Jul 03, 2007. /Lesprom Network/. US consumer is finally beginning to loose his steam. Spending advanced a mere 0.1%. Consumer confidence dropped in June to a 10-month low. Job creation has been slow and real disposable income fell 0.1% in May. Durable goods orders declined nearly 3%. Housing continues to fall as well. The rare positive news was the core inflation steadying at just 0.1%. Fed kept the interest rates unchanged. In Europe , healthy growth continues. Consumer confidence index in Germany hit the highest level ever since the reunification of the two Germanys 17 years ago. Also machinery and equipment investments were at a high level in Germany and improved elsewhere in the Euroland. Further ahead, risks of a slowdown increase. Rapid growth and improving unemployment numbers have brought with them inflation pressures. These will lead to further interest rate hikes, although no rise is expected in this week’s meeting. Japanese GDP grew 3.3% during the first quarter. Capital investments, exports and finally also the private consumption – helped at least temporarily by the lower income tax - supported the sizable advance. The outlook for the second quarter calls for a clearly slower growth. Export growth is subsiding and industrial production fell in April for the second month in a row. The Bank of Japan believes that economy is expanding moderately and expects this to continue. In China, the rapid growth during first quarter appears to have continued during second quarter. Forecasters have raised also the 2007 GDP-estimate above 10% and some already believe this will continue in 2008. The Olympic Games boost the infrastructure investments and help many other sectors as well. Inflation rate has speeded up and is expected to run at 3% both this year and next. Latest news from paper industry was not very encouraging. In Europe, CEPIPRINT’s statistics over the month of May were weaker than expected. European demand went up marginally in newsprint but a continued double-digit drop in exports brought the total European shipments down by more than 4% and the year-to-date number is down almost 3%. In all other wood-containing grades, May demand in Europe was down from May 2006. Year-to-date, regional demand for both SC and LWC is still well ahead 2006 but exports are down. In North America, newsprint demand was down 9% in May and almost 11% year-to-date. In most other printing and writing grades, demand growth, if any, is slow. However, after several capacity closures, supply/demand situation is normal or even tight (cut-size uncoated free sheet) and prices are stable or going up. In containerboard, numbers for May were not good in the regional sales as box shipments were down by 3.3% compared to May last year. Exports are clearly higher than in 2006, though. With good shipment and inventory statistics over the month of May, pulp market remains tight. Capacity increases are largely offset by the increases in demand and by the continuing losses of production, mainly due to the wood supply issues. The strength of CAD and Euro against the USD has supported the recent price increase attempts. The PIX NBSKP European benchmark moved up by $5.6, or 0.7%, to $796.85/tonne. The 0.8% strengthening of Euro against USD brought the Euro-value down. After conversion, the NBSKP index in Euro dropped by 0.58, or 0.1%, to 590.04 Euro/tonne. In market BHKP, the shipments show increasing gains over 2006. The 8% demand growth in May and the subsequent 4-day drop in the producer inventories illustrate the present strength of the hardwood pulp market. Losses of birch pulp production, market and integrated, help the sales of other BHKP grades. Price increases announced for June in Europe continued to go through last week. The 0.8% strengthening of the Euro against USD reduced the gain in our PIX BHKP benchmark, which moved up by just Euro 0.65, or 0.13%, to 516.81 Euro/tonne. Converting the value into USD brought the index up by $6.45, or 0.9%, to $697.95/tonne. CEPIPRINT numbers for May showed European newsprint demand up, although only by 0.2% from May 2006. This was again explained by growth in imports from outside the region. Shipments from CEPIPRINT members were down both for European and export destinations. Also year-to-date, European demand is up, by 1.6%, but European shipments are down, by 2.8%. The 0.25% strengthening of the Euro against non-EMU currencies pressed the PIX Newsprint benchmark down. Our index lost Euro 0.20/tonne, or 0.04%, and closed at 539.01 Euro/tonne. Demand for coated mechanical reels was down in Europe in May by 0.2%, according to CEPIPRINT. Year-to-date, demand is still up by a healthy 3.6%. Exports from Europe continue to decline with a double-digit %-age. Therefore, the total European shipments were down for May, as well as year-to-date. Euro strengthened from the previous week by approximately 0.25% against the basket of non-EMU currencies causing downward pull on our benchmark. The PIX LWC index lost 1.5 Euro, or 0.22%, and ended at 675.65 Euro/tonne. In coated woodfree papers, Korean imports are replacing Chinese and Indonesian volumes In the US market. Competition within Asia is increasing. In Europe, cost pressures remain as prices are still below their early January level. New price increase attempts have been announced with 5-8% increases from September. The downward impact of the 0.25% weakening of the Euro against the basket of non-EMU currencies was the main price driver. PIX Coated woodfree index lost Euro 0.29, or 0.04%, and closed at 717.45 Euro/tonne. In uncoated woodfrees, US market is tight for cut-sizes but less so for the offset sector. In Europe , the strengthening of the Euro by about 0.25% against the weighted basket of non-EMU currencies brought some downward pull. Our PIX A4 B-copy index climbed up by 1.1 Euro/t, or 0.13%, ending at 840.78 Euro/tonne. In packaging sector, the latest US containerboard numbers showed a 3.3% drop in corrugated box shipments in May against May 2006. Exports from North America to overseas destinations, including Europe, continue to increase. Export growth and supply cuts have helped to keep the North American market in a fairly good balance. Europe approaches the quieter summer season from a good starting point. With economic growth up, all kinds of trade prosper and, with the active trading, containerboard markets remain quite strong. Euro strengthened 0.8% against the USD and by about 0.25% against the basket of non-EMU currencies. Our PIX Kraftliner index for brown virgin fibre based linerboard gained 1.4 Euro, or 0.27%, to 533.28 Euro/tonne. In White-top Kraftliner, impacted mainly by the currency impact, our index fell back by 2 Euro, or 0.29%, closing at 695.24 Euro/tonne. In the recovered paper based containerboards, the PIX Testliner 2 benchmark moved up by Euro 0.72, or 0.16%, to 454.04 Euro/tonne. The PIX Testliner 3 index gained a bit more, 1.1 Euro, or 0.25%, and closed at 436.07 Euro/tonne. PIX RB Fluting went up by more marginal Euro 0.15, or 0.04%, ending at 421.63 Euro/tonne. Recovered paper prices appear to be moving up again in Asia. They have, however, been fairly stable in Europe over the past few weeks. Our PIX OCC 1.04 dd benchmark went up by Euro 0.07 this time, or by 0.07%, closing at 94.01 Euro/tonne. The gap widened against PIX Testliner 2 index by Euro 0.65 to Euro 360.03. Against Testliner 3, the differential widened by one Euro to Euro 342.06. Against RB-fluting the change was small, widening the gap to Euro 327.62. In old newsprints/old magazines grade, our PIX ONP/OMG 1.11 dd index lost a most marginal Euro 0.01/tonne, or 0.01%, bringing it to 113.52 Euro/tonne. The differential to PIX Newsprint index narrowed to 425.49 Euro/tonne.