FOEX: BHKP jumped by $14.58/tonne, or 2%

Oct 17, 2007. /Lesprom Network/. The pulp market in North America continues to be strong although some relief to the tight supply/demand situation should be coming from the closures and production losses at the North American paper mills. The strength of the Canadian dollar is continuing and is supporting together with the increased fibre and energy costs the producers’ pricing initiatives. The earlier announced increase in BSKP to 850 has now practically been accepted. Our PIX US NBSK pulp benchmark remained unchanged from last week at $850.00/tonne. In North America, the news from price movements is mixed. Both rising and declining prices are reported to us. After a clearer jump upwards last week, the upward momentum continued but at a much slower pace than last week. The PIX US Newsprint 30lb index moved up by $1.27/tonne, or 0.23%, to $556.44/tonne and the 27.7lb index climbed higher by $1.17/tonne, or 0.20%, to $592.68/tonne. In the US, stock markets were up last week, driven mainly by unexpectedly good retail sales numbers. But, economic weakness was evident on several fronts. Nominal price of oil hit an all-time high above $84/barrel. Housing market continues to worsen with prices down, sales volumes falling and inventories of unsold units up at record-levels. In Europe, credit crisis has showed signs of calming down. Still, the UK government signalled it as the main reason behind their reduction of the 2008 economic growth outlook. Also in the Euro-zone, weak news dominated. The recent decision to keep the interest rate at 4% appears well-founded, even if the inflation threat has grown. Even without rate hike, consumers and companies are already experiencing tighter credit conditions. Bank of Japan decided to keep the interest rates at 0.5%. This was no surprise. GDP forecasts are brought lower and also the investment growth forecasts dropped. But news is not all negative. Business confidence index remain unchanged, exports grew both in August and September. Manufacturing showed healthy growth in August and purchasing managers’ index for manufacturing climbed higher. In China, high inflation rate is giving the authorities a rapidly growing headache. Both the lending and deposit rates have been raised again. Food has been released from the government reserves and extra incentives have been given to farmers to increase the pork production in order to alleviate the social pressure caused by the rising food prices. The EU has joined the US in encouraging China to revalue its currency. Positive news continues from the paper sector in the US. Exports are doing well, e.g. in newsprint and linerboards, helped by the weakness of the USD. In Europe, no new paper statistics are available. Euro-strength continues to plague pricing. Imports are up in several grades although the volume increase from 2006 is still rather limited. Uncoated free sheet and packaging sector are the only grades in which small gains have been seen over the previous weeks. In market pulp, port stocks reported by Europulp were down again, not much from end August but much lower than at the end of September 2006. A lot of the supply problems remain and it is highly unlikely that all of them would be over before the turn of the year. Nordic pulp and paper companies are hoping that the negotiations over the Russian membership in the WTO would bring some relief in the proposed further increases in the export duties of wood. The PIX NBSKP European benchmark moved up by $1.2, or 0.14%, to $829.86/tonne. The modest 0.3% weakening of USD against Euro caused the Euro-value to drop. After conversion, the NBSKP index in Euro decreased by 0.69 Euro, or 0.12%, to 585.52 Euro/tonne. The BHKP market is considered to be very strong. The price gap to NBSK pulp has been varying around $90-100 per tonne throughout 2007, supporting the BHKP demand. The 0.3% strengthening of the Euro against USD did not prevent our PIX BHKP benchmark to jump in Euro by 8.94 Euro, or 1.7%, to 524.40 Euro/tonne. Converting the index value into USD boosted the index by $14.58/tonne, or 2%, to $743.23/tonne. Newsprint demand in Europe was down by a mere 0.2% for the first eight month period in comparison with 2006. Total shipments from European mills to the area have lagged behind 2006 in the same period, and imports - especially from North America - have increased and thus contributed to balance supply and demand. The index slid down by Euro 0.73 or 0.14% to 536.90 Euro/tonne. Mechanical coated papers demand in Europe was nearly 4% ahead of 2006 in the January-August period. Still, LWC prices have been under some downward pressure. The strengthening of the Euro, by about 0.6% against non-EMU currencies, presented a downward momentum, and together with the changes in the prices, the index adjusted down by 1.28 Euro or 0.2%, which was close to the magnitude of previous week’s gain, to 666.43 Euro/tonne. The coated woodfree market in Europe has continued to present challenges for the paper producers, as production costs have continued to rise, from raw materials to energy costs and additives. Price increases for the papers have been attempted during the third quarter. The strengthening Euro against non-EMU currencies contributed with a downward pull on the index, so the index declined by 2.65 Euro or 0.4% to 695.52 Euro/tonne, which also was slightly more downwards than the index had gained the previous week. In uncoated woodfrees, pricing has been more successful than for other printing papers during the year. The PIX A4 B-copy benchmark has climbed some 12 Euro/tonne in the last ten weeks. Although being counterweighted by the down-force from the strengthening of the Euro against non-EMU currencies, the index managed to step up by 0.63 Euro or 0.07% to 852.12 Euro/tonne. On the US packaging market, upward price momentum has continued, both in containerboards as well as in ready-made boxes. Markets have improved also in bleached board, kraft papers and coated publication grades and pricing is upwards in these grades, too. In Europe, demand as well as pricing picture is mixed. Order books are good but in virgin fibre based kraftliner, price movement has been downwards, pressed by the USD-weakness. Also in White-top Kraftliner, producers are implementing price increases of 40-45/tonne from October 1. Last week Euro strengthened by about 0.6% against the non-EMU currency basket having a slightly negative impact on our Packaging indices. The PIX Kraftliner index decreased by 1.12 Euro, or 0.2%, closing at 525.17 Euro/tonne. In White-top Kraftliner the index gained Euro $0.31, or 0.04%, closing at 707.32 Euro/tonne. In recycled based grades, the price increases continued to show in our benchmarks. The PIX Testliner 2 gained most this time, 2.65 Euro, or 0.6% to 471.54 EUR/tonne. PIX Testliner 3 headed north by 2.11 Euro, or 0.5%, to 454.22 Euro/tonne. The PIX RB Fluting went up by 2.12 Euro, or 0.5%, closing at 443.36 Euro/tonne. In recovered papers, the overseas freight rate increase attempts may cause lower willingness to export outside the region. The pricing picture looks calmer now in October compared to previous months. Our PIX OCC 1.04 dd index gained Euro 0.43, or 0.4%, closing at Euro 106.77/tonne. The end-product - raw material price differentials continued to widen: the gap between OCC and Testliner 2 increased to Euro 364.77. Against Testliner 3, it grew to Euro 347.45, and against RB-Fluting the differential increased to Euro 336.59. The PIX ONP/OMG 1.11 dd index decreased by Euro 0.49, or 0.4%, landing at 127.36 Euro/tonne. The differential to PIX Newsprint index narrowed to 409.54 Euro/tonne.