Apr 11, 2007. /Lesprom Network/. Europulp inventories at ports decreased in March 2007 by 55 000 tonnes or by -4.4% from February 2007 inventories of 1.2 million tonnes to 1.2 million tonnes, being -13.8% below March 2006 inventory. Economic news from the US continues to be negative. Factory orders hardly grew in March. Also the service sector growth slowed down. Consumers’ readiness to continue borrowing weakened and consumer spending grew less. But, some strength remains. Employment numbers were good in March with 180000 jobs added, January-February job numbers were revised upwards and unemployment rate fell to just 4.4%. In Europe, the economic outlook is still strong. The negative impact of the 3% VAT hike on the German growth appears to have been short-lived. The purchasing managers’ index dipped a little, however. High wage rises and demands in several countries, including Germany and Sweden, raise the inflation rate and make an interest rate hike by the ECB in June/July ever more likely. Bank of England kept the rate in the UK unchanged last Thursday. In Japan, the fears of the negative impact of the US slow-down on the Japanese economy are growing. The widely-followed Tankan-report by the Bank of Japan showed the confidence of the Japanese manufacturers slipping lower for the first time since early 2006. But, industrial production fell less than expected and consumer spending was lively. In China, the Central Bank told the banks of the decision to raise the reserve requirements for the third time this year, now to 10.5%. This marks yet another effort to cool off the investment boom. Last year the investment growth was still 24%. The threat of more actions from the US to protect their industries after the already made decision to put countervailing duties on coated woodfree paper and board is evident. In paper industry, the producers are struggling with rising/risen costs and, especially in North America, with weak volumes. In the US, rising postal fees represents an additional problem. Low regional demand and increased imports from China have sent US producers to look into more paper and paperboard sales on export markets, such as Europe, Latin America and India. Newsprint and packaging boards show the biggest increases in exports in early 2007. In Europe, the demand for paper was up in January-February from early 2006 for most grades of paper but the industry is not doing well. With the exception of linerboards and newsprint, price increase efforts have not been successful and fibre costs are up for pulp, recovered paper and wood. Several machines – most of them small – have either been closed or are struggling to stay afloat. Pulp market continues to be supply, or rather shortness of supply, driven. In addition to wood supply and high wood cost problems which plague mills in the Nordic countries, Continental Europe and North American West Coast, several mills are taking maintenance downtime in various parts of the world. The market remains tight, especially for BSKP grades. Price increase attempts, typically by $20/tonne for NBSKP from April 1 began to show in our index. The PIX NBSK benchmark gained $6.2/tonne, or 0.8%, and brought the index to $766.91/tonne. Euro strengthened last week against the USD by 0.4%. This reduced the impact of the price rise in Euro-terms to 2.3 Euro, or 0.4%, with the index closing at 573.48 Euro/tonne. In BHKP, the supply/demand situation is also affected by wood supply problems and by switches from hardwood to softwood. The balance is not as tight as in softwood, however, with more new capacity recently started and even more to be started up in the short-/medium-term future. The strengthening of the Euro pulled the PIX BHKP benchmark lower in Euro-terms to 502.02 Euro/tonne, down by 1.9 Euro/tonne, or 0.4%. Converting the Euro-value into USD, the PIX BHKP index moved up to $671.35/tonne, up by $0.23/tonne, or 0.03%. In newsprint, the prices have stabilized on a level which shows about 3.5% increase from the level at the turn of the year, before the 2007 negotiations were concluded. The minute weakening of the Euro against the weighted basket of non-EMU currencies helped the benchmark marginally higher. The index gained Euro 0.02/tonne, or 0.00%, and closed at 536.98 Euro/tonne. The early year statistics for coated mechanical reels were pretty good, even if exports outside the region were clearly down. The Euro was just a fraction down against the basket of non-EMU currencies. The changes outweighed each other, so the PIX LWC index remained unchanged from previous week at 687.63 Euro/tonne. In coated woodfrees, the January-February shipments were up to the European market but, as most grades, down for the exports outside the region. The most marginal weakening of the Euro against the basket of non-EMU currencies had little impact. The PIX Ctd WF index moved up by Euro 0.04/tonne, or 0.01%, and closed at 718.04 Euro/tonne. In uncoated woodfrees, major producers have announced price increases in the US market, reflecting nearly 0.5 million tonnes of supply cuts and higher costs more than any clear improvement in demand. In Europe, demand was slightly up for the regional deliveries as well as for the exports. The positive impact of the marginally weaker Euro against the non-EMU currencies helped the benchmark an inch higher. The PIX A4 B-copy index gained Euro 0.02/tonne, or 0.00%, ending at 825.34 Euro/tonne. The US producers for containerboards as well as boxboards have doubled their efforts on the export market when the domestic market weakened in the early months of the year. European demand has been better but here the exporters face increasing competition and suffer from the strength of the Euro. Earlier announced price increases and 15%+ higher recycled fibre costs have helped the prices higher in the RCP-based corrugating grades and narrowed the price gap between virgin fibre kraftliners and testliners. There was only a minute change in the Euro against the weighted basked of non-EMU currencies with the Euro weakening fractionally. The PIX Kraftliner benchmark ended up with a gain of 1.76 Euro, or 0.3%, and closed at 522.87 Euro/tonne. The PIX White-top Kraftliner index moved up by 1.03 Euro, or 0.15%, to 687.58 Euro/tonne. The PIX Testliner 2 benchmark moved up a most marginal Euro 0.01 cent, or by 0.0%, closing at 429.47 Euro/tonne. The PIX Testliner 3 index did not change at all, closing at 406.00 Euro/tonne. The PIX RB Fluting moved down by Euro 0.01, or 0.0%, and closed at 390.22 Euro/tonne. The prices of the most grades of recovered paper in China and the export prices to the Asian markets have come down a bit from their end February/early March peaks. In Europe, the prices for the domestic shipments of recovered paper still continued to head higher, though. For our PIX OCC 1.04 dd (CEN 1.04) grade, the benchmark moved up this time by Euro 0.24, or 0.3% and the index closed at 87.48 Euro/tonne. As the changes in recovered based linerboards were minimal this time, the price differentials narrowed. The gap against PIX Testliner 2 declined to Euro 341.99, to Euro 318.52 compared to PIX Testliner 3 and to Euro 302.74 against PIX RB Fluting index. For PIX ONP/OMG 1.11 dd (CEN 1.11), the index moved up by 2.64 Euro, or 2.5%, and closed at 107.82 Euro/tonne, narrowing the differential to PIX Newsprint index to 429.16 Euro/tonne.