FOEX: NBSKP down by Euro 7, or 1.2%

Mar 21, 2007. /Lesprom Network/. Increasing numbers of homeowners fail to pay their mortgages, hit by the rise of the interest rates. This is a threat to banks but also to private spending. Retail sales were soft already in February. Consumer prices rose according to expectations but producer prices more than projected. A positive piece of news was the rebound of industrial production. GDP-growth is at present only about 1% and the annual rate for this year may end up falling below 2%. In Europe, inflation rate slowed down to less than 2%, both for January and February. ZEW-index in Germany climbed higher confirming that the VAT-hike appears not to slow down German economic growth in any significant way. The strength of the German economy is good news for EU as a whole, too. Growth forecasts for Europe have been revised upwards. In China, the growth of the current account and trade surpluses continues. In February, trade surplus was almost $24 billions, the second highest monthly figure ever. The pressures to allow the yuan to appreciate are mounting. Meanwhile, the government is using other measures to keep the inflation at bay and to cool down the over-heated economy. Central Bank hiked the interest rate by 0.27%-points on Saturday. In Japan, the yen, even if still historically very weak, has strengthened by about 2% against the USD since the beginning of the year. The end of 2006 gave a good start for 2007, especially in business investments. Consumer spending is also growing, although only by about 1%. Export performance was very good in the beginning of this year. In paper industry, weakening economic growth in the US and freezing weather in California affecting agricultural production, brought the box volumes down by 4.3% against February 2006. Major producers are combating the softness by taking downtime during first quarter and the inventories fell in February more than their seasonal norm. In Europe, no statistics are out yet on paper production or shipments. UTIPULP’s market pulp consumption numbers show a modest 0.9% decline suggesting a flat or slightly negative paper production month. In Asia, paper production volumes have been reasonably good in the beginning of the year but the production capacity is up quite substantially from a year ago. Pulp market is still firm, particularly the long-fiber sector. UTIPULP’s consumer inventory data showed the stocks going down again in February for the fifth consecutive month. Inventories of market pulp in Europe stood at only 25 days’ worth of consumption and 8% lower than a year ago. Earlier, also stocks at ports were reported to have gone down by Europulp. The PIX NBSKP benchmark gained another $0.44, or 0.06%, which brought the index up to $759.97/tonne. Euro strengthened last week by as much as 1.3% against USD. This led the PIX NBSK benchmark in Euro-terms to a clear fall of Euro 7, or 1.2%, with the index closing at 570.33 Euro/tonne. In BHKP, some weakness has again been reported in the Asian market. In Europe, however, the UTIPULP data showed a clear decline in the regional consumer stocks of market BHKP. This either indicates improved production in the BHKP consuming grades, further furnish changes, a switch towards more softwood pulp in the Nordic region or maybe a bit of all of these drivers. Mainly the further clear Euro-strengthening pulled the PIX BHKP benchmark down in Euro-terms to 503.31 Euro/tonne, down by 6.3 Euro/tonne, or 1.24%. Converting the Euro-value into USD, the PIX BHKP index was pushed by the USD-weakness to $670.66/tonne, up by $0.24, or 0.04%. In newsprint, no further impact from the results of the price negotiations was seen in the index from the quotes received over last week’s sales. The benchmark showed a small dip, as the down-pull effect from the further strengthened Euro (about 0.3%) against the weighted basket of non-EMU currencies took its toll. The index lost Euro 0.43/tonne, or 0.08%, and closed at 534.45 Euro/tonne. The capacity reductions in coated mechanical reels do not clearly show on the market place – at least not yet. This is as much due to the supply growth of coated woodfrees as to demand weakness in LWC. In fact, January shipment data was rather encouraging. The Euro strengthened by about 0.3% against the basket of non-EMU currencies which pulled the benchmark slightly down. The PIX LWC index retreated by marginal Euro 0.19/tonne, or 0.03%, and ended at 687.96 Euro/tonne. In coated woodfrees, most of the impact on our benchmark came, once again, from exchange rate movements. The approximately 0.3% strengthening of the Euro against the basket of non-EMU currencies pulled the benchmark lower. The PIX Ctd WF index slid down by Euro 0.23, or 0.03%, and closed at 718.04 Euro/tonne. In uncoated woodfrees, the market feeling is rather positive. This shows also in the price behaviour. The pull-down of the strengthening Euro against the non-EMU currencies was overrun by the upward price changes and the PIX A4 B-copy index gained 1.18 Euro/tonne, or 0.14%, ending at 824.65 Euro/tonne. Weakening of the economic growth impacts the demand for packaging grades in the US but in the rest of the world the demand continues to grow with the expansion of the trade. Tightening recovered fibre supply/demand balance has raised the raw material costs. The growing cost pressures have led also the US producers to attempt price increases. So far those attempts have not been successful. In Europe the linerboard price initiatives have led to small increases, especially in the recovered fibre based grades. There was downward pressure from the weaker USD and from the 0.3% strengthening of the Euro against the weighted basket of non-EMU currencies. The PIX Kraftliner benchmark ended up with a minor gain of Euro 0.17, or 0.03%, and closed at 519.90 Euro/tonne. The PIX White-top Kraftliner index retreated by Euro 2.4, or 0.35%, to 685.93 Euro/tonne. Within the recovered paper based grades, the PIX Testliner 2 benchmark showed a marginal loss of Euro 0.16, or 0.04%, and closed at 421.82 Euro/tonne. The PIX Testliner 3 index moved to a different direction and, in spite of the Euro strength, gained Euro 1.9, or 0.5%, and ended at 399.06 Euro/tonne. The PIX RB Fluting moved up even more, heading north by Euro 2.8, or 0.7%, and closed at 386.32 Euro/tonne. Demand pull for recovered paper in Asia calmed down a bit in early March but as an after-effect of the heating up of the international trade conditions in February, recovered paper prices have continued to move up both in Europe as well as in the US. And the upward movement applies both to the overseas exports and to the trade within these key regions. For our PIX OCC 1.04 dd (CEN 1.04) grade, the benchmark moved up this time by Euro 4.2, or 5.2% and the index closed at 85.59 Euro/tonne. The differentials to end-products narrowed. The gap was reduced to Euro 336.23 against PIX Testliner 2, to Euro 313.47 compared to PIX Testliner 3 and to Euro 300.73 against PIX RB fluting index. For PIX ONP/OMG 1.11 dd (CEN 1.11), the index moved up Euro 1.65, or 1.7%, and closed at 100.96 Euro/tonne, which reduced the differential to PIX Newsprint index to 433.49 Euro/tonne.