US Paper Markets Down, Europe on the Rise

August 29, 2006 (FOEX) - The European paper data comparisons over the month of July, and partially for the year-to-date numbers, too, are distorted by the impact of the strike/lock-out of the Finnish paper industry in 2005. There was a distinct difference between the US and European paper markets in July, reported Finland's FOEX.

In the US, consumption of the newspaper dailies was down by 9%, coated woodfrees by 5.3% and uncoated free sheet by 1.7%.

In Europe, newsprint demand was reported up by over 4% by CEPIPRINT. In SC (supercalendered), the regional demand was also up a lot. Other uncoated mechanicals did very well, too. In coated mechanicals, regional demand gains were very small. In the CEPIFINE statistics over woodfrees, total deliveries were up a lot in the coated grades but the regional consumption showed a minor decline. In uncoated grades, all July numbers were positive.


In the North American pulp market, the situation in NBSK remains tight. Several key producers have separately announced price increases, typically by $20/ton to $770/ton from September. However, the FOEX PIX US NBSK benchmark, for August, remained at $750.00/ton, unchanged from previous week.

In Europe, market pulp was helped by a strong performance from the European paper sector in July. UTIPULP reported market pulp demand down from July 2005, but the inventories of market pulp at consumers are down by 17,000 tons from June 2006 and were over 80,000 tons below the July 2005 level. Market pulp shipments showed an 8.6% increase over July 2005. In spite of good shipment numbers, producer stocks went up more than the seasonal norm, or by 3 days' worth of deliveries.

The BHK market has been supported by the increasing production and delivery volumes of woodfree and tissue papers, both in the European as well as Asian markets. Euro weakened by 0.3% against the USD over last week which helped the FOEX BHK benchmark move up in Euro-terms. The index closed at 515.76 EUR/ton, up by 1.4 EUR/ton, or 0.27%. Converting the index-value into USD brought it down to US$658.21 ton, down by 27 cents/ton, or by 0.04%.


US newsprint statistics continue to offer very disappointing numbers. In July, the long-lasting erosion continued with a drop in the consumption of dailies. Operating rates, still high, have eased off a little from the highest values seen earlier this year. Producers are in the process of attempting another price increase, supported by the continuing strength of the Canadian Dollar, but rolled partially back by at least some of the producers. This week's PIX US Newsprint 30lb benchmark gained 4 cents, or 0.01%, and closed at US$641.08 ton, whereas for the 27.7lb benchmark the gain was just 3 cents, or 0.00%, to $683.19 ton.

Newsprint shipments to the European market were strong. CEPIPRINT reported the European demand estimate up by 4.1% for the month of July and 4.3% up year-to-date. Euro weakened by about 0.4% against the weighted basket of the non-EMU currencies last week. The PIX Newsprint index inched up by a mere 3 cents, or by 0.01%, to 519.48 EUR/ton.


In coated mechanical reels, the shipment numbers in July were good over the labor strife-impacted July 2005. Total shipments were up by 8.3%, according to CEPIPRINT. Regional demand was estimated up by just 0.3% but more, 2.7%, year-to-date. Helped by the 0.4% weakening of the Euro against the non-EMU basket, the PIX LWC benchmark gained 36 cents, or 0.05% closing at 705.13 EUR/ton.


In coated woodfrees, the July data from CEPIFINE showed shipments to Europe were marginally down and the estimated WE demand was down by 0.4% for July but still up 3.3%, year-to-date. Helped by the weaker Euro, the PIX Ctd WF benchmark went up by 97 cents, or 0.13%, ending at 720.27 EUR/ton.


In uncoated woodfrees, CEPIFINE numbers were very positive. Total deliveries were up almost 10% in July, exports up nearly 30% and the estimated WE demand by just over 6%. Weakening of the Euro by 0.4% against the weighted basket of non-EMU currencies was not enough to hold the benchmark price up. FOEX's PIX A4 B-copy index retreated by 1.7 EUR/ton, or 0.21%, and closed at 805.42 EUR/ton.


In packaging sector, the US containerboard market remained firm in July. The operating rates reached 98% and the corrugated box shipments continued to rise. Inventories climbed at box plants but remained well below long-term average levels.

In Europe, the activity has also remained better than seasonally expected in August. Containerboard price increases have been announced, typically 30-40 EUR/ton from September for continental Europe and EUR 40/ton, or equivalent, from August for the UK. The currency movements had a small positive effect on FOEX's indexes as the basket of non-EMU currencies strengthened by about 0.4% against the Euro. Also the USD strengthened.

For Kraftliner, changes in quotes received were mainly slightly up. The PIX Kraftliner index gained just over 2 Euro, or 0.4%, and closed at 489.71 EUR/ton.

For White-top Kraftliner, quotes received were mainly unchanged. With some help from the weaker Euro, the PIX White-top Kraftliner benchmark gained 1.24 EUR/ton, or 0.19%, and reached 670.05 EUR/ton.

For the recycled based packaging grades the quotes were largely unchanged but with some upward changes as well. The PIX Testliner 2 index rose by 1.9 EUR, or 0.5%, to 385.53 EUR/ton. The PIX Testliner 3 index gained also but only 12 cents, or 0.03% to 356.77 EUR/ton, and the PIX RB Fluting went up by 1.44 Euro, or 0.42%, to 342.39 EUR/ton.


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