Aug 01, 2007. /Lesprom Network/. The US economy surprised with the second quarter GDP-growth at as much as 3.4%. Business investments, growing exports and government spending were the main contributors. Consequently, consumer confidence improved in July. But the rest of the news increased pessimism over the near-term future. Oil prices headed higher. New and existing home sales dropped to new lows. Durable goods orders were weak. And finally, credit market confidence is eroding with the defaults in the sub-prime mortgages. In Europe, the economic growth data continues to be predominantly positive. Last week’ stock market stumble reflected partly the global fall of the equities. Other reasons were regional concerns over tightening credits, i.e. interest rate hike, and lower than expected company earnings affected by the record-strength (early last week) of the Euro. The devastating floods in the UK also hurt the EU economy. In Japan, the prime minister’s position is threatened by the loss of his party in the Sunday elections. It will be more difficult to govern without the necessary political majority in the upper house. Major earthquake in Northern Japan did a lot of economic damage. 70% of the car industry was temporarily idled and the largest nuclear plant closed. OECD produced a report over the environmental impact over the rapid growth of the Chinese economy. Problems are seen both by the increasing pollution and by the badly damaged global image over the safety of China’s food, car tire and many other products. If the image is not improved, Chinese export performance will begin to suffer more than so far. CEPIPRINT’s and CEPIFINE’s latest statistics show a slowdown in the European paper shipments growth. The mechanical paper, including newsprint, demand in the region declined by 3.1%. Cumulatively, regional demand was still up by 1.4% for the first 6 months but the decrease in exports outside the region by almost 13% brought the total shipments down by 2%. May numbers from CEPIFINE came out with woodfrees showing similar results to the mechanical grades. Combining the coated and uncoated woodfrees, the regional demand declined by 0.7%. Cumulative numbers over the first 5 months showed no change in total shipments against 2006. Exports fell by over 9% but demand within the region was still up by 1.5%. In North America, Canadian regulators approved the awaited merger of Abitibi and Bowater. This increased the expectations of further capacity cuts in newsprint and improved the chances of the 25-dollar price hike, proposed from September on the US market, going through. The persistent strength of the Canadian dollar against the US also supports this and some other pricing initiatives. Market pulp shipments continued to show modest growth against 2006. June deliveries were up, according to PPPC, by 2.3% and the cumulative numbers over the first half showed a 1.7% increase. The modest increase in producer stocks did not remove the tightness from the market especially as further tension was created by the start of the woodworkers’ strike in British Columbia. Market BSKP shipments were up only 0.6% in Jan-June. The PIX NBSKP European benchmark moved up by $0.55, or 0.07%, to $799.81/tonne. The 1.1% strengthening of USD against Euro pushed the Euro-value up more. After conversion, the NBSKP index in Euro headed higher by 6.85 Euro, or 1.2%, to 585.90 Euro/tonne. In market BHKP, the wide price-gap to BSKP continues to support the sales volumes. The shipments were up, according to PPPC, by more than 12% in June and 3.5% during the first half. BHKP producer inventories edged up in June by one day. Several major producers have separately announced a $20/tonne price increase from August 1. The 1.1% strengthening of the USD against Euro brought clear upside pressure in our PIX BHKP benchmark, which moved up by 5.6 Euro, or 1.1%, to 512.78 Euro/tonne. Converting the value into USD brought the index down by most marginal $0.01, or 0.0%, to $700.00/tonne. Newsprint data for June from CEPIPRINT was disappointing. Total shipments were down by nearly 5% from June 2006 and regional demand by 4.5%. Over the first 6 months, total shipments were down over 3% but regional demand up 1% with increased import volumes. The minor 0.1% weakening of the Euro against non-EMU currencies helped the PIX Newsprint benchmark marginally higher. Our index gained Euro 0.02/tonne, or 0.00%, and closed at 538.85 Euro/tonne. European demand for coated mechanical reels was down by 0.9%in June but still up 2.8% over the first 6 months. According to CEPIPRINT, export continued to plunge with a 28% decline in June. Euro weakened by 0.1% against the weighted basket of non-EMU currencies giving our benchmark a slight upward push. The PIX LWC index gained Euro 0.56, or 0.08%, ending at 674.63 Euro/tonne. In coated woodfree papers, European data over May, reported by CEPIFINE, came out with fairly weak results. European demand was up by 1.1% but with another large drop in exports, total shipments retreated by 1%. Cumulatively, total shipments showed no change but regional demand was still up by 2.7%. The slight push from the 0.1% strengthening of the non-EMU currencies against Euro helped the benchmark. The PIX Coated woodfree index gained Euro 0.42, or 0.06%, and closed at 716.98 Euro/tonne. In uncoated woodfrees, the CEPIFINE statistics over May came out with declining numbers. Total deliveries were down by 2.5%, exports outside region by more than 10% and regional demand by 2.2%. Cumulative data over the first five months showed no change in total shipments and a minor 0.4% gain in regional demand. The slight weakening of the Euro against the non-EMU basket gave a minor upward push. Our PIX A4 B-copy index went up by 2.1 Euro, or 0.25%, ending at 841.97 Euro/tonne. In packaging sector, the disappointing June delivery data from North America has not stopped pricing initiatives. Virtually all major producers are now out with an increase announcement in the US market, typically from beginning of August by $40 or $50/tonne. Also in Europe, a number of producers have announced price hikes. Demand in EU has been satisfactory with the good economic growth. Recent weakness of the USD against Euro and the increasing imports from outside the region work in the other direction. Euro weakened 1.1% against the USD and very marginally, or by 0.1%, also against the basket of non-EMU currencies. The PIX Kraftliner index for brown virgin fibre linerboard retreated by Euro 0.64, or 0.12%, to 529.12 Euro/tonne. The PIX White-top Kraftliner lost Euro 0.85 (also 0.12%) and closed at 697.58 Euro/tonne. In the recovered paper based containerboards, the PIX Testliner 2 benchmark came down by Euro 0.09, or 0.09%, to 455.51 Euro/tonne. The PIX Testliner 3 index remained absolutely flat at 438.21 Euro/tonne. PIX RB Fluting gained 1.55 Euro, or 0.36%, and ended at 426.70 Euro/tonne. Recovered paper demand has continued lively in the European market. After rapid rise of the prices in late June/early July in Chine, trading activity there slowed down. Prices for the Asian exports from the US have dropped slightly ($2-3) in the last couple of weeks. Our PIX OCC 1.04 dd benchmark gained Euro 0.48, or 0.5%, and closed at 98.90 Euro/tonne. The gap against PIX Testliner 2 index narrowed to Euro 356.61 and against Testliner 3 to Euro 339.31. Against RB Fluting the differential widened to Euro 327.80. In old newsprints/old magazines grade, the PIX ONP/OMG 1.11 dd index stayed flat at 120.10 Euro/tonne. The differential to PIX Newsprint index widened very marginally to 418.75 Euro/tonne.