market report final 11-13-12

Raw Material Report Outlook 2013

2

This report contains a number of forward looking statements. Forward looking statements reflect our current views about future events

and are based on currently available financial, economic and competitive data and therefore include a level of risk and uncertainty.

FORWARD LOOKING STATEMENTS

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Content

•

General information

•

Print Media Key Cost Drivers (incl. Pigment)

•

Liquid Packaging and Narrow Web Key Cost Drivers (incl. Pigments)

4

Key messages – Raw Materials

•

Raw material markets remain strong despite general economic outlookWell managed intermediate markets

•

Demand is down –

supply (managed) even more down•

All large oil companies report increases (>25%) of refinery margins Strong BST pricing (Benzene / Styrene / Toluene)Vegetable oils volatile (drought)Increasing Gum Rosin pricing

•

Crude mid / long term outlook remains bearishBut for Brent Crude today’s reality shows the complete oppositeBrent remains at a significant premium to WTI

•

Currency fluctuations make it hard to buy from the right source

•

Market demand fluctuations (sudden high, then low) makes it hard

to maintain a low cost inbound chain

5

Key Messages – Logistics / Packaging / Utilities

•

LogisticsDiesel surcharge went up over the last 2 quarters on the back of crude and higher refinery marginsAfter a peak in July, container rates in the most important lanes are weakening and coming off a high pointAlthough volumes are down, ocean carriers are aggressively pulling capacity to keep rates propped up. They are collectively committed to not allow price erosion in 2012-13 as they did in 2011.

•

PackagingDespite weak demand in Europe and NA HDPE prices follow the gains in plastic feed stocks with double digit figuresHot galvanized steel remains stable and above Q4 2011 prices despite poor economic outlookKraft paper is making moves upward for the first time in 2.5yrs affecting liner board pricingSupply base continues to consolidate in the area of packaging containers making it more difficult to leverage volume and spend with fewer suppliers

•

UtilitiesEU 2020 as well as the drive for more green sources has increased and will continue to drive the costs of electricity and gas in Europe Markets continue to be volatile mainly due to economic uncertainty, speculation, as well as, geographical and political issues

6

Last 4 years Economic outlook From a Raw Material perspective (1)•

Q3 / Q4 2008

market collapsed –

high stocks in the chain (compared to new lower sale levels)

•

Q1 / Q2 2009

markets stabilised –

stocks were taken out of the markets –

suppliers rationalised products and capacities

•

Q3 / Q4 2009

markets started to reverse and the normal supply chain amplification effects occurred

while each step in the chain ordered slightly more than real demand –

base markets became short:

Higher than real demandRationalised supply base

•

Q1 / Q2 2010

–

growth continues while stocks have not been rebuilt, first signs of major supply chain stress

•

Q3 / Q4 2010

–

many key materials are short, combined with critical supply capacity unavailable (temporarily or taken out)

•

2011

–

Pricing power remains with the base chemical producers. Turmoil

in the Middle East caused crude prices to increase fast bringing further economic volatility. The tragic events in Japan caused further challenges in the security of supply

7

Last 4 years Economic outlook From a Raw Material perspective (2)•

2012

–

Volatility. Materials move up and down very hard. No long term contracts and many challenges on demand and supply, partially driven by speculation. Currencies and base raw materials move fast. When prices drop, no trading in large quantities is possible. Pricing power is still with sellers, despite economic head-wind. Due to the negative outlook of the graphic arts industry, this market is more and more perceived as unattractive and the last resort for leftovers.

•

Outlook 2013 –

It is expected that many suppliers in the ink supply chain will

see further shrink of their demand. We expect a number of suppliers to really struggle to survive. The large Global Chemical companies will decide to reduce output

rather than go into the normal chemical pricing cycle. Given their domination, due to the last 5 years of consolidation, they will succeed. While crude might hit lower prices, due to the change in refinery set-up and the use of more shell gas / oil, many crude related products will actually see price increases as their specific intermediates become short

8

Key Cost Indicators Major concern is Benzene / Toluene / Styrene increases, as this drives many other materials. Vegetable oils down after peak, the rest are flat or up

9

Forex – A 12 month roller coasterEuro versus GBP

USD versus BRL

USD versus AUD

USD versus CNY USD versus INR (1000)

Euro versus SEK

USD versus Euro

EUR versus CNY

10

Forex – 2012 – Explanation note

•

With the global chemical world dependant on China, the strength of the Yuan versus the USD and more specifically against the Euro is driving significant additional inflation

•

While the Euro has gained some strength, compared to the 2008 peak, it is still extremely weak, resulting in additional inflation in the Euro region

•

Australia / Brazil benefitted from strong exchange rates versus the USD, hence some level of tempering the underlying inflation of RM costs, however lately (and outlook) is that this benefit will be less

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Crude Oil

•

Crude in quarter 3 increased significantly versus Q2 and only in the last month reversed the trend. The increase was not expected given the general economic outlook.

•

European markets are even more a worry due to record low stocks. Any issue will result in a major price explosion

•

The gap between WTI and Brent has increased in Q3 from $14 to $22. Except for the US, all others regions are ‘Brent’

based and even some products in the US follow Brent rather than WTI

•

Cost for crude related products will increase in Q4 due to current market conditions.

•

In Europe the effect is slightly less than originally anticipated due to the partial recovery of the Euro

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►Print

Media

►Liquid Packaging

and Narrow

Web

Click

on an application

Key Cost Drivers

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Print Media Key Cost Drivers

►Coldset

NA

►Publication

Gravure

NA

►Publication

Gravure

EU

►Heatset

EU

►Coldset

EU

►Sheetfed

EU

►Heatset

NA

►Transfer Media►Press Room

Chemicals

►Additional Key Cost

Drivers

►Sheetfed

UV

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AdditivesHydrocarbon Resin

Phenolic Resin

Flush/Carbon

Distillate

Heatset NA Key Cost Drivers

Distillate•Distillate prices driven by crude and jet fuel / kerosene prices

Carbon Black•Driven by crude oil derivatives

Hydrocarbon Resin•DCPD & C9 feedstock pricing driven by gasoline and lighter ethylene cracking slates

Flushed Colour

Phenolic Resin•Main driver is Tall Oil Rosin which loosely follows Gum Rosin

Additives•Waxes -

prices will continue to follow trend of crude oil

15

Distillate NA Cost Development Background

Flush ColourHeatset

NA

•Product Driven•Distillate prices follow jet fuel / kerosene price trends

•Financial Driven•Prices dip in summer months then rise to near 2012 highs

•Expectation•Slowdown in natural gas fracking

improves supply of distillates temporarily while rigs are transitioned from gas to oil•Prices expected to remain elevated

16

Carbon Black Cost Development Background

•Product Driven•Carbon costs are driven by the price movement of various crude oil derivatives.•Prices for 2012 through Q3 increased / Q4 decreased slightly•Prices for 2013 will reflect movements in these feedstocks.•How much movement will depend on the unpredictable derivative costs as a percent of crude.

