::The Center for Paper Business and Industry Studies::

0710115 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (10/15/07)

Deutsche Bank - Equity Research

* NEWSPRINT

Catalyst is out with a $25/tonne price hike for Oct. 1, despite Kruger's failure on a similar increase in September. SP has announced $30 for Nov 1. Last week brought some good news on supply. Tembec announced plans to indefinitely idle a 100K/mton machine at Kapuskasing, ON - - - one wonders, why did it take this long? Kruger announced plans to curtail 25,000 tonnes of newsprint capacity in Quebec next month. These are the first signs that 2nd and 3rd tier players are willing to act in front of ABY/BOW merger. August consumption figures at the US dailies were off 10%.

* KRAFT PAPER

Longview Fibre is out with a $30/ton price hike initiative on extensible sack kraft paper for September. Longview also announced the closure of 2 more paper & paperboard machines late last week - - - the exact impact of kraft paper remains unclear. The kraft paper market is far tighter than most observers have realized. Suppliers have reported strong demand, especially for shipping sack paper.

Grocery bag paper rose $50/ton in May.

* CONTAINERBOARD

"Locked in concrete" noted one well-known financial consultant to the sector - in speaking about the $40/ton autumn containerboard hike. Downstream, the corresponding box price hike appears to be taking hold with unexpected ease. We've had some conversations with converters that suggest box price gains could exceed the $40/ton board hike. This would be a shift from earlier board hikes which did not appear to be fully passed-thru by many of the integrated producers. OCC prices are continuing to rise, putting cost pressure on recycled mills.