FOEX: NBSK up by $4.1, or by 0.6%

Jan 24, 2007. /Lesprom Network/. The U.S. consumer confidence index of Michigan University hit its highest level in 4 years. Lower oil prices contributed. High employment numbers help, too. Building activity appears to have reached the bottom. Home builders’ sentiment index came up in December. Points above support the view that the slow-down is short and not too deep. But, production at factories was down sharply. Current account deficit is very high. And, inflation ran at a high 0.5% monthly level in December. Also in Europe the inflation rate was high in December and the annual rate is at the upper limit of ECB. The likelihood of an interest rate hike in March increased further. In Germany, the ZEW-index climbed back up in January. With it, European stock values reached their 6-year high on Friday. EU 2007 economic growth forecast may soon be revised upwards. In Japan, the decision of the Central Bank not to raise interest rates on January 18, expected by the majority of analysts, created a lot of controversy. BoJ was seen to have bowed to the pressure from government and to have lost some of its independence. Still, the decision was very sound economically. Inflation shows only +0.1% growth. An interest rate hike could have brought Japan back into a deflationary phase. China has been the clearly fastest growing large economy in the world for the past 5 years. By selling increasing volumes of goods abroad, China is adding to over-supply of money which is also exported as the financial sector within China remains underdeveloped. Chinese currency remains undervalued prompting even further the over-investments in production. Breaking of this vicious circle would be needed, in order to avoid protectionist moves from the West. In paper and paperboard industry, tissue and box-board appear to be the grades with best order books and the best short-term demand outlook. EMGE’s Global Monthly Monitor for printing and writing papers showed the world demand growth up 2.9% for the first 11 months of 2006 but indicated a growth of only 2.1% for the last 3 months. WE demand was down for the first 11 months and NA number was virtually flat. With pressure from outside imports or increased competition on the Europe’s export markets, price increase attempts by the producers continue to receive a lot of resistance. In the US market, containerboard stocks are up and demand growth has slowed down. Printing and writing grades are all flat or weakening and prices came down in December. This also has an impact on the European pricing. Since the beginning of the year, PIX indexes are slightly up in all grades but the strength of the non-EMU currencies explains most of these gains so far. The next few weeks will reveal if any rises are in the books. According to the press and analysts, producers have had some initial success in newsprint pricing. In market pulp, the pick-up in the demand, and the production losses, especially in softwood, due to either wood supply or technical problems, continue to keep the BSKP market tight. In Asia, market is tight and price increases, in most cases by $20/tonne, have been announced by several producers in China and other Asian countries from February 1. The PIX NBSK benchmark gained $4.1, or 0.6%, and climbed to $745.07/tonne. Euro strengthened last week by 0.5% against USD, which held the PIX NBSK index in Euro-terms back to a minor rise to 574.99 Euro/tonne, up by Euro 0.31/tonne, or by 0.05%. In market BHKP, production keeps growing from the Latin American producers. Indonesian producers have also been active and the price gap between softwood and hardwood pulp continues to widen in Asia. In the US and in Europe, January is typically a slow month in printing and office papers which affects BHKP demand. Euro strengthened last week against USD by 0.5% and pulled the PIX BHKP benchmark down in Euro-terms. The index closed at 518.19 Euro/tonne, down by 2.9 Euro/tonne, or 0.55%. Converting the Euro-index into USD, the index moved to $671.47/tonne, down by $0.36, or 0.05%. Newsprint, with 3.5% increase in demand over the first 11 months has been one of the strongest grades of paper in the European market. With order backlog from 2006, the final results of the price negotiations will be seen only a few weeks from now. The benchmark moved up, partly also helped by the approximately 0.6% weakening of the Euro against the weighted basket of non-EMU currencies. The index climbed up by 2.2 Euro, or 0.4%, and closed at 523.57 Euro/tonne. Coated mechanical reels were under price and volume pressure through the year. Over the first 11 months, CEPIPRINT reported the demand down by 1.1%. After capacity closures, markets are in a better balance and price increases attempted but strongly resisted by the buyers. Euro weakened by about 0.6% against non-EMU currencies, helping to push the index up. The PIX LWC index gained Euro 0.28/tonne or 0.04% and ended at 700.71 Euro/tonne. In coated woodfrees, the statistics over January-November from CEPIFINE showed European demand for coated woodfree reels up by 1.6%. Euro’s 0.6% weakening against the basket of non-EMU currencies helped to push the benchmark higher. The PIX Ctd WF index moved up by 2.2 Euro, or 0.3%, to 727.70 Euro/tonne. In uncoated woodfrees, both the European and US demand have been weak in recent months and the for Europe the first 11 months showed, according to CEPIFINE, a 0.4% decline in the regional demand. Exports and downtime taken in North America have kept prices mostly unchanged. The weakening of Euro against non-EMU currencies helped to push the PIX A4 B-copy index up by 1.2 Euro/tonne, or 0.14%, to 821.64 Euro/tonne. In packaging sector the brown kraftliner market appears to have softened a bit in Europe while recovered paper based grades have been stable. In North America, inventories went up when domestic demand growth subsided, shipments to Asia met the increasing exports from China and capacity utilization rates remained high. In North America, price increases were announced for early 2007. Euro weakened by about 0.6% against the weighted basket of non-EMU currencies helping to push most of the indexes upwards. In spite of the exchange rate movements, the PIX Kraftliner benchmark lost Euro 0.87, or 0.17%, closing at 520.55 Euro/tonne. In contrast, PIX White-top Kraftliner index climbed up by Euro 0.41, or 0.06%, and closed at 688.99 Euro/tonne. In recovered paper based grades, all the changes were upwards but in different magnitudes. The PIX Testliner 2 benchmark moved up by Euro 0.23, or 0.06%, to 414.96 Euro/tonne. The PIX Testliner 3 index went up a bit more gaining Euro 0.81, or 0.21%, and ended at 387.51 Euro/tonne. The PIX RB Fluting gained the most with an increase of 1.2 Euro, or 0.33%, and closed at 373.63 Euro/tonne. A good demand pull in China has reportedly raised the prices of some recovered paper grades in the Asian markets in January. For our two new recovered paper indexes in Europe, the exchange rate movements play a more limited role than in the paper indexes. Index value for last week’s business over PIX OCC 1.04 dd came out at 75.22/tonne, up again by Euro 0.10, or 0.13%. For PIX ONP/OMG 1.11 dd, the index value came up by Euro 0.61, or by 0.66% and closed at Euro 92.74/tonne.