Apr 25, 2007. /Lesprom Network/. US core inflation cooled down in March. Drop of the pace increased the expectations that the Fed will ease the prime rate lower latest in June. The rates for short-term treasury bills already declined. The stock market reacted positively. The general economic outlook continues to be dim and very little real GDP growth is expected to be seen in the US in the coming months. In Europe, the economic outlook is still good but the Euro-land is getting increasingly concerned over the increasing strength of the Euro against USD and many other currencies. Against Japanese yen, Euro is now a full 1/3 over-valued! The pound sterling is also very strong, even though the UK consumer price inflation moved above 3%. Strengthening Euro and GBP weaken Europe’s competitiveness in virtually all of its export markets. In Japan, economic growth was nearly 3% during first quarter but there are growing concerns over a potential slowdown. Yen has continued to weaken and the latest Tankan survey showed that Japanese companies expect further depreciation. With Yen already at record lows and economic growth at 3%, can this happen? In China, economic growth in March exceeded all expectations. With it, first quarter 2007 real GDP appears to have grown at 11.1% annual rate. Rate this high is unsustainable in longer run. Consumer prices rose in March 3.3% against March 2006, well above the recently seen rates. There is an urgent need for the authorities to finally find effective ways and means to prevent the over-heating. Paper markets continue to show mixed signals. In printing and writing grades, global volume growth is low, even clearly negative in the North American market. Capacity closures help the capacity utilization rates which improvement, in turn, has triggered price increase attempts. USD-weakness also supports higher prices. In Europe, Euro strength hurts and prices for coated grades are below the year-turn level. In copy-paper, however, a modest price recovery has been seen also here. In packaging sector, boxboard is doing OK on both sides of the Atlantic. Containerboard weakened in the US but with tighter global markets and some indication that also the US box market could be firming, at least one producer is re-initiating price increase attempts from mid-May. In Europe, volumes have been satisfactory and prices have been rising. Recovered paper based grades are up more than 6% from the turn of the year. In virgin fibre based grades, increases have been more modest. Tissue demand has continued to rise, world-wide, but production capacity has risen even more and the pricing environment has therefore been more challenging than maybe foreseen. Pulp demand rebounded in March, as expected. Market pulp shipments were up 2.1% from March 2006 but for the first quarter they were down 0.9% against first quarter 2006. Supply constraints have continued and the UTIPULP numbers showed the lowest end March inventories ever since the statistics have been gathered with the present base. NBSKP shipments were up marginally both for the month of March and for the 1st quarter. Producer inventories from PPPC were unchanged at the low 25 day level for BSKP market pulp. The PIX NBSK benchmark lost $0.34/tonne, or 0.04%, which brought the index down to $771.18/tonne. Euro strengthened last week against USD, this time by 0.5%. The benchmark fell in Euro-terms by 3.35 Euro, or nearly 0.6%, with the index closing at 566.79 Euro/tonne. In BHKP, demand picked up in March after a slow start of the year. Shipments represented, as for BSKP, 94% of capacity. Supply problems kept production rate lower and producer stocks came down by one day, from 40 to 39 days, according to PPPC. The 0.5% strengthening of the Euro against the USD pulled the PIX BHKP benchmark lower in Euro-terms to 493.83 Euro/tonne, down by 2.7 Euro/tonne, or 0.55%. When converting the Euro-value into USD, the PIX BHKP index inched down by $0.02/tonne, or 0.00%, to $671.91/tonne. In newsprint, March statistics are not out yet. Message on the demand remains unchanged; European market is stable with modest growth in demand continuing but in the US shipments continue to head south, in spite of the efforts to activate the readership. Euro weakened by about 0.2% against the weighted basket of non-EMU currencies. This was instrumental in pushing the benchmark slightly higher. The index gained Euro 0.43/tonne, or 0.08%, and closed at 536.81 Euro/tonne. In coated mechanical reels the demand was up in Europe for the first two months but both in the US and in Asia the development has been less bright. In the US, prices for both coated and uncoated mechanicals have eroded in early 2007. Euro weakened by about 0.2% against the basket of non-EMU currencies which helped to push the benchmark higher. The PIX LWC index moved up by 2.4 Euro/tonne, or 0.35%, to 686.23 Euro/tonne. In coated woodfrees, price increases are attempted in the US, initiated and supported by the import duties levied on Asian paper. In Europe, regional demand was up for the first two months but exports outside the region were clearly down. The 0.2% weakening of the Euro against the basket of non-EMU currencies helped to move the benchmark higher. The PIX Ctd WF index headed higher by 1.7 Euro/tonne, or 0.23%, landing at 718.42 Euro/tonne. In uncoated woodfrees, world markets are firmer than in the coated grades. All major producers in North America have announced price increases in the US market from May 1. In Europe, while March data is not available, demand continues to be described as “satisfactory”. The 0.2% weakening of the Euro against the non-EMU currencies helped to push the benchmark slightly higher. The PIX A4 B-copy index gained Euro 0.55/tonne, or 0.07%, ending at 826.97 Euro/tonne. In the US, the weakness brought into containerboard sector by lower economic activity and by weather-related problems of the agro sector is not fully over but some recovery appears around the corner. Global market is in a better shape and the growing weakness of the USD is improving the export opportunities from North America. In Europe, both containerboard demand and the prices have moved up in the early months of the year. Although the upward push from the RCP-prices has lost some of the momentum, recovered paper prices have not come down in Europe as they did in late March/early April in Asia. Some of the earlier announced increases continued to trickle into our benchmark prices. This week the weakening – by 0.2% - of the Euro against the basket of non-EMU currencies also helped the indexes higher. The PIX Kraftliner benchmark showed a gain of 1.5 Euro, or 0.28%, and closed at 524.43 Euro/tonne. Situation in white-top kraftliner was similar and the index moved up by 2.5 Euro, or 0.36%, to 689.15 Euro/tonne. The prices of the recovered paper based grades continued to head higher, too, but this time clearly less than in the previous weeks. There was also less push from the RCP costs. The PIX Testliner 2 benchmark moved up by Euro 0.21, or 0.05%, and closed at 431.76 Euro/tonne. The PIX Testliner 3 index moved up by Euro 0.22, or 0.05%, and ended at 409.85 Euro/tonne. The PIX RB Fluting went again up the most, or by 1.6 Euro, or 0.4%, and closed at 395.92 Euro/tonne. Price increases seen in recovered paper grades in Europe in the recent weeks were clearly more muted this time. In OCC, some hikes were still seen, e.g. in Iberia, but otherwise the changes reported to us were very limited. Our PIX OCC 1.04 dd (CEN 1.04) benchmark moved up by Euro 0.59, or 0.65% and the index closed at 91.40 Euro/tonne. Price differentials to linerboard showed mixed and limited changes. The gap was decreased to Euro 340.36 against PIX Testliner 2 and to Euro 318.45 against PIX Testliner 3. But, compared to the PIX RB fluting index, the gap widened to Euro 304.52. For PIX ONP/OMG 1.11 dd (CEN 1.11), the index inched up just by Euro 0.01, or 0.01%, and closed at 110.11 Euro/tonne, which widened the differential to PIX Newsprint index to 426.70 Euro/tonne.