Dec 28, 2005. /Lesprom Network/. In the US newsprint market, demand continues its downward trend compared to 2004. In November, the monthly shipments were, however, down less than in the previous months. It is hard to tell yet whether or not this signals an end of the downsizing programs or just the weakness of the comparison period. Anyway, levelling off of the earlier sharp decline combined with capacity cuts and low stocks help to maintain a healthy supply/demand balance. The efforts to get through the announced price increases continue. Last week there were some changes in the quotes to both directions. Increases were more numerous and the index gained 45 cents/tonne, or 0.07%, and closed at $613.53/tonne. On the North American pulp scene, market pulp shipments continue well above 2004 level, largely due to the structural changes affecting both demand and supply. Capacity reduction announcements have continued. In the US market at least one major market pulp producer has so far announced a price increase by $20/tonne from $640 to $660 for NBSKP, effective from January 1. There were no changes in the prices reported to us over last week’s activities with an impact on our benchmark. The US NBSKP index showed, therefore, no change and remained flat at $640.00/tonne. The US third quarter GDP-growth was revised upwards to 4.1%. Economic data over November is predominantly positive. Consumer inflation recorded a decline and the producer price inflation was up less than expected. Private consumption continues to be the main driver of GDP and personal income was again up in November, now by 0.3%. Re-grown deficits, higher interest rates and the tail-end of the energy-bill impact are the main concerns over 2006. In Europe, the year is ending with a positive note. Solid growth in the world economy, coupled with less over-valued Euro helps the exports. Domestic demand is a finally showing some signs of life, mostly in private investments. An agreement over the EU budget has restored some faith on political decision-making. Energy prices, still high unemployment and the risk of a slow-down in exports are the key worries entering 2006. China’s total GDP has been revised upwards and China is now estimated to be the fourth largest economy after the US, Japan and Germany but above Great Britain and France. The upwards revision raises the share of domestic consumption and lowers thus the share of the still massive investments with at least 40% share of the total GDP. Current account surplus continues to grow and at 6.5% of the GDP the surplus continues to pressure for a second revaluation of the Yuan. In Japan, the year is ending with a wide-front solidification of the economic recovery. All key sectors of the economy are contributing. The trade surplus boosts growth and together with higher private consumption numbers is triggering more investments. Structural reforms continue and the general improvement of the future expectations among both private households and the corporate sector brought the Nikkei index above 16 000 points, the highest level since the year 2000. Within the paper industry, a difficult year is drawing to a close with disappointing financial results but with a hint of optimism in the air. Packaging grades have been the strongest sector. The combination of improved demand and capacity closures has improved both the supply/demand ratio and the pricing. In newsprint the demand has been quite weak in the US all through the year but supply cuts have matched the slow-down in shipments. In Europe, the numbers over November, published over the Christmas holidays by CEPIPRINT, showed another large drop in exports and as the regional shipments were slightly down, too, the total shipments fell by over 2% for the month and exactly 2% for the year-to-date. WE regional demand is slightly up for the year, though. In the other printing and writing grades, US demand continued to fall but less than in most other months of the year. Coated grades did better than the uncoated. The supply is under control, proved by a decline in the inventories. In Europe, in the woodcontaining grades, November was a very good month for SC which showed more than 7% growth in shipments over November 2004. The year-to-date shipments are still clearly negative, though. In other uncoated wood-containing grades, both the November’s monthly figures and the year-to-date demand showed declines. Coated mechanical exports were down in November but the regional shipments were up enough to keep the total demand growing, both for the month of November and year-to-date. Price negotiations continue after price increase announcements were made in virtually all major grades of paper and paperboard on both sides of the Atlantic Ocean from January 1. The talks are expected to be tough and long and are presently at such an early stage that there is no news yet over the rate of success of the increase attempts. On the pulp market, the November shipment data came out with a clear increase in the BHKP shipments over November 2004. The year-to-date numbers continue to be down for those countries which report their monthly data and probably flat or up very slightly if those not reporting were included. In softwood kraft, the position was opposite. November shipments fell slightly short of those last year but the year-to-date deliveries still show a 2.4% gain. Producers’ stocks remained flat at 32 days of supply – measured as an average of the last 3 months of shipments. Both the port stocks and the consumer inventories in Europe came down – as earlier reported – in November which meant that the total chain of supply emptied a bit further. Also the Asian port stocks are reported to have declining stock volumes. The 2005 list of announced closures is longer than the list of capacity additions in terms of names. In actual tonnage involved, the increases outweigh the decreases but only by a small margin after some of the recently