•Market Driven•Overall market tightness continues•Rubber, tire, and plastics industries dominate the carbon market

and are willing to pay top prices.•Four new tire production sites coming on line in the Americas by

2014 which will increase market tightness

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Carbon Black Material Key Cost Drivers

Heatset NA

Heatset EU

Coldset NA

Coldset EU

Pub G NA

Pub G EU

Sheetfed EU

Click

to

view Carbon

Black

cost drivers

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Hydrocarbon Resin Cost Development Background

•Europe•2013 prices expected to rise due to continued cracking of lighter feed slates•Number of European HC producers has been reduced over the last year•The Euro/USD exchange rate negatively affected the overall cost•Reduced demand has softened the currency impact slightly

•North America•Limited number of suppliers for N. America•Asian suppliers are not competitive or able to meet NA product requirements•Prices stable in Q3 and Q4 2012 after significant Q2 increases•2013 prices expected to rise due to continued cracking of lighter feed slates

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Hydrocarbon Resin Material Key Cost Driver

Heatset NA

Heatset EU

Coldset NA

Coldset EU

Flush Colour

Click

to view Hydrocarbon

Resin

cost drivers

20

Phenolic Resin NA Cost Development Background

Flush ColourHeatset NA

•Product Driven•Rosin resins used in the US are primarily Tall Oil Rosin based. TOR pricing trends with gum rosin

•Financial Driven•Due to reduced gum prices and a softening TOR market, rosin resins prices declined slightly in Q4 2012

•Expectation•Phenolic resin supply and demand is in balance•Prices are expected to remain flat for Q1 2013 if gum remains stable

21

Additives Cost Development Background

•Waxes•Microcrystalline -

prices have been flat since their peak in mid 2011 due to higher crude oil prices. 2013 prices will be stable to slightly higher depending on the price of crude oil.•Virgin PTFE has increased 50% since the end of 2009. Prices are

expected to be stable through the first half of 2013.

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Additives

Filler

Resin

Flush/Carbon

Oil

Coldset NA Key Cost Drivers

Base / Vegetable Oil•Base oils driven by crude prices and base oil inventories•Vegetable oil volatility continues


Filler•Producers have idled capacity and rationalized production•Primary suppliers implemented price increases in January 2012

Flushed Colour

Resin•DCPD & C9 feedstock pricing driven by gasoline and lighter ethylene cracking slates

Additives•Organoclay

trending slightly up (market driven)

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Base/Vegetable Oil Coldset NA Cost Development Background

Flush ColourColdset NA

•Base Oil•Base oil prices follow crude oil and base oil inventories•Prices fell in Q3 with crude decline, but expected to rise slightly for Q4•Domestic producers slowed their exports to Europe due to reduced

demand•Soybean Oil -

Market price volatility continues•Sluggish 2013 economic outlook combined with Eurozone

uncertainty and poor North America crop are limiting year end supplies

•Linseed Oil -

Stronger than expected 2012 North America flax crop•Q4 2012 small price reduction and expectations for flat pricing throughout first half of 2013

•Castor Oil -

Excellent crop size in 2012 -

25% market price decline•Prices are expected to rebound in 2013 due to lack of planted acres and increased exports of castor meal

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Filler Coldset NA Cost Development Background

•Kaolin•Idled capacity and rationalised

production to address shrinking market for kaolin (paper market

driven)•Little rationalization occurred in 2011, signalling

a levelling

out between supply and demand•No plant shutdowns occurred in 2012 and none are foreseen for 2013•Costs mainly driven by energy and process chemicals which are showing an upward trend•Producer Price Index for kaolin mining has shown increase of 33%

since 2008•Expect a small price increase in January 2013

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Additives Coldset NA Cost Development Background

•Organoclay

-

Product Driven•Major cost driver is beef fancy tallow (BFT) which was relatively flat in 2012•BFT is used to produce quaternary amine that coats the clay to give it the required properties•Pricing in 2012 saw increases in Q1 while holding steady the rest of the year•Pricing in 2013 is uncertain and will depend on both BFT movement and demand from other industries

•Organoclay

-

Market Driven•Oil and natural gas companies dominate clay usage and are willing to pay top prices•Hydraulic fracturing (fracking) for oil and natural gas extraction are at the heart of this increased demand•It is expected that the increased demand from these industries will drive prices in the coming year

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Filler

Pigment/Carbon

Solvent

Resinate

Publication Gravure NA Key Cost Drivers

TOR Based Resinate•Trends with gum rosin pricing


Filler•Producers have idled capacity and rationalised

production.•Major Suppliers implemented price increases in January 2012.

Solvent•Trends with crude oil and gasoline pricing

Dry Pigment•No serious pigment shortages, potential for upward price pressure•Enforcement of environmental protection laws continues to disrupt supply of pigments and intermediates from India and China

27

TOR Based Resinate Cost Development Background

•There are two resinate

manufacturers in the US. Both have dedicated their capacities to specific gravure ink producers•Resinates

are approximately 50% solids, most of which is tall oil rosin (TOR)•The same fundamentals that drive phenolic

resin prices drive resinate

prices but on a 50% basis•Resinate

prices declined slightly in Q4 2012 with falling gum rosin prices•Resinate

prices are expected to trend up in 2013 with the potential for higher gum rosin prices

28

Filler Publication Gravure NA Cost Development Background

•Kaolin•Idled capacity and rationalised

production to address overall shrinking market for kaolin (paper market driven)•Little rationalization occurred in 2011, signalling

a levelling

out between supply and demand.•No plant shut downs occurred in 2012 and none are foreseen for 2013.•Costs mainly driven by energy and process chemicals which are showing an upward trend•Producer Price Index for kaolin mining has shown increase of 33%

since 2008•Expect a small price increase in January 2013

29

Solvent Publication Gravure NA Cost Development Background

•Toluene•Used to supplement recovered solvent in publication gravure inks•Price trending with crude oil and aromatic / gasoline prices•Prices are expected to rise further in Q4 2012 and remain elevated

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Filler

Pigment/Carbon

Solvent

Resinate

Publication Gravure EU Key Cost Drivers

Gum Rosin Based Resinate•Having experienced major volatility during 2010/2011, the market

in 2012 appears to have settled.


Filler•Primary cost driver is energy costs

Solvent•Toluene price trends with crude oil price.


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Gum Rosin Based Resinate Cost Development Background

•Gum Rosin•Having experienced major volatility during 2010/2011, the market

in 2012 has settled, but at a much higher level than the average in 2009.•Sluggish demand around the world, together with substitutions of

alternative raw materials has added downward pricing pressure but as a result, farmers are refusing to tap their trees•Volatility still exists with the fear that any sudden pick-up in activity will lead to upward price movements.•Outlook for 2013 is likely to trend up slightly

32

Filler Publication Gravure EU Cost Development Background

•Kaolin•All major kaolin producers have idled capacity and rationalised

production over the last 2-3 years to address an overall shrinking market, primarily driven by the paper market.•Little rationalization in 2011 with no plant shut downs in 2012,

signalling

a levelling

out between supply and demand.•Increasing operational costs including that of fuel and chemicals used in the manufacturing process are pushing pricing upwards.

33

Solvent Publication Gravure EU Cost Development Background

•Toluene•Virgin toluene is used to supplement recovered solvent in publication gravure inks.•Toluene price generally trends with crude oil price.•Reduction of available volume due to reducing capacities has added pressure to the higher price levels.•Recent issues with unplanned shutdowns / technical problems led to a short term supply issue which has driven prices higher.•2013 Outlook -

Prices expected to stabilise

at the higher level due to supply / demand situation.

