Fourth Quarter 2010

Growth in exports at the start of the quarter was slow to pick up, pointing to the fact that the global economic recovery was still quite fragile. Consumer confidence was still weaker & that we were failing to sustain it at acceptable levels. Fears of Double dip recession were receding but worries in the Euro Zone debt crisis continued to heighten concerns on Toxic Debts and rising unemployment.

Following the October National Holiday in China we noticed some strengthening in demand from Far Eastern Mills, with an equally strong European Domestic demand. This continued to increase over the quarter, with end November – mid December being the strongest export period.

During the quarter the cost of freight remained reasonably stable, with slight upward adjustments seen in October & early November. This became necessary in view of the reduced High Cube container availability, as imports slowed once Christmas inventories were fulfilled.

Prices for OCC strengthened in October from levels of USD210 to USD215+, which moved up to USD220+ by mid-November.

Likewise, prices for Mixed Paper enjoyed similar increases with movement from USD180+ to USD185+ in October and by mid-November had reached USD190+.

Demand from India, and other Asian countries also continued to grow steadily with a gradual increase in prices.

The extreme wintery conditions experienced in December in both Europe and USA started to have an adverse effect on material availability. Collections were unable to meet demand and this forced prices upwards reaching new levels of USD230+ for OCC & USD200+ for Mixed Paper.

Floods in Queensland will also have affected short-term fibre supplies out of Australia for the Asian market.

In the short term, we will see price fluctuations as the imbalance between supply & demand (domestically as well as Global) remains strong. However, once the variation in weather influences settles down, we expect to see a more stable market by the end of the first quarter of 2011.

With reducing Stock levels at Mills in Asia, and with new expansions coming on stream during 2011, we will see a growth in exports both to meet the demand for the restoration of stock levels and to satisfy new capacities across the various Mills.

As we end the year & start the New Year 2011, one senses a general feeling of optimism with somewhat increased confidence that the pace of growth in the emerging economies – China, India, Brazil, & South Africa – should generate stronger confidence for Global Economic growth.