BRAZIL AND CHILE WORLD PULP MANUFACTURERS AND EXPORTERS · FIBRIA, CMPC, ARAUCO AND SUZANO ARE THE SOUTH AMERICAN LEADING PULP MANUFACTURERS Fibria’s Três Lagoas II, inaugurated

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BRAZIL AND CHILE – WORLD PULP MANUFACTURERS AND EXPORTERSAN OVERVIEW OF THE SOUTH AMERICAN PULP AND PAPER INDUSTRY

Stockholm, Sweden

November 28th 2017

Overview

Brazil’s pulp and paper industry

Chile’s pulp and paper industry

How can Business Sweden help

BUSINESS SWEDEN 29 NOVEMBER, 2017 2

AGENDA

SOUTH AMERICAN EUCALYPTUS HAS A SHORT ROTATION PERIOD


BRAZIL AND CHILE FIGURE AMONG THE WORLD’S LARGEST PULP AND PAPER MANUFACTURERS

SOURCE: IBÁ, PÖYRY, FAO

Country # Pulp # Market Pulp # Paper

United States 1 54,0 3 9,0 2 78,0

Brazil 2 19,8 1 14,3 5 13,3

Canada 3 17,0 2 9,9 9 11,1

China* 4 16,8 n/a n/a 1 111,2

Japan 5 15,8 n/a n/a 3 30,2

Sweden 6 12,7 6 4,0 8 11,3

Finland 7 11,6 5 4,5 7 11,7

Russia 8 9,8 7 2,8 10 10,2

Chile 9 5,5 4 4,6 23 1,1

Germany 10 3,1 9 1,1 4 24,1

SWEDEN WOULD NEED AROUND 8 YEARS TO GROW THE EUCALYPTUS FOREST THAT BRAZIL CAN GROW IN 1 YEAR

0 10 20 30 40

Canada

Scandinavia

WesternEurope

USA

Oceania

Chile

China

Brazil

Eucalyptus

Pinus

FOREST PRODUCTIVITY WORLWIDEFAO’S PRODUCTION CAPACITY RANK 2015, (MT/Y) (m³/ha.year)

* CHINA’S DATA SOURCE IS PÖYRY.


SOURCE: PÖYRY 2016, VALOR, COMPANIES’ WEBSITES

PULP PRODUCTION CAPACITY BY COMPANY (MT/Y)

0 1 2 3 4 5 6 7 8

Klabin

Eldorado

Mercer International

Domtar

Weyerhaeuser

UPM

Georgia-Pacific

Stora Enso

Metsä Fibre

International Paper

Suzano

Arauco*

CMPC*

APRIL

APP

Fibria

Brazilian companies

Chilean companies

Other

FIBRIA, CMPC, ARAUCO AND SUZANO ARE THE SOUTH AMERICAN LEADING PULP MANUFACTURERS

Fibria’s Três Lagoas II, inaugurated

in 2017, made of Fibria the largest

pulp producer in the world

Eldorado II project, if put into

action, will raise Eldorado’s

capacity to 5 MT/Y

Klabin entered the pulp

segment in 2016 with the

Puma project in Ortigueira-PR

BRAZILIAN AND CHILEAN COMPANIES ARE AMONG THE WORLD’S LARGEST PULP PRODUCERS

Arauco plans to invest 2,5 MUSD in

the modernization and expansion of

its manufacturing plant

* ARAUCO AND CMPC HAVE OPERATIONS IN OTHER SOUTH AMERICAN COUNTRIES, SUCH AS BRAZIL.

Overview





AGENDA

Area: 8 515 767 km²

Population: 207,7 million

Constitution: Democratic republic

President: Michel Temer (PMDB – Democratic Movement)

