Industry Reports

Deutsche Bank Reports Summaries

080317 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (3/17/08)

Deutsche Bank - Equity Research

* Containerboard

IP announced it will buy Weyerhaeuser's containerboard operations for $6B. With a combined capacity of 11.5M tons IP becomes the world's largest c'board company. Increasing evidence of a slowdown in box demand will raise the "degree of difficulty" on a containerboard hike. Several industry sources have pointed to a marked easing in box vol's over the past 2-3 weeks. The 7 largest producers (75% of North American market) announced plans for a $50/ton March containerboard price hike and Smurfit, IP and Pratt have announced corresponding box hikes. The big obstacle will be making prices "stick" in the wake of sluggish box demand. Key positives: healthy operating rates & weak US$.

* Panels

The structural panel composite price declined this week by $3/msf to $282/msf. The benchmark grade of OSB (7/16" in the North Central region) increased by $2/msf to $142/msf. Despite the increase, 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. We note that LPX appears headed toward its 2002 trough stock price levels.

* Uncoated Free Sheet

Uncoated white paper prices continue to push upward - trade sources suggest that overall price levels are up $40-60/ton since January 1. The cut-size market remains the strongest. Domtar, International Paper, Georgia Pacific and others are out with a $60/ton March price hike on 50-lb offset rolls, with other UFS grades set to follow. The increase comes shortly after many producers announced a $60/ton increase on cut-size paper for Feb.