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Industry
Reports
Deutsche Bank Reports Summaries
061002 Deutsche Bank Report - Dr. Paper's Pulse on
Pricing
Deutsche Bank - Equity Research
LUMBER
The Random Lengths composite fell $12/mbf to $274/mbf last
week.
The 10 year low for the composite was $265/mbf in November of
2002.
Some higher-cost mills are bleeding. Canadian mills are
reportedly
pushing lumber across the border in front of an October 1
imposition
of a 15% export tax. British Columbia mills are dealing with
yrs
worth of "beetle kill" wood and mills across NA continue to focus
on
using lower-cost, small diameter logs.
CONTAINERBOARD
While reports in trade press suggest a "balanced market", we're
more
cautious. Trade sources suggest that c'board is much more
readily
available - 'no questions asked'. The risk is that cyclical
or
seasonal slowing in Q4 could lead to pricing erosion in early
'07.
With natural gas & OCC costs down, recycled mills have
healthy
margins and the ability to cut prices if they need to. At the
mill
level, operating rates here in the U.S. have averaged 97%
YTD.
August box shipments were up 3.1%. Seasonal maintenance and
the
300K/tpy Red Rock closure should get us through Q4.
UNCOATED FREE SHEET
Markets Are OK - but nothing more. Producers have deferred
a
September price increase. Some in the trade are
pointing to IP's
unwillingness to move. We think slower markets and some
moderation
in offset roll prices are the key issues. The recently
announced
combination of WY and Domtar's UFS assets makes the new Domtar
the
largest UFS producer in NA and almost certainly lead to more
capacity rationalization. It looks to us like the industry
needs to
cut supply by 400-500K/tons. While pricing is around
"mid-cycle"
levels, high costs mean that profitability is still poor.
061002 Deutsche Bank Report - Glatfelter Land Sale
Appears Larger Than Expected
Deutsche Bank - Equity Research
Glatfelter {Ticker: GLT.N, Target Price: USD 20, Recommendation:
Buy}.
The sale process is underway - but on a larger scale.
GLT appears
to be monetizing, much, if not all, of its remaining
80,000/acres.
GLT has retained Landvest to sell 24,537/acres of SE. PA
timber.
This is a much larger parcel of PA land than mgmts' initial
guidance
suggested and implies it may be liquidating remaining
acreage. It's
not hard to imagine GLT's entire portfolio generating $5-6/share
in
pretax proceeds, substantial value on a stock currently trading
at
$13.55/share. Earlier this year, GLT suggested that it would
sell
the higher-and-better-use half (20K acres in VA, 10K each in DEL
&
PA) of its portfolio and pointed to $150-200MM in
proceeds.
Its not "garden variety" timberland. The 24.5K acres is close
to
Washington, DC, Baltimore and Philadelphia suggests that many
buyers
will approach the land from a recreational perspective --- a
view
which suggests relatively high per acres values. Landvest has
a
strong position in the NE US selling high-end vacation and
recreation properties. Landvest's website (www.Landvest.com,
go
to “Properties by Region” in upper right corner and
specify “Pennsylvania Timberland”) notes that the land
is scattered
across 10 counties. The site notes that the “sale
process will
consist of multiple bid events coupled with traditional
listings,
debuting in early October of 2006.” Landvest
currently shows a
3900/acre block of timber in NW. PA (much further from the NE
corridor) under contract at $7.5MM - - - roughly $1900/acre.
The bottom line? An encouraging confirmation of a
broader-than-
disclosed land sale program. We think the company is apt to
provide
more color on the program during their Q3 conference call. We
continue to label GLT a "Buy" with a $20 price target.
060929 Deutsche Bank Report - Dr. Paper's Weekly Wrap
Up
Deutsche Bank - Equity Research
Capacity returning. Stora's 550K CN magazine paper & newsprint
mill
is restarting after 9 mo's. Labor cost cuts along w/ lower
taxes &
energy drove decision.
New Euro capacity planned. Progroup bldg 650k/tpy c'bd machine
in
Germany - largest in the world - w/ '09 start-up. Same old
story:
gov't financing incentives drive new capacity --- even while
Smurfit-
Kappa, SCA & others struggle to get mkt in balance.
Pulp appears to be topping. NBSK hikes in Europe deferred to
Oct.
Hardwd hike is dead. NBSK futures prices for NA are -$20/mton
from
recent highs. Restart of Terrace Bay, Ont mill will boost NA
supply.
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