Languages: Brazilian Portuguese

Currency: Brazilian Real

GDP* 2016: 1 796 billion USD

GDP* per capita 2016 (PPP): 14 810 USD

Inflation 2016: 6,3%

Main export: Iron ore, petroleum, biofuels, soy, aircrafts and vehicles

Main imports: Petroleum, electronic equipment and auto parts

Swedish Exports to Brazil 2016: 972 million USD

Swedish Imports from Brazil 2016: 514 million USD


BRAZIL IN A NUT SHELL

SOURCE: IBGE, MINISTRY OF FOREIGN TRADE *CURRENT PRICES

São Paulo

Rio de Janeiro

Belo Horizonte

Brasília

Curitiba

Porto Alegre

HOWEVER, CORRUPTION IN THE GOVERNMENT STILL CREATES UNCERTAINTY


BRAZIL’S RECESSION REACHED ROCK BOTTOM AND ECONOMY IS STARTING TO PICK UP AGAIN

Brazil enters economic

recession due to the public

deficit generated by the

government

President Dilma Roussef is

impeached with an

accusation of crime of

responsibility

Michel Temer, Roussef’s

Vice-President becomes

the new President of Brazil

Government held

suspicious credit

operations and irregular

public decrees

“Lava Jato” investigation

uncovered a large

corruption scheme

involving politicians and the

public Brazilian oil

company Petrobras

2015/20162014 2017 TEMER GOVERNMENT

Slow return of investments and control of

inflation

Positive growth of 2,2% forecasted for

2018, after 0% in 2017

Labor reform

Privatization of infrastructure operations

Unsuccessful reforms: political system

and social security (under discussion)

Political and economic uncertainty

Polarization of 2018 presidential elections

Accusations of corruption involving Temer

and his staff

BRAZIL IS A MAJOR PULP EXPORTER, BUT ALSO PRODUCES PAPER FOR THE LOCAL MARKET


BRAZILIAN PULP PRODUCTION GREW 57% IN 9 YEARS

SOURCE: ASSOCIATION OF THE BRAZILIAN FOREST INDUSTRY (IBÁ), BRAZILIAN MINISTRY OF FOREIGN RELATIONS

0

1 500

3 000

4 500

6 000

7 500

9 000

10 500

12 000

13 500

15 000

16 500

18 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Production of Pulp Production of Paper

Exports of Pulp Exports of Paper

AROUND 69% OF PULP PRODUCED IN BRAZIL IS EXPORTED, WHILE ONLY 20% OF THE PAPER IS DESTINED TO FOREIGN MARKETS

PRODUCTION AND EXPORTS OF PULP AND PAPER IN BRAZIL, THOUSAND TONS PULP PRODUCTION BY TYPE

86%

11%3%

Hardwood(eucalyptus)

Softwood(pinus)

High yield pulp

52%

25%

11%

7%

1%4%

Packaging and Wrapping

Printing and Writing

Tissue

Cardboard

Newsprint

Others

PAPER PRODUCTION BY TYPE

(CAGR = 5,1%)

(CAGR = 7,9%)

(CAGR = 1,5%)

(CAGR = 0,5%)

PINUS REPRESENTS 22%, WHILE THE REST IS COMPOSED BY NATIVE SPECIES


EUCALYPTUS REPRESENTS 72% OF PLANTED AREA

SOURCE: ABRACELPA, IBÁ

FORESTRY INDUSTRY IS LOCATED IN SOUTHERN STATES SUCH AS MATO GROSSO DO SUL, SÃO PAULO, PARANÁ AND SANTA CATARINA

Pará

Santa Catarina

Tocantins

Bahia

Rio Grande

do Sul

Paraná

Mato Grosso

do Sul São

Paulo

Espírito

Santo

Rio de

Janeiro

Minas

Gerais

Mato Grosso

Rondônia

Acre

Amazonas

RoraimaAmapá

Maranhão

Piauí

Sergipe

Ceará

Alagoas

Pernambuco

Goiás

Paraíba

Rio Grande

do Norte

Brasília

Pinus planted area

Eucalyptus planted area

Forestry industrial plants

LEGEND

Rank State Eucalyptus

1 Minas Gerais 24%

2 São Paulo 17%

3 Paraná 15%

4Mato Grosso

do Sul11%

Total (ha) 5 670 000

PLANTED FOREST AREA BY STATE

34%

29%

14%

10%

6%

4% 3%

Pulp and paper

Independent producers (timber)

