::The Center for Paper Business and Industry Studies::

080310 Deutsche Bank Report - Dr. Paper's Pulse on Pricing (3/10/08)

Deutsche Bank - Equity Research

* CONTAINERBOARD

Can they do it? 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 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$.

* UNCOATED FREE SHEET

Uncoated white paper prices continue to push upward. 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. Our trade sources report that "spot market" prices have risen $40/ton since 1/1/08. Jan. UFS shipments of uncoated free sheet declined 1.2% y/y. However, capacity closures are keeping the market snug.

* UNBLEACHED KRAFT BOARD

MeadWestVaco announced it will increase coated unbleached kraft (CUK) grades for folding cartons by $40/ton in April. Operating rates averaged nearly 100% during 4Q07, with domestic demand up 10.7% y/y in 2007. According to RISI, price increases for all major folding carton grades have been announced over the last few weeks.