announced closures have actually taken place. At least one major producer has announced a price increase in NBSKP, by $30/tonne in the European market from January 1. For our European NBSKP index, most quotes received over the Christmas week were unchanged. The few changes were mainly downwards. The values received were still in the range of 585-620 and the most common quote continued to be 600. The PIX benchmark lost again some ground in USD-terms and closed at $598.69/tonne, down by $0.52/tonne, or 0.09%. The USD strengthened last week by 1% against the Euro. The Euro-value of NBSKP came up accordingly. The index in Euro ended - after conversion - at Euro 504.84/tonne, up by Euro 4.8/tonne, or almost 1%, from the previous week. For BHKP, the November delivery statistics were good with the North American market showing clearly the biggest gain year-to-date. In this grade the producer stocks came down. The quotes received for the European BHKP PIX-index were mostly unchanged. Among the few changes, moves were seen in both directions. Exchange-rate movements played a major role. The USD-quotes ranged again at $565-600 with $590 remaining as the most common quote. The prices reported in Euro continued to be in the 490 to 500 range. Last week USD strengthened by 1% against Euro. Euro 500 converted to $593/tonne. Average from the USD-quotes alone was $589.51, up by just $0.01/tonne or 0.00% from the previous week. Average of the quotes reported in Euro decreased again, now to 495.00 Euro/tonne, down by Euro 0.71/tonne, or 0.14%. The weakening of Euro against the USD sent, however, the official benchmark in Euro higher. The index closed at 496.86 Euro/tonne, up by Euro 4.6/tonne, or 0.9%, from last week. Converting this into USD meant a drop of $0.67/tonne, or 0.1%, to $589.23/tonne. The newsprint market remains firm, even if the delivery statistics over the month of November showed a drop against November 2005 on both sides of the Atlantic. In Europe regional demand was down 0.3% but exports by as much as 15%. The annual demand in Western Europe is still positive with a 1.2% gain, partly supplied from outside the region, though. Price increase announcements vary by market and by supplier in the range of 5-10%. The success of these attempts will be seen only gradually, due to the 5-8 week long order books. Euro strengthened last week by about 0.75% against the basket of non-EMU currencies. With largely unchanged quotes from the previous weeks, the benchmark fell, due to the downward pull from the exchange rate movements. The index closed at Euro 489.84/tonne, down by Euro 0.61/tonne, or 0.12%. In coated mechanical reels, CEPIPRINT reported a 2.6% increase in the November shipments to WE and a 1.7% gain in total shipments after a decline in the exports outside the region. On year-to-date basis, WE demand is up by modest 0.4% but the total shipments by more than 2.5% boosted by the strong exports in early 2005. Only a limited number of changes were reported for our benchmark, to both directions. The main impact came from the stronger Euro – up by about 0.75% against the weighted basket of non-EMU currencies - which pulled the benchmark downwards. The index fell from last week, by Euro 2.0, or 0.3%, and closed at Euro 699.95/tonne. CWF numbers over November for Europe are not yet available. The US shipment data was positive with a 0.3% gain whilst most other printing and writing grades were down. Most key producers have announced higher prices from January 1 in Europe but negotiations continue and no results are known at this stage. In the quotes received, a few changes only were seen, in both directions. The benchmark was pushed down by the 0.75% stronger Euro (against the basket of non-EMU currencies) and the index closed down, just as last week, by 2.2 Euro/tonne or 0.3% at Euro 719.32. In uncoated woodfrees, the European statistics over November are not out yet. In the US the shipments were, once again, down from 2004 but less than in the previous months. For our European benchmark, among mainly unchanged quotes, some changes were also reported to us, predominantly downwards. With a further downward impact from the 0.75% strengthening of Euro against the basket of non-EMU currencies, the B-copy benchmark registered again a decline. The index lost 2.5 Euro/tonne, or 0.3%, and closed at Euro 781.41. The continued strength of the world economy helps world trade and the gains in trade volumes support the demand of containerboard. Most of the demand growth has been in Asia but the market has strengthened also in the US and WE markets, mainly during the recent after-summer months. The higher shipment volumes have not stopped the supply reductions from continuing. Consequently, inventories have stayed low and supply/demand ratio has remained strong enough to help price increases through, after a substantial price drop in Europe during the early months of the year. Further increases, typically by $40/tonne in the US and Euro 50/tonne in the European market, have been announced by the major producers. The currency movements last week had both a negative impact and a positive impact on our kraftliner benchmark. The strengthening of the USD by 1% against the Euro pushed the benchmark up but this was largely counter-balanced by a 0.75% strengthening of the Euro against the basket of non-EMU currencies which pull the index down. The price changes received from the market were very limited. The PIX Kraftliner index inched up by Euro 0.19/tonne, or 0.04%, and closed at 429.46 Euro/tonne. In the recycled fibre based grades, the quotes were also largely unchanged. The benchmarks were, therefore, mainly impacted by the downward pull from the strengthened Euro. Both the recovered paper based grades prices slid slightly lower. Our PIX Testliner 2 index lost Euro 0.52/tonne, or 0.15%, and closed at 340.42 Euro/tonne. The PIX RB Fluting index fell by Euro 0.51/tonne, or 0.17%, to Euro 298.29/tonne.