Steel industry and charcoal

Financial investors

Wood panels and laminate floor

Solid wood products

Others

PLANTED FOREST DESTINATION BY SEGMENT

Rank State Pinus

1 Paraná 42%

2 Santa Catarina 32%

3Rio Grande do

Sul12%

4 São Paulo 8%

Total (ha) 1 580 000

3,2; 68%

0,8; 18%

0,3; 7%

0,2; 5% 0,1; 2%Planting

Land aquisition

Replacement ofmachinery

Roadways

R&D

5,8; 75%

1,1; 14%

0,3; 4%0,5; 7%

Expansion ofproduction capacity

Replacement ofmachinery

R&D

Others


SOURCE: IBÁ

THE INVESTMENTS IN NEW PLANTS AND PRODUCTION LINES ARE FINANCING THE EXPANSION OF THE INDUSTRY’S CAPACITY

2016 INVESTMENTS BY SEGMENT, BBRL)

FOREST INDUSTRY INVESTMENTS GREW 18% IN 2016

FOREST INDUSTRY INVESTMENTS, BBRL

4,2

6,0 7,7

4,1

4,5

4,7

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

2014 2015 2016

Industry Forest production

EXPANSION OF PRODUCTION CAPACITY AND EQUIPMENT REPLACEMENT WILL CONTINUE IN 2018

%


THE LARGEST COMPANIES IN THE SECTOR ARE INVESTING IN NEW PRODUCTION LINES

SOURCE: ABTCP/PÖYRY, VALOR, COMPANIES’ WEBSITES, MEDIA OUTLETS

LARGEST BRAZILIAN PULP AND PAPER PLAYERS

FIBRIA, SUZANO AND KLABIN ARE THE LARGEST PULP AND PAPER COMPANIES IN BRAZIL, CONTROLLING AROUND 65% OF THE MARKET

UPCOMING INVESTMENTS

360 MBRL – Remaining investments in the new

eucalyptus pulp production line (Três Lagoas unit), part

of Horizonte 2 project.

* ESTIMATED VALUES (SOURCE: VALOR)

Net Revenue 2016: 9 615 MBRL (3 052 MUSD)

Planted forest: 571 thousand hectares

Focus: Eucalyptus pulp

Capacity pulp: 7,25 million tons per year



Focus: Eucalyptus pulp


Capacity paper: 1,3 million tons per year



Focus: Paper and cardboard


Capacity paper: 2,0 million tons per year

312 MBRL – “Structural Competitiveness” project:

New tissue production line (Imperatriz unit)

New lignin production line (Limeira unit)

Effluent treatment station investments (Imperatriz

unit)

2,1 BBRL – Expansion of production capacity*:

800 MBRL – New cardboard equipment

400 MBRL – New kraftliner paper equipment

900 MBRL – Expansion of the “fluff pulp” production

capacity

MAIN CHALLENGES FOR THE PULP AND PAPER INDUSTRY


YET, THE BRAZILIAN PULP AND PAPER INDUSTRY FACES CHALLENGES OF COST-EFFICIENCY AND REGULATION

SOURCE: IBÁ, DESK RESEARCH AND INTERVIEWS * LAND ACQUISITION IS RESTRICTED ACCORDING TO LAW 6.634/79

EXPENSIVE ENERGY, POOR INFRASTRUCTURE AND CONFUSING REGULATION ARE PROBLEMS SHARED BY MOST INDUSTRIES IN BRAZIL

Resources

Infrastructure

Key take-

away 3Regulation

Both foreign companies and local companies with a majority share of foreign capital are restricted in

regards to land acquisition in Brazil*, which pends on governmental authorization.

A new law project that may be voted in 2017 could allow foreign companies to acquire up to 100

thousand hectares of land in Brazil besides renting other 100 thousand hectares.

Increase of energy cost and lack of water. Companies want to invest in efficient technology and reuse.

60% of the energy used by industrial plants is produced by the sector. Main source is black liquor.

Brazil presents historic low investments on infrastructure when compared to average global spending.

The lack of investments in energy and transport infrastructure increase the local production cost.

Overview





AGENDA

Area: 743 812 km2

Population: 17.7 million

Constitution: Democratic republic

Head of State: President Michelle Bachelet

Languages: Spanish (official), English limited use in business

Currency: Chilean Peso

GDP* 2016: 235 billion USD

GDP* per capita 2016 (PPP): 23 969 USD

Inflation 2016: 3.8%

Main export: Copper, fruits, fish products, paper & pulp, chemicals, wine

Main imports: Machinery & equipment, oil & gas, vehicles, telecommunication

Swedish Exports to Chile 2016: 292.8 MUSD (2 534 MSEK)

Swedish Imports from Chile 2016: 113.4 MUSD (981 MSEK)


CHILE IN A NUT SHELL

SOURCE: CENTRAL BANK OF CHILE, IMF, STATISTICS SWEDEN

Northern Region

Mining

Fishing

Central Valley

Finance

Telecom

Construction

Manufacture

Agriculture

Forestry

Pulp & Paper

South

Tourism

Fishing

Forestry

Non-metallic mining

Minerals

Agriculture

Wine

Santiago

*CURRENT PRICES

SEBASTIÁN PIÑERA – “Chile vamos”

Piñera was the President of Chile from 2010 to

2014, between President Bachelet’s two terms.

