Industry Reports

Deutsche Bank Reports Summaries

080204 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (2/4/08)

Deutsche Bank - Equity Research

* CONTAINERBOARD

Mixed signals.  Smurfit-Stone has announced a $50/ton price hike for March 1.  We understand that International Paper and Temple-Inland are also talking with customers.  Inventories remain lean, operating rates are high, and fiber costs are rising.  The big obstacle will be making a containerboard price hike "stick" in the wake of sluggish box demand.  December's 6.8% drop in box shipments appears an "overstatement" on the downside, but it does still raise a yellow caution flag.

* UNCOATED FREE SHEET

The market appears balanced.  Domtar, GP, Boise Cascade & Grays Harbor have announced a series of $60/ton February increase on cut- size paper and IP has just announced a $60 March 3 increase on various rollstock grades.  December UFS shipments and purchases of uncoated free sheet both dropped 5.0% y/y.   

* COATED GROUNDWOOD

The LWC market remains extremely tight!   DB is receiving reports of 10-12 wk backlogs as customers stock up in anticipation of further hikes.  Prices rose $30-60/ton in January as an unusually early Q1 price hike appears to have "stuck".  According to one well-placed industry consultant, price on 40# LWC have risen $190/ton between June of 2007 and January of 2008. Our trade sources report that coated rolls remain especially tight.  To add fuel to the fire, NewPage recently announced plans to close 317K tons of capacity.  Shipment volumes rose 11.5% y/y in December (+2.9% YTD).  It looks like a great environment for smaller LWC producers like Domtar to consider exiting the market.