SAPPI LIMITED

million metric tons
35
30
25
20
15
Source: EMGE
10
1998
Global Coated Woodfree Paper Market Balance
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Demand Capacity
6DEC201012473769
The global demand to capacity ratio for coated woodfree paper increased to approximately 95% in
fiscal 2006 and averaged 94% through fiscal 2008, but declined to approximately 82% in fiscal 2009 due
to the slowdown in the global economy. The demand to capacity ratio rose to approximately 90% in 2010
as global economic conditions improved in our major markets. No increases in industry capacity in
Europe and North America were discernible during this period, with companies reluctant to undertake
major new capital projects in these regions due to the poor returns being achieved. Despite global
overcapacity, high Asian demand growth rates and availability of funding led to significant coated
woodfree paper capacity additions between fiscal 2000 and fiscal 2010 in Asia, particularly in China.
North American apparent consumption declined by 10% during fiscal 2008. Demand declined by a
further 26% in fiscal 2009 compared to fiscal 2008 largely as a result of the global economic recession. In
fiscal 2010, as economic conditions improved, demand for our products improved by 12% compared to
fiscal 2009. Coated woodfree paper prices in North America decreased during fiscal 2010 compared to
fiscal 2009, with a decrease of approximately 7% in the grade that represents the largest end use of
coated woodfree paper, Number 3 60lb rolls.
In Europe, demand for coated woodfree paper grew by 1% in fiscal 2010 compared to fiscal 2009.
Industry shipments however, which include export volumes, grew 7% in the same period. Demand grew
2% in fiscal 2007 and was flat in fiscal 2008. Deteriorating economic conditions in 2009 led to a severe
reduction in demand for coated fine paper of approximately 17%. Due to global overcapacity and low
demand for coated woodfree paper, manufacturers announced closures of approximately 1.7 million
tonnes of coated woodfree paper capacity in 2008 and 2009. These closures positively affected the
supply / demand relationship in Europe and around the world.
The graph below reflects apparent consumption for the United States and Europe. Apparent
consumption is consumption as indicated by mill sales volumes, which ignores the impact of customer
inventory and the reclassification of imports. The sales volume to customers is used as the indicator of
demand, with the difference between apparent and real demand being the movement in inventories.
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