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Additives

Hydrocarbon Resin

Phenolic Resin

Pigment/Carbon

Distillate

Heatset EU Key Cost Drivers

Distillate•Gas oil follows the trend of crude oil•Gas oil pricing is at an all time high


Hyrdocarbon Resin•DCPD & C9 feedstock pricing driven by gasoline and lighter ethylene cracking slates


Phenolic Resin•Tall oil rosin•Gum rosin market

Additives•Virgin PTFE wax remains at high levels•Paraffinic wax is following Base oils

35

Distillate Heatset EU Cost Development Background

•Product Driven•Gas oil is a feedstock produced from crude oil. The European crude is Brent (North Sea sweet, light crude).•Due to instability in the Middle East, crude bounced back after a dip at the end of Q2 and increased significantly in Q3

•Financial Driven•The monetary quantitative easing program by the FED has strengthened the Euro a few cents but also increased speculation on commodities.

•Expectation•Current stocks in ARA (Amsterdam, Rotterdam, Antwerp) area are at low levels and are a potential risk in the winter months which may lead to higher prices in Q1 2013•Brent crude is expected to stay between $105/bbl and $120/bbl in

2013. Exchange rate fluctuations will impact crude pricing in Europe

36

Phenolic Resin EU Cost Development Background

Heatset

EU Sheetfed

EU

•Relatively stable pricing in 2012 -

Any mild decrease of gum rosin price has been limited by increased pricing of phenols and anhydrides•Prices are expected to trend slightly upward in 2013 as sea freight costs increase and gum rosin production decreases due to reduced tapping by farmers

37

Additives Heatset EU Cost Development Background

•PTFE Wax•PTFE prices have been very stable in 2012. Due to export restrictions in China, this high price level is expected to continue in 2013.

•Paraffinic Wax•Microcrystalline wax is a by-product of the refining process. Fewer refineries are producing the oil that creates this by-product leading to an unbalanced supply and demand situation.•In 2012, one supplier went bankrupt, which resulted in 3 refineries closing and 4 refineries reducing capacity or focusing only on fuel production

38

AdditivesFiller

Resin

Pigment/Carbon

Oil

Coldset EU Key Cost Drivers

Base / Vegetable Oil•Base oils do not follow crude oil•Soybean Oil -

Market volatility continues


Filler•Primary cost driver is energy costs


Resin•DCPD & C9 feedstock pricing driven by gasoline and lighter ethylene cracking slates

Additives•Organoclay

trending slightly up in 2012 (market driven)

39

Base/Vegetable Oil Coldset EU Cost Development Background

•Base Oil•Base Oil pricing has not followed crude oil in 2012 as it had its highest level when crude was lowest. As Base oil pricing moved to slightly lower levels, which was not favourable

for producers, refineries started using the feedstock for production of diesel instead of base oils which reduced supply and caused an increase in price.•The monetary quantitative easing program by the FED has strengthened the Euro a few cents but also increased speculation on commodities.•Higher prices are expected by the end of 2012. Prices for 2013 are extremely uncertain, as it depends heavily on the demand from other markets like the automotive industry and, to a certain extent, crude oil prices.

•Soybean Oil•Market volatility continues -

however trading remains within certain upward and downward trends.•Hedge funds still having an impact going forward as they seem to

come in and out depending on general market activity.•2013 Outlook -

Growing demand still expected to outweigh supply in 2013, keeping pressure on prices.

40

Filler Coldset EU Cost Development Background

•Kaolin•All major kaolin producers have idled capacity and rationalised

production over the last 2-3 years to address an overall shrinking market, primarily driven by the paper market.•Little rationalization in 2011 with no plant shut downs in 2012,

signalling

a levelling

out between supply and demand.•Increasing operational costs including that of fuel and chemicals used in the manufacturing process are pushing pricing upwards.

41

Additives Coldset EU Cost Development Background

•Organoclay•Major cost driver is beef fancy tallow (BFT)•BFT is used to produce quaternary amine that coats the clay to give it the required properties•BFT holding steady in price for 2012 thus far•Oil and natural gas companies dominate clay usage and are willing to pay higher prices.•New hydraulic fracturing for oil and natural gas extraction are at the heart of increased organoclay

demand.•It is expected that increased demand from this industry will drive prices up in the coming period

42

Additives

Alkyd Resin

Phenolic Resin

Pigment/Carbon

Veg Oil/Distillate

Sheetfed EU Key Cost Drivers

Vegetable Oil / Distillate•Gas oil pricing is at an all time high•Linseed supply / pricing to stabilise

with a potential to weaken


Alkyd Resin•Costing driven mainly by vegetable oil pricing•Prices of chemicals moving up


Phenolic Resin•Tall oil rosin•Gum rosin market

Additives•Drier pricing volatile and influenced by cobalt metal•PE waxes follow crude / kaolin clay -

primary cost driver is energy

43

Vegetable Oil/Distillate Sheetfed EU Cost Development Background

•Gas Oil•Gas oil is following crude very closely. Crude is expected to be

between 105 USD/bbl and 120 USD/bbl for 2013, the exchange rate can play a significant role in 2013.•The fundamental weaknesses and risks still remain (European crisis, Iran nuclear power program).•The monetary quantitative easing program by the FED has strengthened the Euro a few cents but also increased speculation on commodities.

•Vegetable Oils -

Linseed Oil•Canadian and US crop yields were 50% higher than last year, Eastern European yields were far lower•Reduced Chinese import demand due to higher Chinese yields made more North American based product available for export to Europe.•Linseed cake price has stabilised

at a high level, therefore upward risk is low.•The negative economic outlook can lead to a bear market.

44

Alkyd Resin Sheetfed EU Cost Development Background

•Linseed Oil•Canadian and US crop yields were 50% higher than last year, Eastern European yields were far lower•Reduced Chinese import demand due to higher Chinese yields made more North American based product available for export to Europe.•Linseed cake price has stabilised

at a high level, therefore upward risk is low.•Soybean Oil

•Market continue to be volatile. Influence on alkyd pricing is dependent on time of contracting•Chemicals/Secondary Raw Materials

•TMP, Penta, PTA, IPA, etc. have moved up during Q4/2012. This trend is expected to continue into Q1/2013 and will counteract any cost advantage from linseed oil

45

Additives Sheetfed EU Cost Development Background

•Driers•Cobalt metal price continues to be volatile although there has been more stability in the second half of 2012. Manganese pricing is expected to remain stable for Q4 and 2013•The future of cobalt driers is uncertain because of labelling

issues•Waxes

•After reaching an all time high, ethylene followed crude pricing

downwards for a few weeks but is now back at high levels and is still volatile. The speed of reduction and the following increase was too fast to push it through the supply chain and affect PE wax prices. •An increase back to PE prices of Q1 and Q2 is likely. PE waxes will stabilise

at these high levels as long as crude stays at current levels, •PTFE wax pricing has been very stable at high levels over the last few months and no reduction is expected as the market is still short, driven by Chinese export restrictions.

•Kaolin Clay•Supply / demand in balance. Sufficient supply options available to ensure stable pricing.

46

Press Room Chemicals Key Cost Drivers

►Fountain

Solutions

►Washes

►Spray Powders

►Silicones

47

Fountain Solutions Key Drivers

Glycerin•Glycerin is a by product of bio-diesel production

Gum Arabic•Gum Arabic is agricultural and is dependent on the weather

Glycol Ether•Glycol ethers are derived from ethylene and propylene

48

Glycerin Cost Development Background

•Europe•Approximately 70% of European glycerin is generated as a by-product of bio-diesel. Low bio-diesel production caused by heavy imports from Argentina and Indonesia has led to shortages and higher prices in the short term.•2013 Outlook -

Restart of bio-diesel production will stabilise

supply, demand and pricing.•Pricing remains volatile as European bio-diesel producers are unsure of future bio-diesel quotas.

