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Newsprint Prices Continue Climb, But Margins Still Tight

Aug. 24, 2010 - Newsprint prices in August rose for the 12th consecutive month; +$10/metric ton to $640/mton in the East and $5/mton to $590/mton in the West, say analysts from Deutsche Bank.

According to Mark Wilde, a senior analyst at Deutsche Bank who covers the forest and paper sector, the increase was driven by pass-thru of earlier price hikes (especially for big national buyers) and implementation of Boise’s $25/mton price increase.

In a bid to close the increasing price gap between East and West coast (now $50/mton), Catalyst (#1 west coast producer), Norpac, White Birch & Blue Heron recently announced a $40/mton price increase for September, Wilde said.

Despite the 45% increase in prices in the last one year, margins remain extremely low. Abitibi's recent filing suggests that they lost $64/mton in 2Q, Wilde noted.

Considering the secular issues facing the newsprint industry, producers are exploring opportunities to move some capacity to other paper grades like kraft paper and light-weight containerboard, the analysts said.

Producers are also focusing on off-shore markets like Asia, Latin America and Middle East, where demand is growing.

SOURCE: Deutsche Bank




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