The investment firm owned by Piñera and his

wife holds shares in AntarChile which in turn is

the main investor in Arauco.

ALEJANDRO GUILLIER – “Fuerza de la mayoría”

Economic Plan:

Large public investment projects in order to

stimulate economic growth

21 billion USD in investments on infrastructure,

including roads


THE PRESIDENTIAL ELECTIONS ARE CURRENTLY A KEY ISSUE FOR FUTURE BUSINESS IN CHILE

SOURCE: KREAB, ANTARCHILE

Center Left-wing partyRight-wing party

Guillier’s propositions are considered as a

continuation of the President Bachelet’s

government.

Guillier plans to reform the health and education

systems, besides the private pension system.

Economic Plan:

Modernize industrial regulations

Implement a Production Stimulation Agenda

Focus on investments in SMEs

CANDIDATES FOR CHILE’S PRESIDENCY 2018-2022

AROUND 90% OF ALL CHILEAN PULP PRODUCTION WAS EXPORTED


CHILE PRODUCED 5 MILLION TONS OF PULP IN 2016

SOURCE: FAO, CHILEAN FORESTRY INSTITUTE

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

5 500

2011 2012 2013 2014 2015 2016*

Production of Pulp Production of Paper

Exports of Pulp Exports of Paper

PULP IS PRODUCED FOR EXPORT WORLDWIDE, WHILE PAPER SUPPLIES THE REGIONAL MARKETS

PRODUCTION AND EXPORTS OF PULP AND PAPER IN CHILE, THOUSAND TONS PULP PRODUCTION BY TYPE

47%

53%

Hardwood(eucalyptus)

Softwood(pinus)

65%

26%

5%3%1%

Cardboard

Packaging and Wrapping

Tissue

Newsprint

Printing & Writing andOthers

PAPER PRODUCTION BY TYPE

* THERE IS NO DATA AVAILABLE FOR 2016.

(CAGR = 1,0%)

(CAGR = 2,9%)

(CAGR = -2,2%)

(CAGR = -6,8%)


THE FORESTRY INDUSTRY CONCENTRATED IN CENTRAL CHILE, MAINLY IN THE REGION OF BIBÍO

SOURCE: CONAF, CHILEAN FORESTRY INSTITUTE

THERE IS A STRONG FORESTRY CLUSTER AROUND THE MUNICIPALITIES OF CONCEPCIÓN, LOS ANGELES AND VALDIVIA

Pine planted area

Eucalyptus planted area

Forestry industrial area

LEGEND

36%

37%

11%

15%

1%

Pulp

Sawnwood

Panels and Veneers

Wood Chips

Logs, Posts and Poles

Valparaíso

Araucanía

Maule

Biobío

Arica y Parinacota

Tarapacá

Antofagasta

Atacama

Coquimbo

Santiago

O’Higgins

Los Ríos

Los Lagos

Aysén

Magallanes

V

IX

VII

VIII

XV

I

II

III

IV

XIII

VI

XIV

X

XI

XII

PLANTED FOREST DESTINATION BY SEGMENT

Rank Region Eucalyptus

1 VIII - Biobío 54%

2 IX - Araucanía 26%

3 XIV – Los Ríos 8%

4 X – Los Lagos 4%

Total (ha) 42 788

PLANTED FOREST AREA BY REGION

Rank Region Pinus

1 VIII - Biobío 43%

2 VII - Maule 30%

3 IX - Araucanía 19%

4 XIV – Los Ríos 4%

Total (ha) 54 898Concepción

Valdivia

Los Ángeles

CLUSTERS


PLANNED INVESTMENTS FOCUS ON INNOVATION, ADDING VALUE AND OPENING NEW EXPORT MARKETS

SOURCE: CORFO, CHILE TRANSFORMA

676,80

120,50

50,50

40,50 11,00 8,00

Wood ConstructionPromotion

Sustainability

Drying and ProcessingPlants

Innovation and ValueAdding

Branding & Promotion

Training & Human Capital

OBJECTIVE IS TO INCREASE EXPORTS AND WOOD-INTENSIVE CONSTRUCTION BY 30% EACH BY 2025

Investments 2017-2025

43% private investment

16% investment from public

innovation agency Corfo

40% from other public

entities

= 963 million USD

PLANNED INVESTMENTS (MILLIONS USD)