•North America•U.S. is a net importer of glycerin.•Bio-diesel production has begun its winter slowdown, and less crude glycerin is being generated, as anti-

freeze and de-icer

production increases.•Crude glycerin has found its way into more animal feed applications as the price of corn has climbed.•Price is trending upward.

49

Gum Arabic Cost Development Background

•Good rain levels in main producing countries of Sudan / Chad suggest a good harvest in January. No supply issues expected.•Prices expected to be stable / minimal increase for the foreseeable future.•Political situation quiet.

50

Glycol Ether Cost Development Background

•Europe•Pricing is anticipated to increase in Q4, mainly driven by concerns around availability, following issues in the Middle East and Asia.•A number of major global sources are in or will enter turnarounds in the next few months.

•North America•One major producer of ethylene oxide experienced production problems.•Supply of ethylene and propylene are beginning to tighten.•Pricing appears to be stable to slightly upwards.

51

Washes Key Drivers

Solvent•Hydrocarbon solvents following crude closely

2 – EthylhexylCocoate•Coconut oil is the main driver behind 2-ethylhexyl cocoate

Monopropylene Glycol•The main driver behind monopropylene

glycol is propylene

52

Solvent Cost Development Background

•Hydrocarbon Solvents•Prices follow crude closely. After a drop mid-year, crude has come back to old price levels.•Hydrocarbon solvents are expected to stay at current high levels

in 2013.

53

2-Ethyhexyl Cocoate Cost Development Background

•Europe•The key material drivers in Europe have continued on a downward trend, due to good availability of feed stock.•Market feedback is that the level of reductions has reach its low point and price is expected to stabilise

in first half of 2013

•North America•Availability and inventory of coconut oil continues to improve.•Supply and demand are well balanced.•Pricing is trending downward.

54

Monopropylene Glycol Cost Development Background

•Europe•Availability is very good at present.•Outlook is stable with propylene pricing currently on a slight downward trend. (Q4 -

2012)•Product is seasonal with high demand during the winter months, which could result in possible shortages leading to an upward price trend.

•North America•Aircraft de-icing is a large end user and is seasonal. Weather will impact demand.•Prices declined in Q3 following cost reductions of propylene.•Prices are expected to rebound as propylene continues to rise after the Q3 decline.

55

Spray Powder Key Drivers

Starch•The 2012 North American drought has reduced supply

56

Starch Cost Development Background

•Europe•Maize and wheat starches are becoming tighter in the market.•August crops were delayed due to the floods in Europe.•Starch pricing, having fallen at the start of the year, is now heading in the opposite direction with double digit increases.•Current increases and product availability will not change until

the new crops are harvested in April/May 2013.•North America

•U.S. is now an active importer of corn from South America.•U.S. corn production is at its lowest level since 2006.•Poor yield resulting from the 2012 drought is forcing pricing upwards.

57

Silicones Key Drivers

Silicone•The demand for silicon metal (used in solar cells and computer chips) is down

58

Silicone Cost Development Background

•Europe•Pricing has been stable since the start of 2012, outlook is for this to continue into Q1 -

2013.•Demand has reduced during Q4 as plants around Europe start to de-stock for year end. As a result, current availability/lead-times have reduced significantly.

•North America•A new plant has been built in the U.S.•Exporting to Asia is down as a result of two new plants in China.•Supply and demand are well balanced.•Pricing is trending steady to slightly downward.•A major producer is in deep financial difficulty and may exit the business resulting in a price spike.

59

Transfer Media Key Cost Drivers

►Sleeves ►Blankets

60

Tensioned Blanket Key DriversMixed Compounds•2012 Weakness in butadiene•2013 Expect mild recovery in polymers

Fabric•Reduction in cotton prices•Stabilisation

in polyester

Aromatic Solvents•Toluene is impacted by the aromatics / gasoline market

Interleaving & Cure Paper•Reduced pulp pricing•Paper not demonstrating reductions

61

Fabrics Cost Development Background

•Product Driven•Global demand for short staple cotton generally drives the total

market, especially from the Far East with China and India in particular•Long staple cotton (used for blankets) is limited in its acreage

availability, this is being replaced with alternate cash crops as prices fall•With increased pricing in 2010 and 2011, many spinning mills moved to synthetic yarns reducing availability•Falling base price has destabilised

some markets with traders trying to sell inventories at last year's prices •Financial Driven

•The strength of the US$ versus €

euro has had an impact on market strength, US$ economies have difficulty competing against euro based manufacturers

•Expectation•Base raw material price for 2013 would indicate that pricing should be lower than 2012 prices, however higher priced 2012 yarn inventories will impact pricing during the early part of 2013•With stabilisation

of synthetic prices in relation to the volume of cotton used, 2013 price stability is expected.

62

Mixed Compounds Cost Development Background

•Product Driven•In the first half of 2012, butadiene prices spiked to the record

high prices of 2011. In the second half of 2012 prices dropped but are still higher than in 2010•Acrylonitrile

prices have also declined throughout most of 2012 with a slight

increase in Sept/Oct•Additive and filler costs remain high and stable

•Financial Driven•Weakened Euro versus the US dollar has impacted pricing

•Expectation•Polymer pricing will continue at current levels through end of 2012, but expected minor economic recoveries in NA and China during 2013 would lead to incremental increases•Additives may see increases as raw materials and availability become tight•Pricing pressure expected from increasing environmental requirements globally

63

Aromatic Solvent Cost Development Background

•Europe•Toluene price generally trends with crude oil price.•Reduction of available volume due to reducing capacities has added pressure to the higher price levels.•Recent issues with unplanned shutdowns / technical problems led to a short term supply issue which has driven prices even higher.

•North America•One major refinery is planning a total shutdown, leaving no toluene refineries in the Northeast.•Aromatics market is strong, which is pushing toluene prices upward.

64

Interleaving and Cure Paper Cost Development Background

•Product Driven•Reduced number of paper manufacturing mills available globally•Increased manufacturing cost of paper, including environmental costs of waste management•Additives and chemicals related to the coatings required are continuing to increase•Reduced demand in high specification coated paper has reduced the number of coaters capable of providing wide width paper

•Financial Driven•The continued weakening of the Euro during 2012 has impacted cost for Europe

•Expectation•The reduction in base pulp pricing combined with increases in materials and manufacturing cost should balance the end user pricing

65

Nickel Sleeve Key Drivers

Polymer•Butadiene increases•Acrylonitrile

stability

Polyester Yarn•Stability of North American polyester cord

Stainless Steel•Market stable at lower levels

Nickel•Stability in nickel prices

66

Nickel Cost Development Background

•Product Driven•Raw nickel prices driven by demand in steel production•Global Inventories, demand and replenishment•Conversion costs, especially electricity

•Financial Driven•The weaker Euro versus the US Dollar has impacted costs

•Expectation•Global recovery will influence the demand for nickel

67

Polymer Cost Development Background

•Product Driven•Global market volatility especially from the Far East which drives the price market•Acrylonitrile

cost that has shown reasonable stability•The global NBR polymer demand has been greater than capacity for

several years•Continued margin retention by the producers

•Financial Driven•The continued weakened Euro has impacted cost

•Expectation•End of 2012 polymer pricing is expected to be similar to December 2011 prices, with an increase in 2013 during Q1 and Q2 which will be negated during Q3 and Q4.•New capacity is not expected in NBR during 2013 with global demand influencing and putting pressure on availability

