Industry Reports

Deutsche Bank Reports Summaries

080512 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (5/12/08)

Deutsche Bank - Equity Research

* PANELS

Panels continued to rally. The structural panel composite jumped $11/msf this week to $316/msf - - - after bottoming @ $270/msf in early February. The benchmark grade of OSB (7/16" in the North Central region) rose $15/msf to $177/msf. Ainsworth, Norbord, Canfor, GP, and Weyerhaeuser have recently announced idling and/or permanent closures in OSB (4 OSB mills w/ 1.76MM msf of capacity) & plywood. As with lumber, we think that the prospect of a prolonged downturn may force further (and deeper) restructuring as we move through 2008.

* MARKET PULP

NBSK prices remained flat in April at $880/mton. The collapse of a sale to the Sinar Mas Group has forced the closure of Pope & Talbot's 3 west coast NBSK mills. Maintenance in NA as well as greater-than-expected downtime in Europe should tighten the market. Spot pricing on NBSK had been slipping, but seems appears destined to firm with the Pope closures. There is already talk of a $40/mton hike on fluff pulp. Hardwood remains in balance and is the tighter of the markets.

* COATED GROUNDWOOD

Prices rose $60/ton in April on most LWC grades, and they rose $75/ton for No. 5 40-lb offset rolls. Q1 shipments rose an impressive 10.3%. Anecdotally, some of our contacts in the merchant community report that mills appear to have more tonnage available. On the demand side, contacts in the printing distribution community report that high paper prices and a slower economy are triggering reductions in some cataloging budgets. Last week, Bloomingdales announced that it is eliminating its mail order catalog. We also note that Abitibi-Bowater suggested it could add capacity to this market by converting more newsprint mills to coated paper mills.