May 10, 2006. /Lesprom Network/. In the North American pulp market, the supply/demand balance remains tight. Further BSKP price increases have been announced, either from May 1 or June 1 by $30 or $40/tonne. During the first week of May, enough of those increases were also reported in prices to lift the average above the previous $690/tonne level. The PIX US NBSKP index moved up by $4.47/tonne, or by 0.65%, to $694.47/tonne. US newsprint numbers for March showed a continuing demand decline. The latest price increase has apparently advanced in steps, as we continue to receive, last week mainly upward, adjustments to price data. The PIX US Newsprint 30lb index gained by $1.49 or 0.23% to $638.27. The 27.7lb index moved similarly, and climbed by $1.58 or 0.23% to $681.65. Europulp inventories at ports increased in April 2006 by 5 500 tonnes or by 0.4% from March 2006 inventories of 1.377 million tonnes to 1.383 million tonnes, being -8.7% below April 2005 inventory. US economy continued to expand in April. Wages increased helping consumer spending to continue on a high level. But, inflation accelerated, too, raising the likelihood of another interest rate hike to 5% on May tenth. The 64 000 dollar question is: how resistant the US (and the world) economy really is against this latest energy price shock? In Europe, the high oil price is estimated to add 1% to the inflation rate and reduce real GDP growth by 0.25%. After the decision not to raise interest rates in May, ECB is likely to hike them 0.25 or maybe even 0.5 percentage points in June as the inflation is well above the target rate and business sentiment has continued to improve. In Japan, the economic growth continues but the fiscal situation remains problematic. Public debt has continued to grow and is projected to exceed 150% of GDP by early 2007. Proposed consumption tax increase would reduce deficit but hurt domestic demand and is therefore unlikely before 2008. Most other elements are positive. In China, GDP growth was 10.2% during first quarter, well in excess of the government target of 8%. Fixed investments were up almost 30%. Central Bank raised interest rates by 0.27%. This move from neutral to tight monetary policy is not likely to be enough to slow down growth much. China’s trade surplus continues to grow and over-capacity is still rising in many sectors. In the paper industry the March statistics showed in the US market reducing growth or even declines in the paper and paperboard shipments. Whilst a decline in newsprint demand was no surprise to anyone, shipments in other printing and writing grades and in packaging were below expectations. In Europe, the overall performance in March volumes was predominantly positive. CEPIFINE’s numbers for woodfrees were also positive. In coated reels, first quarter demand was up over 6% from last year. In uncoated woodfrees the decrease in imports from outside and gains in exports in March helped the total deliveries to a 2.3% gain in March and to a 2.7% increase over first quarter. Pulp market has continued to tighten, especially for BSKP as continuing capacity reductions remove supply volumes. Market pulp stocks in the supply chain were low entering April. Further BSKP price increases of $30-40/tonne have now been announced, either from May 1 or June 1. Prices reported to us in Europe over the first week of May continued to move upwards in USD-terms. The PIX NBSKP benchmark moved up by $3.48/tonne, or 0.5%, and closed at $651.71/tonne. The USD weakened again last week, by 1.2% against the Euro, which brought the NBSKP index in Euro to 513.64 Euro/tonne, down by 3.41 Euro/tonne, or 0.7%. In BHKP, new prices were announced by most producers in Europe and NA, mainly from May 1st. Last week USD weakened again, this time by 1.2% against Euro. Euro 520 converted to $659.78/tonne. Average from the USD-quotes alone increased by $8.60/tonne or 1.4% to $628.60/tonne. Average of the quotes reported only in Euro rose by 6.69 Euro/tonne, or 1.3%, to 518.57 Euro/tonne. The notable weakening of the USD against Euro slowed the increase of the Euro-index whilst the USD-index showed a clear gain. The index closed at 496.27 Euro/tonne, up by 1.61 Euro/tonne, or 0.3%. Converting the index-value into USD brought it to $629.67/tonne, up by $9.51/tonne, or 1.5%. Newsprint shipments in Europe continued to grow in March. They were up - according to CEPIPRINT – by more than 3% for the month of March and about 6% for first quarter. Euro weakened last week by nearly 1.0% against the weighted basket of non-EMU currencies. The currency effect worked the index slightly upward, and the index adjusted by Euro 0.84 or 0.16% to Euro 518.50. In coated mechanical reels, March numbers from CEPIPRINT showed a solid 5% growth in the estimated European demand. Some changes, mostly upwards, were reported to us. The currency impact gave an assisting upward push, boosting the index up from last week by Euro 2.21 or 0.32% to Euro 701.82. March numbers for CWF-grade came out from CEPIFINE showing clearly positive results. Good regional demand and a double-digit growth in exports outside the region helped total deliveries to a 7.3% growth in March. For first quarter, shipments were up 6.8% from last year. The price changes, mainly upwards, and the weakening Euro (about 1%) helped the index to climb by Euro 3.34 or 0.47% to Euro 718.03. In uncoated woodfrees, the March numbers from CEPIFINE showed 2.3% growth in deliveries for the month of March and a slightly higher gain of 2.7% for the first quarter. For our PIX European A4 B-copy index, the changes reported were mainly upwards. The impact from the 1.0% weaker Euro presented an upward lift, which together with the upward changes sent the index north by Euro 3.63 or 0.46%, to Euro 796.68. In the US, the market remains solid, even if the March gains, adjusted to the average weekly rate, were below expectations. In Europe, following a largely successful round of increases in early months of the year, new price increases have been announced either from May or June, varying between 30-50 Euro/tonne depending on the grade and the market. The exchange rate movements were mostly helping the indexes. The nearly 1.0% weaker Euro against the basket of the non-EMU currencies helped our indexes upwards this time. For brown Kraftliner, some higher quotes were received and the PIX Kraftliner index gained 1.22 Euro/tonne, or 0.26%, to 467.55 Euro/tonne. For White-top kraftliner most of the quotes remained unchanged with a few lower quotes received as well. The benchmark inched up by 52 cents/tonne, or 0.08%, closing at Euro 667.15. In the recycled fibre based containerboard grades the majority of the quotes were unchanged with a few upward adjustments as well. The 1% weakening of the Euro against the weighted basket of non-EMU currencies also helped the indexes to climb. The PIX Testliner 2 benchmark inched up by 31 cents/tonne, or 0.08%, and closed at 377.44 Euro/tonne. The PIX Testliner 3 moved up by 72 cents/tonne, or 0.21%, to Euro 346.62/tonne. The PIX RB Fluting index gained 59 cents/tonne, or 0.18%, to Euro 332.83/tonne.