cordeiro spf 2012

EL MERCADO DE LA MADERA:Perspectivas de La Bio-energíay la Pulpa de Celulosa

Discussions withSociedad de Productores Forestales

Montevideo July, 4 2012

Facilitated by Mr João Cordeiro

COPYRIGHT@PÖYRY4 July 2012

2

AGENDA

What is Pöyry ?Is the Digital Age Killing the Paper Industry ?What Drives the Success of Eucalyptus Fibre ?Can Value Be Created With Bio-energy ?

Montevideo, Uruguay

COPYRIGHT@PÖYRY Montevideo, Uruguay 3

SCOPE OF OUR DISCUSSIONS TODAY

Forest Products

Multitude ofconventional techno-logies and processes

Multitude of emerging technologies and processes

Conversion

Conventionalproducts

Bioenergy

Newbio-products

4 July 2012


Montevideo, Uruguay 4

PÖYRY GROUPGLOBAL EXPERTS IN CONSULTING AND ENGINEERING

Pöyry is a global consulting and engineeringcompany dedicated to balanced sustainabilityand responsible business

7 000 experts in about 50 countriesProject experience in over 100 countries15 000 projects annually

Net sales in 2011 EUR 796 millionListed on the NASDAQ OMX Helsinki



WIDE RANGE OF DEEP EXPERTISE

URBAN & MOBILITYUrban planningReal estate developmentTransport planningRail infrastructureRoad infrastructureConstructionmanagementBuilding design

WATER & ENVIRONMENTWaterWastewaterWasteEnvironment

INDUSTRYPulp and paperChemicals Minerals processing

ENERGYHydropowerThermal powerBio-renewablesOil and gasNuclear energyTransmission and distribution

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THE DIGITAL AGEAND THE PAPER INDUSTRY

4 July 2012Montevideo, Uruguay


7Montevideo, Uruguay

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WORLD PAPER AND BOARD CONSUMPTION 1950-2010

4 July 2012Montevideo, Uruguay 8

A snap-shot of the last 60 years.

0

50

100

150

200

250

300

350

400

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Million tons

1950s:CAGR 5.5%/a3.0 million t/a





2000-2010:CAGR 1.8%/a6.3 million t/a


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UNDERSTANDING PAPER GRADES

examplesGraphic Papers Newsprint Newspapers

Uncoated Wood-Containing MagazinesCoated Wood-Containing Books

HandbooksUncoated Woodfree Copy PapersCoated Woodfree Manuals

Industrial Papers Containerboard Corrugated Boxes

Cartonboard Folding Cartons

Wrapping and Sack Bags

Hygiene Tissue Papers Toilet PapersPaper TowelsNapkins

Montevideo, Uruguay

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-2

-1

0

1

2

3

4

0 20 40 60 80 100Share of consumption in 2010, %

Demand growth, %/a

10

LONG-TERM DEMAND GROWTH BY PRODUCT THROUGH 2025

CWF

Average 1.6%/a

World paper demand is expected to grow by 1.6%/a in the long term.Tissue, containerboards and cartonboards will be the fastest growing productareas, while the global demand for newsprint/mechanical printing papers isexpected to decline.

Newsprint UWCCWC

UWF

TissueContainerboard

Cartonboard

SackOther P&B


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GDP AND GRAPHIC PAPER CONSUMPTION PER CAPITA

0

20

40

60

80

100

120

140

160

0 10000 20000 30000 40000 50000 60000 70000 80000GDP per capita, in terms of real USD (2009 price level)

Consumption, kg per capita

There has been a clear shift in terms of per capita consumption between 2005 and2010. At higher income levels (above USD 40 000 per capita) the per capitaconsumption has declined on average by 15-25 kg.

Country data 2010

World cross-section 2010

World cross-section 2005




SUBSTANTIAL DEMAND GROWTH OUTSIDE GRAPHIC PAPERS

0

100

200

300

400

500

600

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

Million tonnes

Forecast

When we look at the big picture, it is easy to see who needs fibre in the future.To put it simple, all growth is in tissue and packaging.

Tissue

Graphic Papers

Packaging

Other

-0.1%/v

2.6%/v

3.2%/a

0.5%/a

CAGR 2010-25

CAGR 2010-25: 1.6%/a

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-2

-1

0

1

2

3

4

5

6

0 10 20 30 40 50 60 70 80 90 100

Demand Growth, %/a

LONG-TERM GROWTH OF PAPER AND PAPERBOARD DEMAND BY REGION THROUGH 2025


¨The growth of paper and paperboard demand will be fast in many emergingeconomies, while a decline is expected in traditional markets.

