Mercer to Trim Pulp Capacity in Germany on Lack of Fiber

Nov. 29, 2006 - Mercer International said that it will reduce pulp production at its German pulp mills by about 20,000 tonnes in December because of an anticipated shortage of raw material.

"We believe it is prudent to curtail production in December so that our German mills can build some fiber inventory going into the new year in the event of seasonal weather disruptions to our supply," said Mercer's chairman and president, Jimmy S.H. Lee.

"We are taking this measure as, unfortunately, German State and Federal governments and private forestry organizations have not yet reacted to sufficiently rebalance the wood supply as a result of low harvesting levels during last winter and the increased wood demand from the energy industry," he added.

According to Mercer, the company is importing additional fiber to Germany and currently expects, subject to weather conditions, that its mills will return to full production in January of 2007. The current fiber limitations result primarily because German 2006 harvest levels were insufficient to correct the imbalance of wood supply created by low harvest levels during the very severe winter conditions in Central Europe at the start of the year, increased competition for fiber from the energy sector and exports to other countries.

"The governments' biased promotion of wood for energy production has further aggravated the situation," Lee said. "As a result, there has been considerable upward pressure on fiber prices without a corresponding increase in supply available with under-delivery, in certain cases, of contracted amounts from the State forests and other suppliers.

"We hope that this problem will be better addressed in the coming year by all levels of government in Germany and that corrective measures will be taken to increase the level of wood harvesting to better rebalance the wood supply," Lee added.

SOURCE: Mercer International

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