Paper Demand Lively, Pulp Markets Remain Tight

Aug. 1, 2006 (FOEX) - The paper industry volumes have responded to the still mainly positive news data on the world economic activity. In Europe the numbers released by CEPIPRINT and CEPIFINE over the June demand showed for most grades higher growth for the month than for the first half totals—comparisons again impacted by the labor strife in Finland in 2005.

European newsprint demand in June was up by almost 4%, SC and other uncoated mechanicals together over 10%, and LWC over 6%. On the woodfree side, uncoated grades were up just over 2% and coated woodfree just over 3% compared to June 2005.

In North America, the June statistics also showed lively activity, especially in packaging and uncoated woodfree sectors. Box demand was up by nearly 5% and inventories came down, even if only slightly.

Asian activity is also lively, but the overcapacity in China has increased exports to the neighboring countries and made the price increases more difficult to push through than in North America. In Europe prices have edged up further in packaging grades and in uncoated woodfree with still little real change in the coated grades.


The tightness persists on the pulp market. The June data by PPPC on international market pulp shipments and inventories showed a 4.3% gain in the deliveries over June 2005 and an almost 6% increase year-to-date. High shipments were reflected in the producers' stocks which dropped to 28 days for all grades and just 24 days for BSKP. Further price increases have been announced in the Asian market, typically by US$20/ton for the August shipment.

In North America, the pulp market has remained tight even if the shipments of market pulp were down by 1.1% for the first half. There are still two decided closures taking place before new market pulp capacity starts coming into the market from Chile. There were no changes impacting FOEX's U.S. NBSK benchmark value and price index remained unchanged at US$747.40/ton.

In Europe, the earlier announced pulp price increases continued to go through according to the price data received over the long-fiber market pulp business conducted during the last week of July. The NBSK (in Europe) benchmark climbed up by US$3.51/ton, or 0.5%, to $702.46/ton. (The USD strengthened last week but only very marginally, or by 0.1% against Euro. NBSK index value in Euro increased to 554.69 EUR/ton, up by 3.47 EUR/ton, or 0.6%.)

In BHK, the gain in shipping activity was as much as 12% over June 2005, but with also higher production numbers the producer inventories remained flat from May at 33 days but down from June 2005, though. The Euro weakened marginally, or by 0.1% against the USD over last week. FOEX's BHK index closed at EUR 516.52/ton, up by 2.7 EUR/ton, or 0.5%. Converting the index-value into USD brought it to $654.12/ton, up by $2.60/ton, or by 0.4%.


Statistics from the U.S. newsprint market continue to be weak. Newsprint consumption of the dailies was down by 7.4% over the first half. While the losses in other uses of newsprint have been smaller, production of the U.S. newsprint producers is down 4% and imports from Canada by almost 7%. However, extensive closures of older machines have supported pricing. For the U.S. Newsprint benchmark, again only a few small changes were reported. The 30lb index moved down by 14 cents, or 0.02%, to $642.27/ton. The 27.7lb grade retreated by 6 cents, or by 0.01%, to $683.82/ton.


Newsprint demand in Europe has continued strong. June numbers released by CEPIPRINT showed 3.9 increase in the estimated June demand over last year but, with reduced imports to the region, European shipments were up more, almost 5% for the total and 8.5% within Europe. The small upward adjustment of the index was mainly currency driven, as the EUR weakened by about 0.1% against the non-EMU currencies last week. FOEX's newsprint index moved up by 13 cents, or by 0.03%, to EUR 519.20/ton.


In coated mechanical reels, the June numbers from CEPIPRINT gave an 8% increase in the total European shipments over the labor conflict-affected (Finland) numbers of June 2005. Estimated demand was up over 6% which brought the year-to-date gain to just over 3%. With the help of the exchange rate movements the PIX LWC benchmark gained EUR 1.25, or 0.2% and closed at EUR 704.65/ton.


In coated woodfrees, delivery numbers in July were quite positive with total deliveries by European mills up nearly 8% and WE estimated demand up 3%. The oversupply problems have still prevented the prices from moving up. In spite of the mini-boost from the 0.1% weakening of the Euro against the basket of non-EMU currencies, FOEX's Coated Woodfree benchmark inched marginally downward. The index retreated by 13 cents, or 0.02%, and ended at EUR 718.95/ton.


The estimated demand for uncoated woodfrees in Europe was up 2.3% in June, but total deliveries increased by 4.6%, supported by a big gain in exports. In spite of the minor assistance given by the currency movements, FOEX's A4 B-copy index slid this time back by EUR 1.35, or 0.17%, and closed at EUR 803.02/ton.


The U.S. corrugated box shipments continued strong in June, up by 4.9% on year-over-year basis, while inventories fell. Producers are reported to be trying to push containerboard price increases into box prices.

In Europe, major producers have announced containerboard price increases, typically EUR 30/ton from September for the Continent and EUR 40/ton from August for the UK.

FOEX's packaging indexes continued upward. The currency movements had a small positive effect on the price indexes this time as the basket of non-EMU currencies strengthened by 0.1% against the Euro.

For Kraftliner, some higher quotes were received and the Kraftliner index gained EUR 1.28 or 0.26%, ending at EUR 485.77/ton.

For White-top Kraftliner, quotes received were mainly unchanged and the change was mainly currency driven. The White-top Kraftliner benchmark rose by 32 cents, or 0.05%, reaching EUR 668.32/ton.

Higher quotes were reported for the recycled based packaging grades, and the Testliner 2 index went up by 1.14, or 0.30%, to EUR 382.98 EUR/ton, the PIX Testliner 3 by 59 cents, or 0.17% to EUR 355.16/ton, and the RB Fluting by 13 cents, or 0.04%, to EUR 339.89/ton.

About FOEX
FOEX Indexes Ltd. (www.foex.fi) is a private, independent company specialized in operating as a provider of audited, trade-mark registered pulp and paper price indexes. FOEX is continuing the index publishing activity started by Finnish Options Exchange in 1996.

FOEX's PIX indexes are benchmark price indexes for various grades of pulp, paper and paperboard. FOEX receives real trade information from parties in the pulp and paper industry, from buyers, sellers and agents. The highest 10% and the lowest 10% of the prices are eliminated, and the PIX value is calculated as an average from the remaining prices.


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