Oceania

Average 1.6%/a

Share of consumption in 2010, %

Middle East

Latin AmericaEastern Europe

China

India

Russia

Africa

Rest of Asia

JapanNorth AmericaWestern Europe

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The growth of production is shifting outside the traditional supply areas.

PAPER AND PAPERBOARD PRODUCTION PROSPECTS 2010-2025

0 20 40 60 80 100

North America

Western Europe

Eastern Europe

Japan

China

Rest of Asia

Latin America

Other regions

Production Consumption

Production and consumption 2010

Million tons-20 0 20 40 60 80

North America

Western Europe

Eastern Europe

Japan

China

Rest of Asia

Latin America

Other regions

Growth of production 2010-2025

Million tons


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WHAT DRIVES THE SUCCESS OF EUCALYPTUS FIBRE?


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QUALITY WISE EUCALYPTUS IS SUPERIOR IN MANY APPLICATIONS

4 July 201216

Example Tissue Paper made with Eucalyptus pulp• High softness• High bulk, “fluff ness”-- loosened paper structure • Fast liquid absorption and capacity to retain water • Adequate porosity (pore sizes and distribution)

Montevideo, Uruguay

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SUSTAINABILITY IS KEY FOR OUR LONG-TERM SUCCESS



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THE WORLD OF FIBRE

Paper & Board374 million t

Papermaking Fibre170.7 million t

Mechanical35.1 million t

Chemical119.7 million t

Recovered Fibre203.5 million t

54% 46%

70%

26% 28% 46%

The main raw material for paper is paper !

21%Non-wood

15.8 million t

9%

BHKP54.7 million t

Other pulp33.5 million t

BSKP31.5 million t

Integrated11.0 million t

Fluff Pulp3.9 million t

35%53%

Dissolving4.5 million t

Market Pulp 25.3 million t

46%Integrated

29.4 million t

54%Market

16.6 million t

12%

Montevideo, Uruguay

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WORLD DEMAND FOR CHEMICAL PULP 1995-2025

0

20

40

60

80

100

120

140

160

1995 2000 2005 2010 2015 2020 2025

Million tons

North America

China

Rest of Asia

Latin America

Western Europe

In the long term, global demand for chemical fibre is forecast to grow from 126million tons in 2010 to 150 million tons by the year 2025, corresponding to anaverage growth rate of 1.2%/a.

Eastern EuropeJapan

Emerging marketsCAGR 3.8%/a

Mature marketsCAGR-0.6%/a

OtherForecast




COMPLEMENTARY EXPANSIONPulp and paper capacity in Asia and in South America

Capacity 1000 t/a2 0001 000

200

PaperPulp

mostly pulp mostly paper

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20

25

30

35

40

45

1990 1995 2000 2005 2010 2015 2020

%

SHARE OF MARKET PULP

Forecast

Pulp is called “market pulp” when pulps are sold as raw material to paperproduction – typically pulp is dried and transported to a paper mill in anotherlocation.

Share of market pulpof total wood pulps



9.3

0.2

Total Recovered Fibre Trade 54 million tonsTotal Wood Pulp Trade 47 million tons

0.3

1.7

0.3

0.50.2

1.2

1.6

4.9

0.9

12.8

17.4

0.9

0.3

0.6

0.2

GLOBAL WOOD PULP AND RCP TRADE FLOWS

Asia is key - growing importer of both virgin fibre and RCP.

6.8

4.5

0.2

1.70.7

3.5

4.3

6.9

0.8

1.4

3.2

0.6

1.00.7

2.3

1.40.5

0.3

0.4

1.3

0.1

0.92.3

4 July 2012



IMPORTS OF HARDWOOD CHIPS INTO ASIA-PACIFIC

0

5

10

15

20

1995 2000 2005 2010

Japan China Taiwan South Korea Other

million BDMT

Source: Country Import Statistics

China will become the main importer of wood chips before 2020.

