Industry Reports

Deutsche Bank Reports Summaries

080303 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (3/3/08)

Deutsche Bank - Equity Research

* COATED GROUNDWOOD

Following announcements by both Kruger and Myllykoski, there are reports that Catalyst, AbitbiBowater and NewPage have announced a $60/ton LWC price increase for early April. UPM and Verso are expected to follow. The current market is very tight. DB is receiving reports of 10-12 wk backlogs as customers stock up in anticipation of price 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. Shipment volumes rose 13.0% y/y in January. It looks like a good environment for smaller LWC producers like Domtar to consider exiting the market.

* NEWSPRINT

White Birch, Kruger, Catalyst and Norpac have followed AbitibiBowater in announcing another $60/mton price hike initiative for the second quarter. Together, these producers account for over 80% of the North America newsprint market. 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.

* RECYCLED BOARD

Five North America recycled board producers scheduled $40/ton recycled board(URB) price hikes for Feb 1. Additionally, Altivity Packaging has announced a $40/ton increase for CRB recycled board for mid-March. Several producers have also announced downstream prices on various converted products. The market remains reasonably snug and higher wastepaper costs continue to squeeze margins.