Pulp & Paper Relationship with Towboat Industry Whistler, B.C. June 2 nd, 2006
British Columbia - Pulp and Paper Industry Production Capacity by Company Source: Pulp and Paper Advisory Committee Report January, 2006
Catalyst Paper Corp. Diversified Product Mix Chart Title Newsprint 30% Specialties 43% Pulp 27% Based on 2006 capacities, including the removal of 140,000 tonnes of previously idled newsprint capacity.
Groundwood Paper products Newsprint Directory Soft-calendered and machine-finished high brites Light-weight coated
Millions mt Millions mt N.A. Newsprint Demand & Supply Trends 17 16 15 NA Demand Demand 3.4 million mt reduction - Advertising declines - Switch to Inserts - Circulation declines - Lower basis weights 17 16 15 NA Capacity Supply 3.8 million mt reduction - Mill Closures, Idling - Paper machine Conversions - Lower basis weights 14 14 13 13 12 12 11 11 10 10 9 2000 2001 2002 2003 2004 2005 2006 2007 9 2000 2001 2002 2003 2004 2005 2006 2007 Source: PPPC
Millions mt N.A. Uncoated Groundwood Paper Demand & Supply Trends Millions mt 6.6 6.4 6.2 Demand NA Demand 1.0 million mt increase - Retail sales growth - Product substitution - Customer flexibility 6.6 6.4 6.2 Supply NA Capacity 1.1 million mt increase - Conversions - Product upgrades 6 6 5.8 5.8 5.6 5.6 5.4 5.4 5.2 5.2 5 5 4.8 2000 2001 2002 2003 2004 2005 2006 2007 4.8 2000 2001 2002 2003 2004 2005 2006 2007 Source: PPPC
Newsprint - Assuming a $0.75 Dollar 700 SORTED BY CASH COST WITH COUNTRY INDICATED 600 500 400 300 Cash Cost US$/FMT 200 100 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Cumulative Capacity (Millions of FMT Per Year) USA Canada o:\clients\catalyst\10-26-05.pre
Newsprint - Assuming a $0.95 Dollar 700 SORTED BY CASH COST WITH COUNTRY INDICATED 600 500 400 300 Cash Cost US$/FMT 200 100 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Cumulative Capacity (Millions of FMT Per Year) USA Canada o:\clients\catalyst\10-26-05.pre
ROCE (%) Pulp & Paper Industry in B.C. - Return on Capital Employed (ROCE) 25% Data Source: Price Waterhouse Coopers Plywood and Veneer 19-Year Average 20% 15% 10-13% Cost of Capital Uncoated Market Pulp Groundwood 19-Year Average14-Year Average* Lumber 19-Year Average BC Forest Industry 19-Year Average 10% *Data not available since 2001 1918.9% 5% 883.2% 610.5% 376.3% 418.6% 0%
Norbord Catalyst Paper Fraser Papers Ainsworth Interfor Domtar Canfor Tembec Abitibi Consolidated Cascades West Fraser Timber Western Forest Products Billions US$ Performance Improvements $ Millions Top Significant Catalyst Pulp 100 & Paper Public Market Industry Companies Pulp Strategies Closures/ in the Global Forest Products Announcements Annual Performance Industry in (2003 the Improvements last Net 12 Sales) months Shifting to to higher higher value value products 30 A n n ou n ced P u lp M ill closu res ( 0 0 0 m t) $300 25 Reduce operating costs costs $250 West Fraser, Hinton------------------70,000 20 Shutting Weyerhaeuser, high high cost cost Cosmopolis---------140,000 capacity 15 $200 Weyerhaeuser, Prince Albert-------130,000 Re-invest 10 Bowater inthunder high return Bay---------------210,000 projects $150 Georgia Pacific, Old Town-----------150,000 5 Growth Neenah through Paper, Terrace mergers Bay---------350,000 and acquisitions $100 0 Western Pulp, Squamish------------275,000 Sustainability $50 Domtar, Quevillon-------------------210,000 Canadian Companies Source: PriceWaterHouseCoopers, CIBC World Markets. Tembec, Smooth Rock--------------200,000 $0 Total 1,735,000 2003 2004 2005 3 Year Improvement [1] R ob erts, D on et all. C hanges in the G lobal Forest Produ cts Industry D efin ing the Environm ent for B ritish C olum bia. C IB C W o rld Markets Equity Research Industry Update, March 14, 2005.
Sustainability = A Softer Footprint Certified fiber Recycle content Energy Efficiency Clean Power Clean Production Cleaner inputs Waste reduction Continuous improvement of emissions
Sustainability = Low Carbon Emissions 1,400,000 1,200,000 1,000,000 C atalyst P ap er s P erfo rm an ce 71% reduction 800,000 600,000 400,000 200,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
C atalyst s Papers Fiber Certification PriceWaterHouseCoopers Chain of Custody Standard on fibre supply ISO14001 Registration Independent Compliance Auditing
Sustainable Forest Management Certification British Columbia Millions of ha 130 120 110 100 90 80 120.5 Series4 CSA SFI Globally, B.C. is second only to Canada in total area that is independently certified 70 60 50 40 30 20 10 0 42.4 37.8 31.9 17.1 7.5 6.5 5.7 4.8 4.4 4 2.3 Canada BC USA Finland Sweden Germany Russia Australia Malaysia Brazil France Chile Source FPAC December, 2005
B.C. Coast Pulp & Paper Operations Elk Falls Powell River Vancouver Port Alberni 4 Crofton
Challenges for Towboat Industry Coastal Pulp & Paper mills have an extra step to service N.A. markets and container shipments. We need: Consistent, reliable service Lower lead times to Customers Lower costs to remain competitive Transit Damage has been very low Weather conditions still create some issues
Challenges for Towboat Industry
Challenges for Towboat Industry Transformation of Coastal Forest Industry Logging Operations Sawmills Pulp and Paper mills High Capital costs of new Equipment
Opportunities for Towboat Industry Continue to Improve Towing Efficiencies In n o vate so lu tion s w ith P u lp & P ap er C o s Engage Workforce - No labour disruptions Support initiatives to improve access and infrastructure to Ports and borders Support Actions to create a business climate that supports re-investment: Tax parity with other jurisdictions R & D incentives Coastal Forest Policy Changes
Towboat Industry and Pulp & Paper Thank You