Paper Recovery and Challenges Around the World Bowater Inc. - PowerPoint PPT Presentation

Paper Recovery and Challenges Around the World Bowater Inc. Bowater Inc. Director of Recovered Paper Director of Recovered Paper Bob Tucker Bob Tucker Tappi – 8 th Forum on Recycling Niagara Falls, Ontario September 24, 2007

Presentation Overview • Introduction • Recovered Paper Major Issues • Fiber Cost • Global Trade • Transportation • Quality Deterioration • Adequate Supply

AbitibiBowater Mill Locations Mill Locations AbitibiBowater

AbitibiBowater Recycle Mill Locations Recycle Mill Locations AbitibiBowater Bowater Recycle Mill Locations Bowater Recycle Mill Locations Total N. American Total N. American Consumption Consumption 2.8 million tons 1.2 million tons B.Comeau Alma Ponderay Thunder Bay Belgo Gatineau Thorold Calhoun Bridgewater (UK) Mokpo (S. Korea) Snowflake Augusta Coosa A. River 250,000 TPY 350,000 TPY

Current Market Conditions • World RP demand is strong - “Sellers Market” • Growth in Asia utilizing RP will further stress the market • Current price levels do not allow for profitable operations • Quality of residential ONP is deteriorating, even so there isn’t enough of it. • Unlikely that these conditions will change in the near-term

Fiber Cost

Global Trade

EXPORT OF US RECOVERED PAPER (ONP, OCC & Mixed Paper ) 7000 6000 5000 Thousands of Short Tons 4000 3000 2000 1000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e ONP OCC Mixed Paper 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e ONP 1257 1305 1481 1726 1888 2132 1820 2018 2223 2214 2009 1947 2202 2808 3600 4038 4074 4561 OCC 2731 2749 2718 2353 3285 4002 2983 2590 2733 2344 2952 3021 3696 4492 4201 4719 5327 5417 Mixed Paper 1146 1005 895 958 1181 1877 1745 1733 1726 2362 3161 3784 3949 5091 4982 5686 6497 6554 Totals 5134 5059 5094 5037 6354 8011 6548 6341 6682 6920 8122 8752 9847 12391 12783 14443 15898 16532 Source: AFPA

RISI projects world RP demand will grow another 40 million mt’s by 2011

Transportation

Freight Optimization

Transportation Modes and Challenges – Rail � “Don’t seem to want our business” – Truck � “Driver regulations(hrs.) shortage, fuel, service challenges” – Ocean � “Volatile container rates/supply” – Transit Times � “Inventory strategy” – Weather: » Suspended Collection » Delayed Pickup/Delivery » Quality Implications – equipment/sorting

Quality Deterioration

ONP Content Evolving • Processing costs have been increasing each year as the % of ONP in a load of ONP has been decreasing % NEWSPRI NT I N ONP 95 85 75 65 1994 1996 1998 2000 2002 2004 Source: Abitibi-Thorold Mill, CPPA De-inking Committee Oct 5, 2006

What is Single Stream? � The combination of dual stream, Paper fibers and commingled containers collected as one. � 96 Gallon containers � Automated side loader collection vehicles � State of art [regional] processing facilities � Reduces collection costs (supplier and municipal), but increases mill costs � Reduces Workers Comp costs � Increases volumes - good & bad

Single stream Material • Single “Scream”

Geographic Distribution of MRFs Serving Single Stream Systems 70 64 60 50 38 2002 40 33 32 2006 30 No Glass -2006 20 15 15 12 10 10 8 10 0 0 Northeast South Midwest West Source: Governmental Advisory Associates, Inc. Westport, CT

Bowater Newsprint Coosa Pines, AL 4.50% Pulper Rejects 4.00% 3.94% 3.50% 3.33% 3.21% % of Total Consumption 2.93% 2.96% 2.90% 3.00% 2.92% 2.83% 2.78% 2.94% 2.78% 2.63% 2.65% 2.62% 2.72% 2.67% 2.50% 2.67% 2.57% 2.50% 2.63% 2.59% 2.58% 2.34% 2.45% 2.46% 2.38% 2.29% 2.28% 2.16% 2.00% 1.92% 1.85% 1.84% 1.50% 1.00% 0.50% 0.00% 5 5 5 6 6 6 7 7 5 5 5 6 6 6 7 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 - - - - - - - - - - - - - - - - n r y l p v n r y l p v n r y l u u u a a o a a o a a a e a e a J J J M M M J M S N J M S N J M

ONP Quality – Inspection Results Outthrows: Prohibitives:

Managing Quality Problems • Mill Recognition of Supplier Realities • Supplier Education of Mill Realities • Clear Mills Specifications • Consistent Quality Enforcement • Partnership Between Mill and Supplier

Adequate Supply

2006 Recovery Rate = 53.4% Total Recovered 53,488 Total Supply 100,198

NORTH AMERICAN NEWSPRINT Drivers of Decline in 2006 • North American Demand • Grammage: -1.6% (Millions of Metric Tons) • Advertising: -2.0% 14 2.7% -0.4% • Circulation: -2.7% 13 12 -10.8% -2.3% -1.1% -2.3% 11 -5.6% -6.0% 10 Typical Market Initiatives • -10.4% 9 • Conversion to specialties 8 and other products 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD* • Value enhancements with customers • Ship to other markets * YTD July 2007 • Sell, close, merge assets Source: Pulp & Paper Products Council

Adequate Supply What will positively impact collections?: Municipal education & recognition of RP value • Further integration into collection by consumers • Political/Environmental Pressures (U.S., China?) • Incentive based recycling (RecycleBank) • U.S. Population growth •

RecycleBank - WHAT WE DO

Thank You Bowater Inc. Bowater Inc. Director of Recovered Paper Director of Recovered Paper Bob Tucker Bob Tucker