IMC Paper Market Update 6/26/08

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Midland NationalFresh ideas on paper

• IMC Paper Market Update 6/26/08
• Tom Pankow, GM Procurement Strategy

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Who is Midland Paper?

• One of largest independent fine paper merchants
  in the U.S.
• Privately held, under current ownership since
  1983. We have been in business for over 100
  years
• Midland is now over 750MM in sales annually
• I joined Midland in 2006 as GM Procurement
  Strategy
• Prior to joining Midland, I spent 11 years with
  Meredith Corp. where I was responsible for
  directing all aspects of the paper procurement
  operation (gt155M tons gt145MM annually) and
  consulting on print procurement
• Prior to joining Meredith, I spent 9 years with
  Quebecor World 4 years in paper purchasing and
  5 years in manufacturing management

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Paper Market Snapshot

• The fifth price increase in the past 13 months
  has been announced for July 1st shipments
• The increases impact all grades of paper, and
  range from 2.50 to 3/cwt
• There are holes in mill schedules, however,
  this is typical for Q2. The market is forecast
  to firm for most grades, especially groundwood
  grades as we enter Q3
• Many producers are offering to pre-make Q3/Q4
  tons now to ensure delivery because their
  customer forecasts suggest that demand will far
  exceed production capacity in Q3
• Demand forecasts for LWC and high end SC papers
  are especially strong and many producers of these
  products are bullish on Q3 Q4. The recent news
  that Katahdin Paper will shut its 180M TPY SC
  machine at the end of July was quickly followed
  by price increase announcements for shipments
  on/after July 1
• The Katahdin shut represents a North American
  capacity reduction of SCA equal to 12
• NewPage announced that they will take 25M tons of
  machine down time in June/July across their
  coated platform and that they will cease
  production at their Niagara mill by June 22. The
  net effect of these actions is a reduction of
  North American coated capacity of approximately
  60M tons in 2008.
• US dollar remains weak compared to currencies of
  key trading partners (Euro Canada)
• The weak dollar makes exports of paper from
  Canada and especially Europe unattractive and has
  lead to an increase in exports from the US,
  further tightening the market.
• Pulp, energy and other material input costs
  continue to hit new records, placing pressure on
  paper mills to continue raising prices to cover
  these cost increases in an effort to survive.
• Evidence suggests that real demand for paper has
  fallen significantly due to the paper and postal
  cost increases, the weak economy and slack
  consumer confidence. Paper producers, printers
  and end users of all types are struggling to
  survive the current market situation as they
  endure challenges from all sides.

4
RISI Market Pricing for Key PW Grades
5
Exchange Rates are Currently Unfavorable for
Exports to the US Market
6
US Imports fall due to weak US
7
Printer Held Inventory Very High Compared to
Consumption
8
Catalog Circulation Hurt by Postal Rate
Increases. Circs down 2.2 Q1 YOY
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Magazine Ad Pages tumble 6.4 in Q1 YOY.

• Categories up 1Q 08
• Food Products 19.4
• Retail 1.8
• Media Advertising 1.1

• Categories down 1Q 08
• Automotive - 21.3
• Technology - 16.3
• Home Furnishing Supplies - 15.5
• Direct Response Companies - 14.1
• Toiletries Cosmetics - 8.9
• Apparel Accessories - 5.8
• Financial Insurance and Real Estate - 5.6
• Drugs Remedies - 4.3
• Public Transportation, Hotel Resorts - 0.3