Feb 22, 2006. /Lesprom Network/. In the North American pulp market, most key producers have publicly announced $660/tonne for NBSKP. Recent and approaching closures of pulp production capacity, most of it NBSKP, have sent buyers looking for new sources of supply. Most of the announced increase went through already in early February. Last week no changes were seen in the quotes after the removal of the top and bottom 10% from the reported prices. The US NBSKP index stayed flat at $656.08/tonne. In the US newsprint market, the supply cuts continue to match the decline in the US newsprint demand. The announced increases, typically by $40/tonne from February, continue to creep through. Benchmarks moved slightly higher in both basis weights. The index for the 30 lb news gained $0.99/tonne, or 0.16%, and closed at $621.44/tonne. The PIX US Newsprint 27.7 lb (45g/m2) benchmark showed a similar movement and came up by $1.1/tonne, or 0.17%, to $664.46/tonne. Positive drivers in the US economy were January retail sales at +2.3% and housing starts up to the highest level since 1973! Warning signals came from core producer price index jump of 0.4%, the Fed indication that the interest rate hikes need to continue and from the consumer confidence drop in February. In Europe, the limitations in the recently passed deregulation directive disappointed those hoping for higher employment. Otherwise optimism is rising. Business sentiment fell marginally in February in Germany but is still clearly above its long-term average. Exports are doing well and private consumption could start showing some growth. Above-target inflation rate, increased likelihood of another interest rate hike, strikes/strike-threats and bird-flu problem are the most essential threats. In Asia, currencies stand a fair chance of appreciating against the USD in 2006, once the Fed stops raising the US interest rates. Japan and China have stronger growth outlook than in the West. The US and European voices supporting protectionism are getting louder. Stronger yuan would help to maintain commercial relationships and support growth through higher domestic spending. In Japan, fourth quarter GDP turned out even better than expected. Private consumption has started to grow faster than foreseen in early 2006. Despite the spending gains, prices remain rather flat. This means less pressure to raise interest rates. Unemployment is falling and earnings are creeping up. Also business sector is growing with surges in investment activity and in purchasing managers’ buying plans. European paper numbers are not out yet for January. UTIPULP’s consumption numbers show a clear improvement in pulp consumption – and hence paper production – in January against December 2005 but virtually flat comparison against January 2005. Among different grades, sentiment has improved in uncoated woodfrees as well as in newsprint, in the latter partly due to the fact that the price increases continue to go through. Packaging sector enjoys a much better start for the year than the dismal over-supply stricken situation a year ago. Publication papers, other than newsprint, are having hard time in the price negotiation process. On the pulp market, the exits of pulp capacity, market or integrated, begin to show in the supply/demand balance. Technical problems at mills in different parts of the world and some wood-supply problems, mainly due to weather conditions, reduce the supply further, in practice. Some big buyers are looking for alternative supply sources as their regular suppliers have either quit the business or put buyers on a temporary allocation. January numbers from UTIPULP showed flat consumption against January 2005 but the inventories fell over 100 000 tonnes representing 27 days’ of consumption, i.e. 3 days less than a year ago. Quotes received for our European NBSKP index continued to climb higher. The PIX benchmark climbed up by $4/tonne, or 0.7%, and closed at $619.81/tonne. The USD strengthened last week by 0.9% against the Euro. Therefore the index in Euro climbed - after conversion – more than the USD-index and closed at Euro 522.47/tonne, up by 8 Euro/tonne, or 1.6%. In BHKP, local market became more lucrative for both Canadian and US producers but now, with the re-start of the Nackawic mill, supply/demand balance appears less strong in the US market than in Europe or Asia whereto the North American producers ship reduced volumes. In Europe, the announced price increases continue to go through. Last week USD strengthened by 0.9% against Euro. Euro 510 converted to $605/tonne. Average from the USD-quotes alone moved up by $2.6/tonne, or 0.43%, to $609.00. Average of the quotes reported in Euro rose by 1.8 Euro/tonne, or 0.36%, to the flat 510.00 Euro/tonne. The strengthening of the USD against Euro helped Euro-average up more than the USD- average. The index closed at 512.74 Euro/tonne, up by 5.9 Euro/tonne, or 1.2%, from last week. Converting the index-value into USD brought it to $608.26/tonne, up by $1.6/tonne, or 0.3%. The newsprint price negotiation results are showing more and more in our index numbers. The downward pull from the slight strengthening of Euro against the basket of non-EMU currencies was hidden as the higher quotes pushed the index higher by 6.4 Euro/tonne, or 1.3%, and closed it at Euro 509.89/tonne. LWC demand declined in Europe last year with most of the drop in December. Energy and other costs triggered price increase announcements but negotiations have been difficult. The effect of a slightly strengthened Euro provided a minor downward pull but the upward changes were enough to bring the benchmark up from last week by Euro 0.46/tonne, or 0.07%, and the index closed at Euro 702.24/tonne. In CWF, changes in the prices reported to us were seen to both directions, fairly evenly distributed. Pulled down also by the slightly stronger Euro, the index dropped marginally, i.e. by Euro 0.57/tonne, or 0.08%, to 717.63 Euro/tonne. In uncoated woodfrees, there was a mix of changes reported – to both directions. The slight downward impact from the minutely stronger Euro dampened the upward push from the higher quotes. The index gained Euro 0.17, or 0.02%, and closed at 788.83 Euro/tonne. Packaging product demand continued solid over the year-turn. The capacity exits continued in late 2005 and more closures have been announced for the first half of 2006 both in North America and in Europe. In addition to the attempts to push higher prices through, the weakening of the Euro by 0.9% against the USD helped the kraftliner benchmark values up from the previous week. Several higher quotes were again received and the PIX Kraftliner index moved up by 5.8 Euro/tonne, or 1.3%, to 444.11 Euro/tonne. The PIX White-top kraftliner index also continued to head higher. Exchange rate movements against non-EMU currencies brought a minor downward pull but the higher quotes were numerous and the benchmark moved up again, this time by 5.2 Euro/tonne, or 0.8%, and ended at Euro 665.81. In the recycled fibre based grades, the benchmarks were pulled slightly downwards by the minute strengthening of the Euro against the basket of non-EMU currencies but that impact was much smaller than the upward push from the numerous higher quotes. The PIX Testliner 2 index gained 6.9 Euro/tonne, or 2%, and closed at 356.40 Euro/tonne. The PIX Testliner 3 benchmark moved up even more, namely by 7.6 Euro/tonne, or 2.4% to Euro 331.56/tonne. The PIX RB Fluting index followed suit and climbed up by 6.9 Euro/tonne, or 2.2%, to Euro 314.17/tonne.