68

Polyester Yarn Cost Development Background

•Product Driven•Polyester•Conversion and electricity•Smaller number of North American thread mills have limited pricing leverage

•Expectation•Declines in the polyester market are due to a decrease in global

demand compared to 2011•Expect some increases in the polyester market due to demand recovery in 2013•Pricing of polyester cord is expected to be stable

69

Stainless Steel Cost Development Background

•Product Driven•Steel•Nickel•Specialized conversion requirements and electricity•Low purchase volumes for the steel market•Chinese and Asian demand are largest and impact the global markets

•Expectation•NA Market declined Jan-June and has been stable since July•North American market expected to be stable for balance of 2012 and into 2013•Expect producers to balance production and match reduced demand to stabilize pricing

70

Liquid Packaging and Narrow Web Key Cost Drivers

►Solvent Based

Colour

►Solvent Based

Clear

►Solvent Based

White

►Water Based

Colour

►Water Based

Clear

►UV Coating

►Additional Key Cost

Drivers

71

Solvent

Pigment

Resin

Additives

Solvent Based Colour Key Cost Drivers

Additives•Silicones have not seen the feedstock decrease so far•Waxes follow crude oil

Pigment•No serious pigment shortages, potential for upward price pressure•Enforcement of environmental protection laws continues to disrupt supply of pigments and intermediates from India and China

Resin•Nitrocellulose •Reduction of planted cotton acreage will keep the NC market short

Solvent•Crude pricing fluctuations recently related to geo-political news, the economy, and oil and product inventories

72

Additives - Liquid Packaging & Narrow Web Cost Development Background

•Defoamers, Rheology

Modifiers, Dispersing & Wetting Agents•Silicone based additives have yet to see the decreases in the silicone feedstocks. Pricing is expected to come down in 2013.•All other additives have stabilized for the remainder of 2012. Another small increase is expected for 2013..

•Waxes•PE Waxes follow crude closely. After a dip, ethylene prices remain at high levels, consequently PE waxes will stabilise

at high levels going into 2013.•FT-Waxes are still short. The capacity increase has been absorbed by high demand in other markets. The additional capacity expansion has been delayed to 2014.•PTFE prices have been very stable in 2012. Due to export restrictions in China, this high level is expected to continue in 2013.

73

Additives - Liquid Packaging & Narrow Web Key Cost Drivers

s/b White

s/b Clear

s/b Colour

w/b

Colour

w/b

Clear

UV Coating

UV Sheetfed

74

Resin - Solvent Based Liquid Packaging Cost Development Background

s/b Whites/b Clears/b Colour

•Product Driven•Pulp suitable for nitration is 0.4% of the global pulp market.•The reduction of planted cotton acreage will keep the NC market short until 2014.•Unbalanced NC market despite the global economic crisis.

•Financial Driven•Currency volatility, political uncertainties, economic weakness and financial speculations, all have an immediate impact on NC pricing.

•Expectation•Pricing will be driven upward over the next two years due to the

expected shortage in cotton.

75

Solvent - Solvent Based Liquid Packaging Cost Development Background

s/b Whites/b Clears/b Colour

•Product Drivers -

Ethylene, Propylene and Energy•After a slight decline at the beginning of Q3, propylene and ethylene are now on the rise. IPA and ester pricing have been affected by supply / demand and feedstock costs.•Annual planned refinery shutdowns associated with required preventive maintenance keeps the market short. Three refineries are up for sale.•Global demand for solvents remains high. Raw material cost have

increased exponentially•The industry continues to operate its assets at high rates

•Financial Drivers -

Currency Volatility•Political uncertainties, economic weakness and financial speculation have an immediate impact on solvent prices.

•Expectation•Solvent prices will remain high due to emerging countries, which

today are the major markets, driving higher margins for the solvent producers.

76

Solvent

Resin

Additives

Solvent Based Clear Key Cost Drivers




77

Solvent

TiO2

Resin

Additives

Solvent Based White Key Cost Drivers


TIO2•Higher prices are expected in 2013.



78

TIO2 - Liquid Packaging Cost Development Background

•Product Driven•No new world scale investments in ilmenite

and ore mines.•Limited availability of slag and ilmenite

has been the major reason for the price explosion over the last

years. Reduced demand caused be economic downturns and substitutions brought this price erosion to a standstill.•In addition to limited mining possibilities, TiO2 production capacity reduced by 7%. Rising feedstock costs and RM price margin pressure resulted in price increases of 20-30% over two months.

•Financial Driven •Currency volatility.•Political uncertainty, economic weakness, and financial speculation have had an immediate impact on TiO2 prices.

•Expectations•It is expected that TiO2 prices will decline until first quarter

2013, but due to the improved housing market in the U.S., prices are expected to rise in the spring.

79

Water

Pigment

Polymer (Emulsion)

Hard (Dry) Resin

Additives

Water Based Colour Key Cost Drivers


Polymer (Emulsion)•Polyurethane and acrylic •Polyols, ethylene, propylene, acetone, isocyanate

and MDI are all key base feedstocks

Water

Hard (Dry) Resin•Hard acrylic resin water based•Styrene feed stocks very volatile causing increases

Pigment•No serious pigment shortages, potential for upward price pressure•Enforcement of environmental protection laws continues to disrupt supply of pigments and intermediates from India and China

80

Polymer (Emulsion) - Water Based Liquid Packaging Cost Development Background

•Product Driven•Isocyanate

production has stabilized slightly. Isocyanates

are driven by the benzene and petroleum markets.•TDI supply remains tight due to plant turnarounds, strong exports and high demand.•IPDI market has loosened up since the Evonik

plant in Mobile, Alabama is up and running.•Financial Driven

•Polyols, ethylene, acetone will continue to be volatile in pricing and critical in supply due to unscheduled shutdowns and planned plant maintenance supporting higher prices. •Propylene continues to be short due to most ethylene crackers running light feed stocks as well as suppliers controlling global propylene production. Propylene demand is expected to remain strong keeping prices evaluated.

•Expectation•Escalated prices continue to be supported by supply/demand.•Supplies of IPD are short and are expected to remain short through 2013 due to Chinese demand, particularly for windmill blades. In addition, higher acetone prices are contributing to the support of IPD prices.

81

Hard (Dry) Resin - Water Based Liquid Packaging Cost Development Background

w/b

Clearw/b

Colour

•Product Driven•Styrene is produced from ethyl-benzene, formed by alkylation of benzene with ethylene.•Methyl methacrylate, styrene, ethyl-benzene, benzene and ethylene are solid acrylic resin feed stocks.

•Financial Driven•All feed stocks for styrene have been very volatile and drove prices upward through 2012.•GAA remains tight due to an explosion at a major Japanese producer resulting in market shortages and higher prices. Methyl methacrylate

is also tight due to growth in emerging markets which are yielding higher margins for producers.•Volumes are moving rapidly to markets that will pay higher prices than graphic arts.

•Expectation•Feed stock for styrene will remain tight and prices volatile through 2013.•Japanese plant explosion will keep acrylic acid tight for 2013.

