Fortress objects Chinese dissolving pulp anti-dumping duty

Upon the completion of the investigation and MOFCOM's final determination, an application may be made by the Canadian Government to the World Trade Organization (WTO) to review MOFCOM's determination.

WTO cases typically have a duration of approximately two years, inclusive of appeal processes. Although Fortress Paper believes that it has strong arguments against the imposition of a dumping duty, there is no assurance that it will be successful in reversing MOFCOM's preliminary determination or in securing the Canadian Government's support in commencing a WTO review.

In part to mitigate the adverse effects of the dissolving pulp duty, the Company reconfirms that it has the ability to implement its "swing mill" strategy at its Fortress Specialty Cellulose Mill (the "FSC Mill"). The Company intends to enter into agreements to provide customers with regular volumes of northern bleached hardwood kraft ("NBHK") pulp, including specialty maple NBHK pulp. The FSC Mill's commitment to providing customers with regular volumes will allow the Company to secure better purchase orders for its NBHK pulp.

The FSC Mill will be able to lower its cost structure accordingly and achieve a capacity increase of approximately 25% when redirecting production from dissolving pulp to NBHK pulp and specialty non-paper grade pulps.

The FSC Mill is able to swing production between these pulp products because Fortress Paper has, in addition to its expertise in dissolving pulp production, extensive experience in both NBHK pulp and specialty non-paper grade pulp production. Leveraging this expertise, the Company anticipates being able to both provide regular volumes of dissolving pulp and swing production to NBHK pulp with minimal downtime.

The flexibility derived from the FSC Mill's swing mill strategy should allow the Company to mitigate the adverse impacts resulting from the imposition of the dumping tariff on Canadian dissolving pulp exports into China.

The Company anticipates that the adverse impact of any dumping tariff will be limited to the short-term as trade patterns realign to effectively nullify any duty, and expects that global dissolving pulp prices should normalize over the long-term.

The redesign of the FSC Mill allows the Company to focus production on the most profitable pulp markets in the interim. The Company is also in the process of expanding its dissolving pulp sales network outside of China in order to secure the best pricing for its dissolving pulp and further mitigate the impact of the duty imposed by MOFCOM.

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Fortress Paper