PULP & PAPER

As reported by Paperage magazine
Pulp production is being fueled by export containerboard volumes and also by export pulp demand created by the weak U.S. dollar. Prices are also being pushed by Canadian and Brazilian costs of production and higher prices for domestic fiber created by fewer operating sawmills generating wood chips. Additional softwood and eucalyptus pulp capacities coming online in South America and recycled containerboard capacity in China could disrupt the steady pace of price increases seen this year. U.S. producers should still have one good year left in 2008, but it will be a draw for Canadian pulp exporters.

Paper demand in North America is saturated and will continue to be negatively influenced by the move to electronic advertising and a lower level of economic activity. Supply curtailments by International Paper at Bastrop, LA and Pensacola, FL and by Domtar at Woodland, ME, Port Edwards, WI, and Gatineau, QC may buttress domestic uncoated freesheet prices and even provide an opportunity for appreciation, but the grade will still lose some volumes to lower priced uncoated mechanical products made by AbitibiBowater and supercalendered grades which will be made by NewPage. Coated freesheet made by the latter has also been losing market share, and in a slowing economy this decline in demand will dominate prices, despite the fall in imports due to the weak U.S. dollar. The deciding profitability factor for North American paper producers will be cost reduction that can still be wrung from high cost capacity.