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THE IMPORTANCE OF CHINA

0

50

100

150

200

250

1995 2000 2005 2010

China

0

15

30

45

60

75

1995 2000 2005 2010

Recycledfibre consumption, million tons

China

Virgin Market Pulpfibre consumption, million tons

Rest of the WorldRest of the World

Chinese recycled fibre imports are already approaching maximum level of close to 30 million tons while market pulp consumption should about double in next 15

years


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CAN VALUE BE CREATED WITH BIO-ENERGY ?




GLOBAL LIFE CYCLE OF WOODMore than half of wood currently used globally, is used in energy production.

Wood Demand1.57 billion bone dry tons

Fuel Wood Sawn Wood Wood panelsFibre / Pulp

Power

Heat By-Products and ResiduesPaper, Board

51% 49%

62% 38%

I N P U T

O U T P U T

CO2, Ash



EU RENEWABLE ENERGY DIRECTIVE

Enforced by the European Parliament and Council in December2008 and it became law in June 2009.It sets the following binding targets:

• 20% increase in energy efficiency • 20% reduction in greenhouse gas (GHG) emissions • 20% share of renewable energy in overall

EU final energy consumption by 2020 • 10% biofuel component in vehicle fuels by 2020



EXAMPLES OF RENEWABLE ENERGY TARGETS

16

15

12

16

4

3

1

5

0 5 10 15 20 25 30 35 40 45

Germany

France

Italy

United Kingdom

Sweden

Finland

Austria

Netherlands

Mtoe of renewable energy

20102020

Mtoe

Selected Countries Shown

1 Mtoe = 11.63 TWh



NATIONAL RENEWABLE ACTION PLANS THE “NREAPs”

All EU member states were required to publish an actionplan to detail the measures enabling them to comply withthe 2020 targets.

FinalEnergy

ConsumptionEstimates

Renewable:• Heating & Cooling• Electricity• Transport

TechnologyMix



FINAL ENERGY CONSUMPTION OFRENEWABLE ELECTRICITY IN THE EU-27

0

200

400

600

800

1000

1200

1400

2010 2012 2014 2016 2018 2020

TWh

Liquid biomassfuelsBiogas

Solid biomass

Wind

Solar

Geothermal

Hydropower

Wind is the winner, but there is significant growth in biomass and solar



FINAL ENERGY CONSUMPTION OF RENEWABLE HEATING AND COOLING IN THE EU-27

0

200

400

600

800

1000

1200

1400

2010 2012 2014 2016 2018 2020

TWh

Heat pumps

Liquid biomassfuelsBiogas

Solid biomass

Solar

Geothermal

Renewable heating and cooling in the EU-27 is based mainly on solid biomass.



SCHEMES AND INCENTIVES TO PROMOTE GREEN ENERGY

Guaranteed fixed payment paid for each unit of electricity produced from renewable sources.Guaranteed fixed payment in addition to the wholesale electricity price paid for each unit of electricity produced from renewable sources.Tradable certificate, which is granted to generators for a stated multiple of units of electricity produced from renewable sources. It’s an additional source of income to the wholesale electricity price.Price to be paid for each non-delivered GC in respect of the renewable energy obligation.

System imposing a minimum share of electricity generated from renewable sources on customers, retailers or producers.

System where incentives are guaranteed up to a predetermined amount of capacity or electricity generation from renewable sources.

Any tax related incentive policy (tax deduction, flexible depreciations schemes etc.

Feed-in tariff

Feed-in premium

Green certificate

Penalty price

Quota system

Max quota system

Fiscal incentives

Definitions



The UK has established a renewable electricity quota system with a tradable greencertificates.

Authority

Generator

Ofgem issuesROCs to green

generator

Supplier

Traders

Other suppliers

Generator sells the electricity to supplierCustomer

Supplier sells the electricity to customer

Generator sells the ROCs to any

supplier or trader

ROCs can be traded between suppliers and traders

Suppliers redeem ROCs to meet the

obligation

RENEWABLE ENERGY POLICY - CASE UNITED KINGDOM

The current UK system utilises green certificates, known as ROCs, to encourage the adoption of renewable energy generation techniques. The amount of ROCs available to a generator is dependent on the generation technique being used.A purchase obligation is placed on licensed electricity suppliers. Compliance with the obligation is demonstrated either from redemption of GCs (Renewable Obligation Certificates ROCs) or by paying a buy-out price to the Buy-out Fund.Average ROC price has been close to 40 GBP/MWh



Denmark offers both feed-in tariffs and premiums for renewable energy production.

