takes 2 tonnes of dried pulp to get 1 tonne of NCC US National Science Foundation - $600 billion business 2020

29. 29 Brian McClay & Associates Inc. Brian McClay, Principal Montreal, Canada bmcclay@videotron.ca 514-457-4450 www.pulpmarket.ca Brian McClay, Principal Montreal, Canada bmcclay@videotron.ca 514-457-4450 www.pulpmarket.ca