The goal of forecasting is not to predict the future but to tell you what you need to know to take

meaningful action in the present.

Paul Saffo Six Rules for Accurate Effective Forecasting Harvard Business Review, July-August 2007, 122-131

PINE FOREST (natural or planted)

Pine Tapping
CRUDE GUM (CG) (Pine oleoresin or Pine resin)

Timber
Chips

Kraft Process

Paper

Rosin Plant Black Liquor

GUM TURPENTINE (GT)

GUM ROSIN (GR) (CGR, IGR, BGR) SULFATE TURPENTINE (CST)

Pine Chemicals

Industry
TALL OIL ROSIN (TORA)

Industry

Industry

Industry

TURPENTINE DERIVATIVES

POLITERPENIC RESINS (PTR)

ROSIN RESINS (RR)

Alex CUNNINGHAM alexcunn@gmail.com 30 OCTOBER 2012

TACKIFIER RESINS
Tapping
Pine resin

Pine Forest
Pine Chemicals

Kraft Process

Petroleum
Petrochemistry

Black Liquor Industry

Industry
Sulfate Turpentine

Turpentine

Rosin

Tall Oil Rosin

Pygas (C5, C9, DCPD)

Industry

Industry

Industry

Polyterpenic Resins

Rosin Resins

Hydrocarbon Resins C5 or C9

Alex CUNNINGHAM alexcunn@gmail.com 30 OCTOBER 2012

 Volumes and Prices China the #1! 2012 into a New Normal Field open for new(old) players

 Volumes and Prices China the #1! 2012 into a New Normal Field open for new(old) players

TACKIFIER RESINS GLOBAL VOLUMES IN KTON (2011)

ROSIN RESINS GUM ROSIN [KTON] 690

TALL OIL ROSIN

WOOD ROSIN TOTAL
HYDROCARBONIC

390
10 1.090 [KTON] 452 241 252 105 1.050 [KTON] 30

TACKIFIER RESINS

[KTON]

ASIA NORTH AMERICA EUROPE REST OF THE WORLD TOTAL POLYTERPENIC USA

ROSIN RESINS
HYDROCARBON RESINS

1.090
1.050 80

POLYTERPENIC RESINS

TOTAL

2.220

EUROPE
Source: AR Eldorado (2011) & (2012) Baumassy (2012). REST OF THE WORLD TOTAL

20
30 80
Alex CUNNINGHAM alexcunn@gmail.com 30 OCTOBER 2012

GUM ROSIN GLOBAL PRODUCTION [TM/YEAR]

- 36 % ?!
1997 2007
826.000 78.000
56.000

2008
589.000 67.000
55.000

2009
553.000 67.000
55.000

2010
575.000 69.000
52.000

2011
710.000 70.000
52.000 15.000

2012
450.000 70.000
52.000 30.000 30.000 22.000 22.000 21.000 697.000 - 32,2 %

+5

+10

China Brazil
Indonesia Vietnam India Mexico Argentina Other TOTAL

535.000 40.000
69.000

33.000 22.000 21.000 46.000 766.000

35.000 16.000 9.000 17.000 1.037.000 + 35,3 %

35.000 16.000 9.000 17.000 788.000 - 24,6 %

35.000 16.000 9.000 13.000 748.000 - 5,1 %

33.000 22.000 11.000 15.000 777.000 + 3,4 %

31.000 22.000 13.000 17.000 930.000 + 19,7 %

Surces: Song Lifeng (2009) & (2012) Rosineb (2009) AR Eldorado (2011) & (2012) Baumassy (2012).

Alex CUNNINGHAM alexcunn@gmail.com 30 OCTOBER 2012

GUM ROSIN CHINESE PRODUCTION [TM/YEAR]

Current Production Record ! [1.000 TM/YEAR]
Province
Yunnan (YN) Guangxi (GX) Guangdong (GD) Hubei (HU) Jiangxi (JX) Fujian (FJ) Anhui (AH) Henan (HE) Guizhou (GZ) Hunan (HU) Sichuan (SC) Hainan (HA) Shanxi (SX) Chongqing (CQ) Zhejiang (ZJ)

2000 2001 2002 2003 2004 41 170 125 8 24 47 2 2 13 2 44 200 130 8 25 46 2 4 15 2 53 246 126 12 27 38 3 5 18 3 65 260 140 15 30 35 3 8 20 5 70 270 145 15 40 45 3 8 20 5

