Jun 06, 2007. /Lesprom Network/. In the US, the most recent economic news is predominantly positive. Manufacturing sector picked up some pace again with factory orders up by a healthy 0.6%. Most importantly, the non-farm payrolls expanded more than expected, almost twice the increase of the previous month. Inflation continues to run fast but most of that is oil-price related. Core consumer prices actually fell back to the Fed comfort Zone. In Europe, the ECB will almost certainly raise the interest rates in their Wednesday meeting. Inflation rate has slowed down a bit but the money supply has continued to expand rapidly. The economic growth has slowed down a little to 3% for the Euro-zone and 3.2% for the whole EU. Weaker household spending growth was the main contributor to this slowing down. Japan’s first quarter GDP-growth was pegged at 0.6%, down from the high fourth quarter-2006 numbers. Unemployment numbers are still very low, just 3.7%. Capital expenditures fell during first quarter but are expected to rebound during second quarter. Consumer prices are falling and Japan is on a brink of another deflation. Under the circumstances it is difficult to raise interest rates. No hike policy prolongs Yen weakness. In China, stock market had another period of unrest. It was triggered by an effort to control the excesses by introducing a “stamp duty” on share purchases. This additional cost did not burst the asset bubble but it did send the stocks down by 6.5%. Next day they recovered 1.5%, though. Another trigger for the abrupt stock market movement could have been the higher inflation. European paper numbers over the month of May were more positive than the previous month’s performance. CEPIPRINT’s data showed wood-containing shipments up by 0.9% against April 2006 even if still 1.2% down for the first 4 months. Woodfree numbers from CEPIFINE were better. European demand was up in coated woodfrees both for the month of April (7%) and for the year-to-date volume (3%). In uncoated woodfrees, European demand grew by 3.4% in April and is up 1.3%, year-to-date. Exports in woodfrees are down in a substantial way in both main grades, however. The US box volumes tend to correlate well with the industrial activity index, ISM. ISM value climbed to 55.0 points in May. Anything above 53.0 has – historically – been good enough for the box shipments to rise. The preliminary decisions on the US anti-dumping duties against the imports from China, Indonesia and other Asia, help the NA regional demand in paper sector. With stock numbers in the supply chain down, the tightness persists on the pulp markets, both in BHKP and in BSKP. The main reason for the tightness is the shortness of actual production on some mill sites. Pulp price increases which have been announced from June 1, typically by $20/tonne, are meeting strong resistance from the buyers. The NBSKP European benchmark moved higher but the average remained just a fraction below 780. The prices went up by $0.98 or 0.13% to $779.63/tonne. The fractional weakening of Euro against USD had limited impact on the benchmark. After conversion, the index moved up by Euro 0.94 or 0.16% to 580.25 Euro/tonne. This latest round of pulp price increase attempts was initiated by the market BHKP producers with Brazilian producers taking the lead. The main drivers for the increase attempt were the widened price gap to BSKP and the shortfall of the actual production. Wood supply issues and technical problems at several mills have kept the BHKP volumes well below the capacity. The most marginal (0.0%) weakening of the Euro against USD had little impact on the PIX BHKP benchmark, which rose by 1.1 Euro or 0.22% to 505.59 Euro/tonne. Converting the index value into USD brought a similar change and the benchmark moved up by $1.22, or 0.18%, to $679.31/tonne. In newsprint, demand in Europe in April was up by 3.8% from April 2006, as published by CEPIPRINT. The bulk of this increase came through an 80% increase in imports from outside the region, predominantly from North America. A 0.3% strengthening of the Euro against non-EMU currencies pulled the PIX Newsprint benchmark slightly down. The index lost Euro 0.17, or 0.03%, and closed at 538.46 Euro/tonne. For coated mechanical reels, latest CEPIPRINT statistics showed the European demand up by a healthy 4.8% from April 2006 and the cumulative demand number was up by 3.7%. But total shipments grew much less as the exports outside Europe continued to sink in double-digit numbers. The Euro strengthened during the week by about 0.3% against the basket of non-EMU currencies, contributing a downward pull. The PIX LWC benchmark lost Euro 0.18, or 0.03%, and ended at 681.77 Euro/tonne. In coated woodfrees, the CEPIFINE March and April data came out showing a solid 7.3% increase in April demand in Europe and a 3% gain in demand year-to-date. Also in this grade, exports continue to fall limiting thus the gains in total shipments. Downward pull from the 0.3% strengthening of the Euro against non-EMU currencies dragged the index lower. The PIX Ctd WF index showed a loss of Euro 0.90, or 0.12%, and closed at 719.25 Euro/tonne. In uncoated woodfrees, CEPIFINE data on European shipments was encouraging with a 3.4% increase in the European demand in April and with a more modest 1.3% gain year-to-date. Also in this grade exports outside the region continue to fall, in April by as much as 24%. The 0.3% strengthening of Euro against non-EMU currencies was enough to pull the benchmark down. The PIX A4 B-copy index lost Euro 0.46/tonne, or 0.05%, ending at 835.95 Euro/tonne. In packaging sector, the growth in world shipments is strong, reflecting the continuing recovery of the international trade. Also in Europe, the over-capacity still seen not so long ago, is much less of a problem today. In North America the situation is less good with the economic slowdown but helped by the healthy export volumes, market appears to be picking up a little there, too. Asian demand growth is starting to bring up the RCP-prices again. In Europe, price increase initiatives of 20-40 Euro/tonne have been seen, supported by the earlier risen recovered paper costs. The weakness of the USD continues to put some pressure on the Euro prices in brown kraftliner, though. This time, the USD showed virtually no change. The basket of non-EMU currencies weakened against the Euro by about 0.3%. This brought some downward pull on the benchmarks. The PIX Kraftliner benchmark lost a modest Euro 0.43/tonne, or 0.08%, and closed at 528.89 Euro/tonne. In white-top, our PIX White-top Kraftliner index came down by Euro 0.36, or 0.05%, closing at 694.76 Euro/tonne. Prices for the recovered paper based containerboards are still moving up. The PIX Testliner 2 benchmark came up this time by 5.65 Euro, or 1.3%, to 448.32 Euro/tonne. The PIX Testliner 3 index gained 6 Euro, or 1.4%, and closed at 426.93 Euro/tonne. The PIX RB Fluting again went up the most and gained 6.2 Euro, or 1.5%, ending at 414.24 Euro/tonne. According to the reports from Asia, recovered paper prices have again had some upward pressure there after gradually softening in April and early May. In Europe, prices of our benchmark grades went to different directions. The PIX OCC 1.04 dd benchmark lost Euro 0.22, or 0.24%, and closed at 92.06 Euro/tonne. As the prices of RCP-based containerboards were on the rise, the differentials continued to widen: the gap against PIX Testliner 2 increased to Euro 356.26, to Euro 334.87 compared to PIX Testliner 3 and to Euro 322.18 against PIX RB Fluting index. However, in old newsprints and magazines, price quotes received last week had mainly upward adjustments and the PIX ONP/OMG 1.11 dd index moved up by 1.5 Euro/tonne, or 1.4%, to 112.78 Euro/tonne. The differential to PIX Newsprint index narrowed to 425.68 Euro/tonne.