Industry Reports

Deutsche Bank Reports Summaries

080225 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (2/25/08)

Deutsche Bank - Equity Research

* Framing Lumber

The modest rally of the previous 2 weeks was short-lived, as the Random Lengths composite edged lower by $4/mbf to $243/mbf. One factor was wintry weather in the Midwest and Northeast. With the spring building season ahead, this is a time of year when prices typically rally, as the distribution chain begins to add inventory. However, with the prognosis for US housing market still weak, the rally is apt to prove sub-par.

* Structural Panels

The structural panel composite price edged higher for the second straight week, rising $1/msf to $276/msf. However, the benchmark grade of OSB (7/16" in the North Central region) edged lower by $2/msf to $130/msf. At current levels, most North American mills are selling OSB for well below cash cost. Ainsworth, Norbord, Canfor, GP, and Weyerhaeuser have recently announced idling and/or permanent closures in OSB & plywood. Still, with the housing market showing no signs of recovery, we expect even more closures to be announced.

* Newsprint

AbitibiBowater announced another $60/mton price hike initiative for the second quarter. Just like the $60/ton initiative for the first quarter, this one will also phase in at $20/mton each month. Publishers appear to be more resistant to the 2Q hike than the 1Q hike, with some predicting sharp declines in consumption. Recent mill closures have tightened the market, but the closures will have to continue to match expected consumption declines. With the recent acquisition of AbitibiBowater's Snowflake Mill, Catalyst is now the 4th largest producer of newsprint (c.980K tonnes per year).