Oct 03, 2007. /Lesprom Network/. US Consumers’ income increase was smaller in August than in July but consumer spending still moved up 0.6%, clearly more than projected. Together with low increase in the inflation rates this gave hope that the ill-effects of the credit crunch could be overcome with limited damage. Those hopes suffered a major blow when both industrial production and the new orders statistics showed clear setbacks. In Europe, the British economy grew faster than expected, at over 3% (annualized) rate. Both consumers and government spent actively. But, as recent OECD research concluded, the recent market turmoil could pull the UK to a clearly lower growth and even necessitate an interest rate drop. The signs of weakness are spreading to other EU countries as well. Consumer confidence in Germany fell for a second month in a row. Fukuda, Japan’s new prime minister, promised to remain committed to balancing the budget and continuing the program of economic reforms. One of the main corners is the need of large additional funding in order to take on the rapidly grown group of elderly people without unduly hurting the economy. In China, positive external imbalance continues to form a substantial part of the economic growth. It has also been instrumental in creating the excessive investment boom. Chinese authorities have introduced a long string of restrictions on credit and measures which tightened the bank’s reserve ratio requirements. The third quarter now appears to have brought some steps toward the right direction. Woodfree paper statistics in Europe for the July-August performance are not out yet. CEPIPRINT’s August data was encouraging. Newsprint consumption was slightly down from August 2006 but exports showed this time a sizeable increase which brought total deliveries to a small plus. Other woodcontaining grades did better. Both SC and LWC showed sizable increases in the regional consumption. In North America, consolidation of the industry continued with Stora Enso selling its North American operations to New Page (which is owned by Cerberus, private equity group). Mostly this consolidation covers coated publication grades. In another deal, Boise Cascades paper and board operations were sold to Aldabra. The new entity, named Boise Paper Co., is the third largest uncoated woodfree producer in North America. US newsprint statistics were again very weak, showing 8.5% demand decline against last year. In other grades, coated paper prices have risen in August/early September. Anti-dumping duties on Asian imports, dollar weakness and supply rationalisation are the main drivers. In market pulp, continuous cuts in the practical supply, for various reasons, have continued to negate the impact of the theoretical rise in the market pulp capacity. Market pulp shipments in August were strong, making it the strongest month of the year, especially when seasonally adjusted. PPPC statistics showed that BSKP inventories remained at their low level of 26 days, seasonally adjusted. Prices continued to move up in USD-terms. The PIX NBSKP European benchmark moved up by $5.5, or 0.7%, to $825.59/tonne. The 0.9% strengthening of Euro against USD brought the Euro-value down. After conversion, the NBSKP index in Euro dropped by 1.5 Euro, or 0.25%, to 582.26 Euro/tonne. In market BHKP, start-up of Botnia’s mill in Uruguay appears to be delayed for political reasons. Strikes and wood supply problems also affect production levels. The shipments showed a 10% increase over August 2006. According to PPPC, BHKP producer stocks came down, seasonally adjusted, by 3 days to just 31 days. Price increase attempts are on from October 1. The 0.9% strengthening of the Euro against USD brought our PIX BHKP benchmark down in Euro-terms. The index retreated by 4.7 Euro, or 0.9%, to 507.79 Euro/tonne, lower than in the beginning of the year. Converting the value into USD kept the index flat at $720.00/tonne. CEPIPRINT numbers for August showed European newsprint demand down by 1.1% from August 2006. This time, exports outside the region showed a large gain, even if cumulatively exports are still slightly down. Euro weakened very marginally against the basket of non-EMU currencies. This helped the PIX Newsprint benchmark to the positive side. Our index gained Euro 0.07/tonne, or 0.01%, and closed at 537.13 Euro/tonne. Demand for coated mechanical reels was good in Europe in August. The 6.3% gain in the regional demand, reported by CEPIPRINT, brought the cumulative result for the first 8 months to +3.9% for coated mechanical reels. The minor 0.1% weakening of the Euro against the basket of non-EMU currencies gave a minute upward push but the benchmark crept marginally down. The PIX LWC index lost Euro 0.02, or 0.00%, and ended at 666.37 Euro/tonne. The coated woodfree supply/demand and price situation in North America has improved. In Europe, statistics are still available only up to June. In spite of the minor weakening of Europe against the non-EMU currencies, the benchmark slid slightly lower. Our CWF index lost Euro 0.46, or 0.07%, and closed at 696.03 Euro/tonne. The uncoated woodfree market has stayed in a healthy balance in the US with supply reductions, even though the demand has been fairly weak. New pricing initiatives from mid September have been announced. In Europe, the market has been OK with currency movements increasing import pressure and making exports less interesting. Despite minor upward push from the marginal weakening of Euro against the non-EMU currencies, our PIX A4 B-copy index dipped by moderate Euro 0.69, or 0.08%, to 848.27 Euro/tonne. On the US packaging market, first the containerboard and now also the box price increases appear to be going through without major resistance. European linerboard mills and box plants have good order books. Price increases have been announced in white-top liners, where price movements so far have been more limited than in the brown grades. Last week USD weakened again against Euro, this time by 0.9%. Euro weakened most marginally, or by about 0.1%, against the non-EMU currency basket. Impacted by the USD-weakness, the PIX Kraftliner index retreated by Euro 0.06 or 0.01%, closing at 526.35 Euro/tonne. With the exchange rate impact, the PIX White-top Kraftliner index gained Euro 0.88, or 0.13%, and closed at 702.47 Euro/tonne. The PIX Testliner 2 index moved up by Euro 0.41, or 0.09%, ending at 464.46 Euro/tonne. PIX Testliner 3 gained slightly more, 1.5 Euro, or 0.34%, to 447.30 Euro/tonne. The PIX RB Fluting showed a similar increase of 1.44 Euro, or 0.33%, and closed at 434.69 Euro/tonne. In recovered papers, the overseas freight rates of October play a role in prices. The European buyers hope to use this situation and bring the regional prices down. The PIX OCC 1.04 dd index remained at 105.24 Euro/tonne. The gap between OCC and PIX Testliner 2 index widened to Euro 359.22. Against Testliner 3, the differential grew to Euro 342.06, and against RB-Fluting it increased to Euro 329.45. The PIX ONP/OMG 1.11 stayed flat at 127.73 Euro/tonne. The differential to PIX Newsprint index widened to 409.40 Euro/tonne.