82

Water

Resin (Dry)

Resin - Emulsion

Additives

Water Based Clear Key Cost Drivers


Water

Resin (Emulsion)•Acrylic emulsion•MMA, GAA remains in tight global supply

Hard (Dry) Resin•Hard acrylic resin water based•Styrene feed stocks very volatile causing increases

83

Resin Emulsion - Water Based Liquid Packaging Cost Development Background

•Product Driven•Methyl methacrylate

(MMA,) styrene, and glacial acetic acid (GAA) are the key feed stocks in the production of acrylic emulsions.•More than 80% of MMA worldwide is produced by the esterification

of methacrylamide

obtained from acetone cyanohydrine.

•Financial Driven•MMA is tight in spite of the partial restart of Lucite Beaumont early this year. MMA is not being produced to full capacity, resulting in price increases.•GAA remains tight due to an explosion at a major Japanese producer resulting in market shortages and higher prices. Methyl methacrylate

is also tight due to growth in emerging markets which are yielding higher margins for producers.•Feed stock for styrene is very volatile and driving prices upward.

•Expectation•Japanese plant explosion will keep acrylic acid tight for 2013.

Feed stock for styrene will remain tight and prices volatile through 2013.•MMA will return to full capacity yielding some pricing relief on

MMA globally.

84

Sheetfed UV Key Cost DriversDry Pigment•No serious pigment shortages, potential for upward price pressure•Enforcement of environmental protection laws continues to disrupt supply of pigments and intermediates from India and China

Monomer•High propylene prices pushes prices upwards


High Functional Material•Sheetfed

UV material•Increased epoxy and isocyanate

prices, push the prices upwards

Photoinitiator•Photoinitiator-

stable supply situation• The weakening Euro increases prices for Europe

Oligomer•Propylene, BisA, liquid epoxy price continues upward

85

Monomer – Sheetfed UV Cost Development Background

UV CoatingSheetfed

UV

•Product Driven•Main drivers are acrylic acid and propylene.•Current monomer supply situation is stable.•Uncertain situation for acrylic acid due to Japanese production explosion.

•Financial Driven•Contract price of acrylic acid will increase at a greater pace than spot prices as supply availability will be key.•Propylene price continue upwards during Q4 2012.

•Expectation•Contract prices of acrylic acid will continue to increase and spot prices will soar. •Propylene demand expected to remain strong and will keep price elevated.

86

High Functional Material – Sheetfed UV Cost Development Background

•Product Driven•Acrylic acid is the base for all products. Propylene, BisA, liquid epoxy are all used to produce oligomers.

•Financial Driven•Propylene price increases drive the base material up.•BisA

and liquid epoxy prices continues upward and prices for epoxy acrylate

are increasing.•Isocyanates

are short in the market, driving the urethane acrylates

upwards.•Unstable global soy market push prices on acrylates

based on soy.•Expectation

•The Japanese plant explosion will plague supply and drive acrylic acid prices upward.

87

Photoinitiator – Sheetfed UV Cost Development Background

UV CoatingSheetfed

UV

•Product Driven•Base materials for photoinitiators

are also used in the more profitable detergent and medical products market. •Production of PI is mainly in China.

•Financial Driven•Prices will depend on China's continued internal growth. Over the last months, the Chinese Yuan has strengthened against all other major currencies.•Stable supply situation for the next half year.•Specialty photoinitiators

such as polymeric types are higher in cost and are facing additional costs due to new regulatory requirements.

•Expectation•Required Polymeric types will continue driving finished good costs higher.•China is expected to experience continued internal growth, driving pricing upward, mainly in the second half of 2013.

88

Oligomer – Sheetfed UV Cost Development Background

UV CoatingSheetfed

UV

•Product Driven•Acrylic acid is the base for all products.•Propylene, BisA, liquid epoxy are all used to produce oligomers.

•Financial Driven•Propylene price increases drive the base material up.•BisA

and liquid epoxy prices continues upward and prices for epoxy acrylate

are increasing.•Expectation

•Acrylic acid will remain tight for all of 2013.•Unsure situation for acrylic acid due to Japanese production explosion.•Contract prices of acrylic acid will continue to increase and spot prices will soar.

89

UV Coating Key Cost Drivers

Monomer•High propylene prices pushes prices upwards

Photoinitiator•Photoinitiator-

stable supply situation• The weakening Euro increases prices for Europe


Oligomer•Propylene, BisA, liquid epoxy price continues upward

90

Flush/Pigment Material Key Cost Drivers

Heatset

NA

Heatset

EU

Coldset

NA

Coldset

EU

PubG

NA

Pub G EU

Sheetfed

EU

Click

to view Flush / Pigment

cost drivers

s/b

Colour

w/b

Colour

Sheetfed

UV

91

Dry Pigment Cost Development Background

Yellow DriversBlue DriversRed Drivers

•Pigment Intermediates•Asian governments enforce stricter compliance with environmental

laws. As a consequence pigment intermediate producers need to invest in additional waste water treatment (WWT) capacity, increasing overhead costs.•Overall capacities are reduced throughout China/India due to WWT

limits and enforcement of environmental laws.•Pigment intermediates for reds receive increased price pressure due to beta naphthol

shortage and continued environmental challenges.•Pigment intermediates for yellow remain high due to reduced global capacity, shortage of some feedstocks

and high cost of benzene and toluene.•Pigment intermediates for blue/green fluctuate at high levels due to copper and phthalic

anhydride market volatility.•Unfavourable

currency movements and increased freight rates largely influence final cost.

92

Red Pigment Key Drivers (PR53 & PR57)

Strike Chemicals•Caustic soda, hydrochloric acid, sodium nitrite, calcium chloride•Aside from regional supply issues, most markets are slightly declining or stable

4B Acid/ 2B Acid, C Amine Acid•Toluene price generally trends with crude oil price.

BONA, Beta Naphthol•Bona pricing sees continuous upward trend due to beta naphthol

Gum Rosin•Having experienced major volatility during 2010/2011, the market


93

4B Acid/ 2B Acid/ Amine Acid Cost Development Background

•China•4B Acid PT is in surplus in Chinese market due to the demand of its isomer OT. OT is being used in a new application as a gasoline additive. Local 4B acid price remains stable.•2B acid price has remained stable. No big price changes are expected in the near future as supply/demand is in balance.

•North America•4B Acid price remains stable despite rising toluene, unfavourable

changes in currency and freight rates. Currently supply is greater than demand.•2B acid price has remained stable due to declining demand. Future expectation is upward trend due to the rising cost of toluene and freight rates.•C Amine Acid has upward trend due to price pressure of toluene, exchange rate changes and freight. Supply has become unpredictable due to tight supply of both toluene and

chlorine in some regions. Due to the product's polluting nature, plant closures and relocation of factories have been experienced.

94

Strike Chemicals - Red Cost Development Background

•Caustic Soda•Overall the global demand for caustic has been flat. Some regions in US and Europe have experienced supply tightness, keeping prices elevated. Conversely, Asia's weakened downstream demand has resulted in lower prices.

•Hydrochloric Acid•Due to the global economy, China's PVC demand in the construction industry has been very weak thus creating a chlorine excess. The abundance of chlorine contributes to flat HCl

pricing.•US HCl

markets have experienced price increases in Q3/Q4 due to continued strong demand and a decline in the availability of by-product acid. The initial outlook for 2013 is positive.

•Sodium Nitrite•US sodium nitrite has experienced a slight uptick in pricing due

to rising ammonia costs.•China's sodium nitrite price remains stable.

•Calcium Chloride•Calcium chloride has remained stable.

