Industry Reports

Deutsche Bank Reports Summaries

071001 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (10/1/07)

Deutsche Bank - Equity Research

* LUMBER

The Random Lengths composite slid $3/mbf to $271, the new low for the year.  With housing numbers still in retreat and business easing seasonally, we see no hopeful signs on the near-term horizon.  News on the demand side remains disappointing.  Weak wood markets & a strong CN$ appear to be pushing the Canadian industry toward another round of capacity idles/closures.

* MARKET PULP

It's turning out to be a favorable pulp cycle - - - as long as your mill isn't in Canada.  The pulp rally shows no signs of abating. 

The market saw a $20/mton price hike initiative on NBSK for September.  Moreover, the prices of most hardwood grades rose $20- 25/mton in August, and with the market remaining tight, several producers have announced a $20-30 increase for October.  The steep drop in the US$ in recent weeks is apt to provide the fuel for further attempts to boost US$ prices.  Despite the highest US$ prices in over a decade, a strong CN$ & high chip costs are squeezing CN mills.  As noted in last week's DB/Terra Choice pulp call, wood supply/cost issues in Europe & Indonesia are also crimping supply in those regions.

* 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.