CHILEAN MANUFACTURERS ARE AMONGST THE LEADERS OF THE WORLD’S PULP INDUSTRY

SOURCE: CHILEAN FORESTRY INSTITUTE, ORBIS

LARGEST CHILEAN PULP AND PAPER PLAYERS

PRIVATE INVESTMENTS LOOK MORE PROMISING DUE TO BETTER FORECASTS FOR PULP PRICES

UPCOMING INVESTMENTS

Net Revenue 2016: 5 040 MUSD

Planted forest: 502 thousand hectares (2010)

Focus: Bleached radiata pine, eucalyptus


Net Revenue 2016: 5 000 MUSD

Planted forest: 1 000 thousand hectares

Focus: Bleached radiata pine, eucalyptus


Net Revenue 2016: 37 MUSD

Focus: Thermo-mech pulp, radiata pine

Capacity paper: 125 000 tons per year

Plans to invest 2 500 MUSD in modernization and

expansion of the Arauco Plant.

Building a new wood panel manufacturing plant in

Michigan, US, with investments of 300 MUSD.

Arauco is acquiring two wood panel manufacturing

plants in Brazil, in a deal totaling 103 MUSD.

CMPC plans investments between 400 and 500 MUSD

in the tissue operations in Brazil and Argentina.

Investments will focus on plantations and the

completion of manufacturing units.

MAIN CHALLENGES FOR THE PULP AND PAPER INDUSTRY


STRONG FOCUS ON IMPROVING PRODUCTIVITY AND REDUCING COSTS

SOURCE: BUSINESS SWEDEN INTERVIEWS, CORMA

Key take-

away 2

Key take-

away 3

Key take-

away 1

LACK OF INNOVATION IS AFFECTING PRODUCTIVITY AND ABILITY TO COMPETE INTERNATIONALLY

Collaboration

Disasters

Innovation

Key take-

away 3Regulation

Restrictions on the maximum weight for trucks transporting forestry products increases overall logistics

costs making Chilean exports more expensive. The forestry industry are demanding that the maximum

weights be increased to improve competitiveness.

A lack of innovation in the industry is affecting the ability of Chilean forestry exports to compete on the

international markets. There is a need to create value added products to enter and compete in new

international markets and sector niches.

Over 500,000 hectares of forest plantations are owned by small land owners. There is a need to

collaborate in order to increase productivity and grow the sector further.

Natural disasters such as huge forest fires have greatly affected the size of production areas. In 2017

more than 453,000 hectares have been lost. In the worst week, forests equivalent to the size of

Luxembourg were lost to fires.

Overview





AGENDA

BUSINESS SWEDEN SUPPORTED PULPEYE IN CREATING A NEW SALES STRATEGY


CASE: SALES ACCELERATION FOR PULPEYE IN BRAZIL

Hard market entry

Door opening to key

decision-makers

New sales strategy

Generation of new

sales leads

PulpEye is an innovative

measurement technology

company, offering equipment,

online applications and services

for the pulp and paper industry.

PulpEye faced significant challenges in

reaching key clients in Brazil

Business Sweden supported with the

creation of a new sales pitch with a

business case and insights for Brazil

Business Sweden started by identifying

and contacting key decision-makers in

the largest pulp producers in the country

As a result, PulpEye got to hold many

sales meetings and present its solution

with a new customized strategy

THANK YOU

BUSINESS SWEDEN BRAZIL

Rua Joaquim Floriano, 466 – cj 1908 – Ed. Office

BR 04534-002 – São Paulo - Brazil

Phone: +55 11 2137 4400

[email protected]

BUSINESS SWEDEN CHILE

Rosario Norte 615, Oficina 1101 – Edificio Mistral

Las Condes, Santiago - Chile

Phone: +56 2 29 25 1900

[email protected]

Documents

BRAZIL AND CHILE WORLD PULP MANUFACTURERS AND EXPORTERS · FIBRIA, CMPC, ARAUCO AND SUZANO ARE THE SOUTH AMERICAN LEADING PULP MANUFACTURERS Fibria’s Três Lagoas II, inaugurated