95

BONA/ Beta Naphthol Cost Development Background

•

Bona price has been on an upward trend throughout 2012. Direct feedstock beta naphthol

remains unstable due to strict environmental regulations and tightness of feedstock -

naphthalene.•A recent explosion at the largest global beta naphthol

producer caused extreme tightness in the market 2H 2012.•Due to environmental regulations, other producers are being forced to reduce capacity or relocate.•Naphthalene is used to cure cement. As Chinese government stimulus programs are put in place for construction, it reduces the amount of naphthalene available

to other markets such as pigments.

96

Gum Rosin Cost Development Background

Pigment YellowPigment Red

•Having experienced major volatility during 2010/2011, the market

in 2012 has settled, but at a much higher level than the average in 2009.•Sluggish demand around the world, together with substitutions of

alternative raw materials has added downward pricing pressure but as a result, farmers are refusing to tap their trees•Volatility still exists with the fear that any sudden pick-up in activity will lead to upward price movements.•Outlook for 2013 is likely to trend up slightly

97

Blue Pigment Key Drivers

Cuprous Chloride Anhydrous•Copper stays 7500-8500 MT level

Urea•Urea prices have slowly declined

Phthalic Anhydride•Asia PA price follows feedstock orthoxylene

trend

Strike Chemicals•Acetic acid, caustic soda, hydrochloric acid, sulphuric

acid•Aside from regional supply issues, most markets are slightly declining or stable.

98

Cuprous Chloride Anhydrous Cost Development Background

•Copper•Stimulated by QE3, LME copper price jumped in Q3, while weak downstream demand cannot provide support for this pricing. Copper price may see downward trend in latter part of Q4.

99

Urea Cost Development Background

•Prices peaked in Q2 during planting season and have slowly declined due to demand.•Illegal use of agri-grade urea in India is still a major problem, which causes a higher degree of differentiation in market pricing and unannounced plant closures

by authorities.

100

Phthalic Anhydride Cost Development Background

•Asia PA price follows feedstock orthoxylene

trend. Prices declined in July but are back to early 2012 levels.•PA price will remain soft in Q4 due to weak demand from downstream DOP market.

101

Strike Chemicals - Blue Cost Development Background

•Acetic Acid•Due to excess capacity and sufficient methanol feedstock, China's acetic market has been less volatile in 2012 than in 2011. Acetic pricing in the US has been elevated as

a result of unplanned outages.•Caustic Soda

•Overall the global demand for caustic has been flat. Some regions in US and Europe have experienced supply tightness, keeping prices elevated. Asia's weakened downstream demand has resulted in lower prices.


pricing.•US HCl


•Sulphuric

Acid•Most regions have seen minimal decreases in the latter half of the year as a result of sulphur

price stability..

102

Yellow Pigment Key DriversArylides•Benzene price generally trends with crude oil price

Gum Rosin•Having experienced major volatility during 2010/2011, the market


DCB•Prices escalate due to supply and demand

Strike Chemicals•Acetic acid, caustic soda, hydrochloric acid, sodium nitrite•Aside from regional supply issues, most markets are slightly declining or stable

103

Arylides Cost Development Background

•China•China AAOT price on an upward trend influenced by OT. Aniline used as gasoline additive in China has been substituted by OT as a result of new environmental regulations, pushing OT price up.•Chinese AAMX price has shown a downward trend over the past 12 months after jumping over 50% in 2011 due to the Japanese earthquake.

•North America•NA AAA market price remains high due to continual high pricing of benzene and currency fluctuation. Strong upward price pressure will remain going into 2013.•NA AAOT price struggles to remain stable due to rising toluene and global demand. Price pressure will remain going into 2013.

104

DCB Cost Development Background

•China•DCB price continued upward trend, influenced by benzene, ONCB, and limited availability due to capacity loss.•Three ongoing capacity expansion projects in China are planned to be completed in 1H 2013, adding an extra +10K mt

of DCB capacity.•North America

•DCB supply concerns related to reduced global capacity. Two factories exit market while others are forced to reduce capacity due to environmental controls or shortage of hydrogen. •Global supply of ONCB is also reduced due to unplanned incidents

in China and Europe.•Pricing trending upward due to elevated benzene costs, isomer imbalance issues, increased freight, fluctuation of currency and uncertain market conditions. Ongoing

price pressure and limited availability are expected going into 2013.

105

Strike Chemicals - Yellow Cost Development Background

•Acetic Acid•Due to excess capacity and sufficient methanol feedstock, China's acetic market has been less volatile in 2012 than in 2011. Acetic pricing in the US has been elevated as

a result of unplanned outages.•Caustic Soda

•Overall the global demand for caustic has been flat. Some regions in US and Europe have experienced supply tightness, keeping prices elevated. Asia's weakened downstream demand has resulted in lower prices.


pricing.•US HCl


•Sodium Nitrite•US sodium nitrite has experienced a slight uptick in pricing due

to rising ammonia costs.•China's sodium nitrite price remains stable.

106

Flush Pigment Cost Development Background

Flush Drivers

•Pigment Intermediates•Asian governments enforce strict compliance with latest environmental laws. As a consequence pigment intermediate producers need to invest in additional waste water treatment capacity increasing overhead costs.•Overall capacities reduced throughout China/India due to WWT limits & enforcement of environmental laws.•Pigment intermediates for reds receive increased price pressure due to beta naphthol

shortage and continued environmental challenges.•Pigment intermediates for yellow remain high due to reduced global capacity, shortage of some feedstocks

and high cost of benzene and toluene.•Pigment intermediates for blue fluctuate at high levels due to copper and phthalic

anhydride market volatility.•Oils & Distillates

•Oils follow crude trends and distillate prices follow jet fuel /

kerosene price trends. Both expected to increase slightly in 2013.

•Resins•Phenolic

resin pricing expected to be flat in 2013. Hydrocarbon resin pricing expected to rise in 2013.

107

Flush Colour Key Drivers

Heatset Flush - Resin•Main driver is Tall Oil Rosin which loosely follows Gum Rosin

Distillate•Distillate prices driven by crude and jet fuel / kerosene prices

Coldset Flush - Resin•DCPD & C9 feedstock pricing driven by gasoline and lighter ethylene cracking slates

Mineral Oil/Vegetable Oil•Base oils driven by crude prices and base oil inventories•Vegetable oil volatility continues

Coloured Presscake•No serious pigment shortages, potential for upward price pressure•Enforcement of environmental protection laws continues to disrupt supply of pigments and intermediates from India and China

108

Additional Key Cost Drivers

►Packaging ►Logistics ►Energy

Liquid PackagingPrint Media

109

Packaging Key Cost Drivers

► Intermediate

Bulk Container (IBC)

►Drums, Pails

etc.

110

IBC Key Cost Drivers

Steel•Cage for IBC / metal drums•Slow down in the steel industry

HDPE•Inner bottle / plastic drums / plastic pails•Demand from the market is moderate

111

Drums, Pails etc. Packaging Key Cost Drivers

►Plastic Drum ► Jerry Can ►Pail►Steel Drum

112

Steel Cost Development Background

IBCs Drums, Pails etc.

•Europe•Steel demand is decreasing slightly due to the slow down in the automotive industry. Large price decreases are not expected but small adjustments are possible.

•North America•Steel prices are expected to decrease by the end of 2012, and stay low into 2013 (with the possibility of a small spike as usual at the new year, due to producers holding end of year inventories low). This is being caused by the global economic slowdown (China, in particular) which is resulting in a surplus of Chinese steel.

113

HDPE Cost Development Background

IBCs Drums, Pails etc.