Authority

Generator Supplier CustomerGenerator sells the electricty to supplier Supplier sells the electricty to customer

Renewable electricity and heat is supported both with feed-in tariffs and premiums, however, which one a renewable energy generation facility can claim depends on when it became operational. RE generators are entitled to a Feed-in-tariff (FiT) or a feed-in premium paid on top of the spot electricity market price depending on the date of connection to the grid.Biomass plants connected to the grid after February 2008 get 20,1 €/MWh premium on the top of electricity price for 10 years.

Authority approves generator for feed-

in tariff

D

Electricty price

Feed-in premium

RENEWABLE ENERGY POLICY – CASE DENMARK



WOODY AND AGRO BIOMASS SUPPLY AND DEMAND FOR ENERGY IN THE EUAccording to Pöyry’s latest estimates and depending on the scenario used,total biomass supply gap is around 230 TWh in 2020,

This represents some 115 million m3 of roundwood equivalent, depending on fuelquality and conversion efficiency

1) Estimated EU 27 woody biomass supply for energy production and NREAP based demand assessment.2) Includes EU 27 annual allowable cuts, post consumer wood, land management wood and harvesting residues potential.3) Immobilised woody biomass potential is resulting among others from imperfect markets and fragmented forest ownership.

0

250

500

750

1,000

1,250

1,500

Woody biomass supply Woody biomass demand Agribiomass demand Agribiomass supply Supply gap

TWh

Supply 2010 Supply 2020 Supply gap Demand 2020 Demand 2010

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Coal price Taxes forcoal

combustion

Emissioncosts

Effect ofgreen

electricityand heatsubsidy

Cost ofefficiency

loss

Biomasspaying

capability

BIOMASS PAYING CAPABILITY

BPC describes the theoretical upper limit of price for pellets delivered at energyplant by taking into account the national energy policy variations.

Model for biomass co-firing

Example UKIn coal co-firing the effect of green certificates could be some 54 EUR/t of pellets.In new biomass CHP plants the effect of green certificates could be some +105 EUR/t of pellets.


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THE ABILITY TO PAY FOR WOOD IS CHANGING



CONVENTIONAL PRODUCTS* FROM WOOD

Pulps

Sawnwood ReconstitutedPanels

Veneer &Plywood

Fuelwood Charcoal

MechanicalPulp

ChemicalPulp

SpecialtyPulps

Paper & Boards FluffPulp

DissolvingPulps

Newsprint Printing&Writing Tissue Packaging Specialty

Papers AbsorbentsEthersNitratesAcetates

Viscose

Diapers, Binders, Glues, CMC, Explosives, Detergents, Food, Pharmacy, Ryon, Yarns, etc,etc

Impregnatedwood

* Non-extensive liist, some examples

4 July 2012


Bark &Residues

MODERN “CUTS” FROM WOOD –“De la naturaleza a su mesa”

WoodChips

Chips WoodPellets

* Non-extensive lists

PulpMill

SpentLiquor

Extractives

Glucose

HemicellulosesLignin

Pulp Paper

Fuels (e.g ethanol)Organic acidsSolventsSoftnersLubricantswide range of chemicals + polymers

Fibre additivesEmulsifiersHydrogelsSugar-substitutesFurfural (e.g. nylon)wide range of other chemicals

Cellulose

Fatty acidsPharmaceuticalsAntioxidantsBioactive chemicalsOther …

Natural bindersAdhesivesSub-bituminous coalFertilizersCarbon fibresThermo-plastics…

Power &Heat

Power &Heat

4 July 2012

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CONCLUSIONS

4 July 201241

Is the Digital Age Killing the Paper Industry ?– Absolutely Not !

What Drives the Success of Eucalyptus ?– Quality, Cost and Sustainability

Can Value Be Created With Bio-energy ?– It all depends on policies and technologies

For countries like Uruguay and Brazil, rich in land, forestry technologyand competent people, well managed plantation forest translates intomany attractive business opportunities and in improved quality of lifefor our people.

Montevideo, Uruguay


42

João Cordeiro Jefferson [email protected] [email protected]+358 40 524 2502 +55 41 3252 7665

Muchas Gracias !

Montevideo, Uruguay

cordeiro spf 2012

Business

copyrightpyry

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digital age

electricity

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demand growth

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paper industry