Industry Reports

Deutsche Bank Reports Summaries

070220 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (2/20/07)

Deutsche Bank - Equity Research

* NEWSPRINT

The official newsprint price fell an additional $10/mton, after falling $35/mton over the last few months. Without more capacity rationalization, prices could fall further. The market is sloppy and needs a fix; it may come by a "merger of equals" between Bowater and Abitibi. However, we think an even better catalyst would be consolidation among 2nd & 3rd tier players. One other issue to watch: ONP costs. While the trades are showing prices up only about $5/ton in February, our brokerage contacts are pointing to increases as large as $40/ton. This would have big implications for many producers, especially recycled-heavy producers like SP Newsprint.

* PANELS

The structural panel composite rose $8/msf to $278/msf last week. The benchmark grade of OSB (7/16" in the North Central region) rose $8/msf to $152/msf, while plywood prices also rose. Weyerhaeuser's announcement of production cuts at 3 OSB mills created a small end-of-the-week flurry. We believe OSB is below "delivered cash cost" for many mills and regard further shuts as inevitable. LPX, WY, Ainsworth, Kruger and Tembec have announced capacity withdrawals.

* RECYCLED BOARD

The recycled market, like the overall boxboard market, is snug. CRB prices rose $30/ton in February. CRB prices last increased $10/ton in July and $25/ton in September. Sonoco, Caraustar, and the Newark Group have all announced $40-$50/ton for uncoated recycled boxboard March 1.