2005 75 280 155 15 72 52 3 8 20 5

2006 120 300 170 20 85 60 5 5 10 30 8 2 5 3 5 828

19,6%

2007 90 290 165 30 100 55 8 5 20 30 10 5 5 5 8 826

-0,2%

2008 110 200 95 40 37 37 8 10 12 15 7 5 5 3 5 589

-28,7%

2009 2010 2011 2012 130 160 80 50 40 32 12 12 10 10 5 5 3 3 1 553

-6,1%

195 230 83

230 140 76

450 67 264

TOTAL

4 439

4 480
9,5%

5 536
11,5%

7 588
9,7%

7 628
6,8%

7 692
10,2%

575
+3,9

710
+23,4

450
-36,6

Sources: AR Eldorado (2011) & (2012) Song Lifeng, Nanjing (Novembro 2009). Zhao Mingui (2011). ROSINNET (2010).

Volumes and Prices Historic price peak China the #1; Brazil and Indonesia #2; plus many many others

 Volumes and Prices China the #1! 2012 into a New Normal Field open for new(old) players

Wuhile Stadium Shenyang, LN, China Build in: 1998 Blown in: 2007 9 years!

Olimpic Stadium Shenyang, LN, China Build in: 2003 Blown in: 2012
9 years!

PREOS DO BREU vs. COMMODITTIES

GUM ROSIN CHINESE PRODUCTION MAP

LN

SA HB SC HU GZ YN GX GD JX AH ZJ

FJ

HN

EVOLUO SALARIAL - CHINA

2004 GUANGZHOU (Cidade) Salrio Mnimo (RMB/ms) Temporrio Construo (RMB/dia) 684 70 ~ 90

2006 780 90 ~ 120

2008 860 100 ~ 130

2010 1.100 120 ~ 170

2011 1.300 130 ~ 200

2012 1.470

GUANGDONG (Provincia) Temporrio Rural (RMB/dia) 6,3 RMB = 1 USD 3,2 RMB = 1 R$ 50 ~ 70 60 ~ 80 70 ~ 100 100 ~ 130 110 ~ 150

CHINA PINE TAPPER

1 WORKER 1500 TREES 2 KG PER TREE/YEAR PINE TREE RENT 6 RMB / TREE YEAR

(9.000)

ADMINISTRATION COST 500 RMB / MT PINE RESIN * 3 TON =

(1.500)

SALE OF PINE RESIN TO ROSIN PLANT 3 ton * 8.300 RMB / MT = 24.900 =========== NET 14.400 RMB

/ 25 DAYS * 6 MONTH

= 96 RMB/DAY

CHINA PINE TAPPER

1 WORKER 1500 TREES 2 KG PER TREE/YEAR PINE TREE RENT 6 RMB / TREE YEAR

(9.000)

ADMINISTRATION COST 500 RMB / MT PINE RESIN * 3 TON =

(1.500)

SALE OF PINE RESIN TO ROSIN PLANT 3 ton * 8.300 RMB / MT = 24.900 =========== NET 14.400 RMB

/ 25 DAYS * 6 MONTH

= 96 RMB/DAY

CURRENT PINE RESIN PRICE IN CHINA

CHINA SALARY EVOLUTION

2004 GUANGZHOU (City) Minimun Wage (RMB/month) Construction Temporary (RMB/day) 684 70 ~ 90

2006 780 90 ~ 120

2008 860 100 ~ 130

2010 1100 120 ~ 170

2011 1300 130 ~ 200

2012 1470

GUANGDONG (Province) Rural Temporary (RMB/day) 50 ~ 70 60 ~ 80 70 ~ 100 100 ~ 130 110 ~ 150

QUINQUENAL PLAN 2011/2016 + 15% PER YEAR! 2016 2570 RMB/month

China the #1 = The Perfect Storm Speculation Limited forest resources Hand labor scarcity

 Volumes and Prices China the #1! 2012 into a New Normal Field open for new(old) players

2012 into a New Normal Example: Brazil vs. China export market

 Volumes and Prices China the #1! 2012 into a New Normal Field open for new(old) players

Field open for new (old) players Demand for Pine Chemicals Sustainable supply Competitive price Modern tapping technique

Thank you!