•Europe•HDPE price is unpredictable due to volatility in the oil and gas

market, however, as current demand is moderate, short term prices will likely remain stable.

•North America•HDPE prices are expected to hold steady for the remainder of 2012 and into 1Q 2013 due to decreased demand and recent ethane price stability. Outlook for 2013 is continued volatility in HDPE prices. It will be dependent on the outcome of the election and the resulting business climate, any lingering effects from super storm Sandy, as well as geo-political situation in places like Syria.

114

Logistics Key Cost Drivers

►Logistics NA ►Logistics Ocean ►Logistics EU

115

North American Logistics

Rates•Road rates continue to trend upward •Increased operating costs and tight capacity

Market Capacity•Transport market capacity remains tight but stable

Diesel Fuel•U.S. Diesel projected to fall slightly and stabilize through Q4

116

Rates NA Cost Development Background

•Carriers working to repair margins from economy and increased fuel costs.•Current inflation period in the U.S. transport industry•Q3 rate changes by mode

•LTL rates continue to rise, trending up 1-2% each month •Truckload, Bulk rates are relatively flat through the quarter

•Intermodal rates stable with increases at less than 1%

117

Market Capacity NA Cost Development Background

•Capacity projected to slowly tighten through Q4 and be worse in 2013 •Driver shortage expected because of tougher regulations•Carriers holding back on capacity additions•Projected demand increase with economic improvement

•US Shippers Condition Index is at -6.8, scores below 0 are unfavourable

to shippers.

118

Diesel Fuel NA Cost Development Background

•U.S. Diesel projected to average $3.96/gallon through Q4.•2012 Diesel fuel prices rose from a January low of $3.83 per gallon to an October high of $4.15.•Tight market conditions and increasing crude oil prices drove on-highway diesel up in Q3.

119

European Logistics

Rates•Decrease in (new) capacity will probably push prices upwards

Market Capacity•More capacity available in market due to economic slow down

Diesel Fuel•2012 diesel prices stable & high

120

Rates EU Cost Development Background

•Economic slow down and decreasing capacity should result in balanced transport prices.•A misalignment in the timing of these two elements (economic slow down, decreasing capacity) may result in more price volatility

121

Market Capacity EU Cost Development Background

•Recent reports on new truck sales show dramatic drops which will

have negative impact on market capacity

122

Diesel Fuel EU Cost Development Background

•Possible excise duty increases by EU governments could even further increase diesel prices•Crude oil price direction uncertain

123

Global Logistics – Ocean

US to Asia•Exports continue to be strong and rates in the TBWB market are expected to slightly rise

Asia to US•Transpacific carriers collectively committed to reverse 2011-2012 losses

US to Europe•Rates are trending downward

Asia to Europe•Demand in Europe continues to be soft but carriers intend to keep rates up.

Europe to US•Rates are trending downward in the next two quarters

US to Latin America•Rates into WCSA continue to remain strong. •Expect rates to hold steady for the next two quarters.

124

US to Asia TPWB Cost Development Background

•Increases primarily due to rising intermodal costs.•Ongoing USEC labour

issues will push up TPWB rates in late Q4 and early Q1 of 2013.•Equipment shortages continue to be an issue in certain Midwestern locations.

125

Asia to US TPEB Cost Development Background

•December 1 GRI announced by carriers• $480/20’, $600/40’, and $675/40HC

•TSA Carriers have proposed increases for all 2013 contracts.•$800 FEU increase Asia to the USWC •$1000 FEU increase from Asia to the USEC

•Contingent USEC port strike congestion surcharge begins December

30.• $1000/container for all U.S. ports for both imports and export,

includes USWC ports

126

US to Europe TAEB Cost Development Background

•Consolidation of vessel services continues in order to match capacity with softening demand. •Contingent USEC port strike congestion surcharge begins December

30.•$1000/container for all U.S. ports for both imports and exports

127

Asia to Europe WB Cost Development Background

•Q4 spot rates historically trend down but carriers are responding by tightening capacity control resulting in a quick rate restoration.•Carriers will continue to slow steam vessels and consolidate services to reduce capacity•The major carriers have already announced price increases for 2013 due to capacity control and financial need.

128

Europe to US TAWB Cost Development Background

•Consolidation of vessel services continues in order to match capacity with softening demand. •Contingent USEC port strike congestion surcharge begins December

30.•$1000/container for all U.S. ports for both imports and exports

129

US to Latin America Cost Development Background

•Rates into ECSA continue to trend downward. •Additional carrier capacity coming into this market will continue to hold down rates.

•No GRIs

are expected to hold in the next two quarters.•Equipment shortages continue to be an issue in certain Midwestern locations.

130

Energy Key Cost Drivers

Crude•Relative stability in Q4 2012 expected to continue into 2013

Natural Gas•U.S. -

cost expected to increase•Europe -

downward price trend

Electricity•U.S. power generation changing from coal to natural gas

131

Crude Cost Development Background

•Europe•Oil demand in continental Europe remains weak due to the poor economic environment with many nations experiencing mild recessionary conditions•Austerity measures are further harming growth prospects in some regions, while high oil prices (particularly with a relatively weak Euro) are undoubtedly helping to weigh on

demand and dent economic prospects.•Brent and WTI prices remained elevated on the high side during the third quarter due to a combination of factors. A resurgence of geopolitical concerns, poor non-Opec

supply growth, a large sanctions driven decline in Iranian output and the announcement of further monetary stimulus out of the US Federal Reserve.

•North America•Demand, supply, inventory levels, exchange rates, speculation and geopolitical issues all play a role in cost.•After dropping in mid-summer, crude oil prices have stabilized at roughly the same levels as Q4 2011.•The gap between WTI and Brent continues to be around $20 per barrel and predictions that this would narrow significantly have not materialized. In 2013, the glut of inventory at Cushing, OK, is expected to decrease, causing WTI pricing to increase closer to that of Brent crude.

132

Natural Gas Cost Development Background

•Europe•There is a downward bias to prices this winter due to an expected increase in Norwegian output and a persistently weak demand outlook.•While weather driven demand should increase in the final quarter

of this year, the ongoing economic malaise and comparatively cheaper coal prices should further offset demand and associated costs. •Oil prices are likely to ease which should weigh on deferred natural gas contracts as well. •Although commodity prices are likely to fall further, increases in tax and other bundled and associated costs may offset any reductions seen in the markets.

•North America•Total cost expected to increase by up to 9%•NYMEX costs expected to climb beginning Q1•Volumes expected to increase year over year (2012 was a warmer than usual winter)

133

Electricity Cost Development Background

•Europe•With the continuation of weak economic fundamentals in the Eurozone

and a depressed carbon market, power prices are expected to find little support in the fourth quarter.•Should a more favourable

resolution to the debt crisis be found, a return to optimism in

growth prospects for the Eurozone

and an increase in demand may return.•If there is further deterioration in the European debt crisis, this will detrimentally impact carbon prices and push European power prices to the lower end of price expectations.•Although commodity prices are likely to fall further, increases in tax and other bundled and associated costs may offset any reductions seen in the markets.

•North America•Overall electricity increase 2.6%•Clean Energy is main driver in price increase•Change over from coal to natural gas fired power generation

market report final 11-13-12

Documents

beef fancy tallow

plant shut downs

sufficient methanol feedstock

produce quaternary amine

vessel services continues

planted cotton acreage

tall oil rosin

strike chemicalsacetic acid