May 17, 2006. /Lesprom Network/. In the North American pulp market, further closures continue to tighten the regional supply/demand balance, especially in NBSKP. Further price increases have been announced, either from May 1 or June 1 by either $30 or $40/tonne. During the first weeks of May, some of those increases have also been reported to us and the average has been on the way up. Quotes from last week lifted our US NBSKP index up by $3.2/tonne, or by 0.46%, to $697.67/tonne. US newsprint demand numbers continue to be depressing but capacity exits and some maintenance downtime led to another inventory decline in March. The latest price increase continues to creep through. Last week there were again some upward changes in the price quotes received. The PIX US Newsprint 30lb index gained $2.7/tonne, or 0.42%, and closed at $640.94. The 27.7lb index moved also up by 0.42%, or $2.9/tonne, to $684.51. US economic growth continues to be robust. But, the warning signals are getting brighter and more numerous. Weaker USD pushed exports high in April. This narrowed the trade deficit but it also boosted inflation. Fed raised interest rates to 5% and 1-2 additional hikes are expected. Retail sales rose again in April but much less than expected. In Europe, the consumer confidence is heading up. IFO-index in Germany had its highest reading since the German unification. While consumers may be confident of the future, most of the actual growth comes from the strength of the industrial sector, especially exports. Inflation runs about 0.5% above ECB target rate and further interest rate hikes are likely. In Japan, improving labour market helps consumer sentiment. Industrial activity lifts real GDP-growth but despite positive sentiments, consumers do not move much. Salaried workers spent 4% less month-on-month in March after a fall in their real incomes. Interest rate hikes are expected but most likely only after the summer. China was not named as currency manipulator by the US Treasury. Still, looking at the increasing over-capacity and high sales to the US market, approaching elections in the US may well trigger protectionist bills promoting high tariffs for the Chinese goods entering the US market. Rapid growth in China continues. US paper shipments were up by 0.4% in first quarter. Of the major grades, newsprint showed the biggest minus and uncoated mechanicals were the clearest winners. Paperboard sector did better. Further price hikes have just been announced for cut-size free sheet. In Europe, the overall performance in March continued to be stronger than in the US. In printings and writings, shipments and capacity utilization rates were up for the first quarter from last year. Protest strike in Finland by the paper industry workers this week, directed against the recently announced lay-offs, removes 3-4 days’ production volumes and reduces the remaining pockets of over-capacity. Pulp market remains solid with global market pulp shipments up from last year’s first quarter and production capacity on the way down during the first half of 2006. Producer stocks were down in March and port stocks rose only marginally in April. In NBSKP, new price increases have been announced. Increase attempts vary between $30-40 and either started in May or are announced from June 1. European prices reported to us over the first weeks of May continued to move upwards in USD-terms. The PIX NBSKP benchmark moved up by $2.8/tonne, or 0.4%, to $654.49/tonne. The USD weakened again last week, by 1.8% against the Euro, which brought the NBSKP index in Euro to 506.81 Euro/tonne, down by 6.8 Euro/tonne, or 1.3%. Euro-price is now lower than in the beginning of the year. In BHKP new prices were announced by most producers in Europe and Northern America, mainly from May first. Prices reported to us continued to head north towards the level of the announced new prices. Last week USD weakened again, this time by 1.8% against Euro. Average from the USD-quotes alone increased by $3/tonne, or 0.5%, to $631.59/tonne. Average of the quotes reported in Euro fell by 3.6 Euro/tonne, or 0.7%, to 515.00 Euro/tonne. The weakening of the USD against Euro meant a drop of the Euro-index whilst the USD-index showed a gain. The index closed at 490.35 Euro/tonne, down by 5.9 Euro/tonne, or 1.2%. Converting the index-value into USD brought it to $633.24/tonne, up by $3.6/tonne, or 0.6%. Newsprint shipments in Europe had a strong first quarter. Euro weakened again last week by about 0.8% against the weighted basket of non-EMU currencies. Most of the change in the benchmark was currency-driven but a few upward adjustments were also seen. Together these drivers brought the benchmark slightly upward. The PIX Newsprint index gained Euro 0.8 or 0.16% to Euro 519.32. In coated mechanical reels, strike in Finland this week leads to some volume losses. Shipment volume gains were high in March and first quarter in Europe. Some changes, mostly upwards, were reported to us. The PIX LWC index came up from last week by Euro 1.5 or 0.2% to Euro 703.29. CWF-shipments were quite strong in March in Europe as well as for the first quarter as a whole. The price changes received from last week were mainly upward ones. Also the weakening Euro (about 0.8%) helped the PIX Ctd WF index which moved up by Euro 3.05 or 0.42% to Euro 721.08. In uncoated woodfrees, first quarter shipments were up by nearly 3% from last year in Europe. For our PIX A4 B-copy index, the changes reported were mainly upwards. The impact from the 0.8% weaker Euro gave another upward push. Together these drivers sent the index north by nearly 5.0 Euro or 0.63%, to Euro 801.67. The US packaging market remains solid, with linerboard shipments up during first quarter. Inventories, both at mills and at box plants are clearly below last year’s levels. In Europe, the supply/demand balance remains satisfactory and a new round of price increases has been announced either from May or June. The weakening of the Euro by about 0.8% against the basket of the non-EMU currencies helped our indexes upwards. The PIX Kraftliner index gained Euro 0.6/tonne, or 0.13%, and closed at 468.15 Euro/tonne. For White-top Kraftliner, some higher quotes were received. The benchmark was pushed higher also by the exchange rate movements. The index climbed up by 1.6 Euro/tonne, or 0.24%, closing at Euro 668.76/tonne. In the recycled fibre based containerboard grades the majority of the quotes were unchanged with a few upward adjustments, mainly in RB-fluting. The 0.8% weakening of the Euro against the weighted basket of non-EMU currencies helped the indexes higher. The PIX Testliner 2 benchmark inched up by Euro 0.26/tonne, or 0.07%, and closed at 377.70 Euro/tonne. The PIX Testliner 3 moved up by Euro 0.24/tonne, or 0.07%, to Euro 346.86/tonne. The PIX RB Fluting index gained Euro 0.75/tonne, or 0.23%, to Euro 333.58/tonne.