Industry Reports

Deutsche Bank Reports Summaries

080211 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (2/11/08)

Deutsche Bank - Equity Research

* LUMBER

The Random Lengths composite increased for the first time since late November, up $6/mbf to $244/mbf.  The catalyst appears to be several large curtailments from the Coast region and suppliers standing firm on price increases.  We may also be seeing the start of the normal seasonal rally as the distribution chain begins to add inventory.  With the prognosis for US housing market still weak, the rally is apt to prove sub-par.

* MARKET PULP

NBHK prices increased $10/mton in January due to supply disruptions in Asia and Europe.  Most producers have announced a $20/mton increase for eucalyptus kraft. This follows the introduction of fluff pulp price hikes this month by Weyerhaeuser, GP, IP and AB of roughly $30/mton to $895/mton.  Market fundamentals have not changed much - - - supplies are tight, the US$ is weak, and wood, energy & freight costs are still high - - - the rally will likely continue into 2008.  We'll be in Latin America with Aracruz, Arauco, CMPC, Suzano, VCP, Veracel, and others, in late February on our annual investor tour.

* CONTAINERBOARD

6 of the top 7 largest producers have announced a $50/ton price hike for early March.  Inventories remain lean, operating rates are high, and fiber costs are rising.  The big obstacle will be making a containerboard price hike "stick" in the wake of sluggish box demand.  The December 6.8% drop in box shipments appears an "overstatement" on the downside, but it does raise a yellow caution flag.  Smurfit-Stone plans to install six new corrugators (one per month) in the first half of '08 to create "super" plants, which will be capable of replacing as many as 2-3 existing plants.