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Strategies & Market Trends : Mercer International (MERCS) -- Ignore unavailable to you. Want to Upgrade?

To: Ben Wa who wrote (159)	5/21/2000 7:48:00 PM
From: KLP	Read Replies (1) \| Respond to of 196

IMO...there is much here that might warrent careful observation....including all the players...and all the moving boxes, etc...have watched for some time....incl lgic KLP siliconinvestor.com

To: Ben Wa who wrote (159)	5/23/2000 2:44:00 PM
From: Mad2	Respond to of 196

Here's a view on pulp from Europe. Mad2 Copyright 2000 The Financial Times Limited ÿ Financial Times (London) May 9, 2000, Tuesday London Edition 2 SECTION: COMMODITIES & AGRICULTURE; Pg. 42 LENGTH: 691 words HEADLINE: COMMODITIES & AGRICULTURE: Paper pulp producer says margins are high enough: StoraEnso's deputy chief executive says the dynamics of the industry make price stability important, says Nicholas George: BYLINE: By NICHOLAS GEORGE BODY: ÿÿÿIt is not often that a senior executive says he would prefer that profit margins in a key division didn't rise any more, but that's what Bjorn Hagglund, deputy chief executive of StoraEnso told the markets last week. He was referring to the market pulp division of the Finnish-Swedish forestry group, which saw an operating loss of Euros 4m in the first quarter of 1999 transformed into an operating profit of Euros 112m for the first quarter this year. Operating margins reached 34 per cent. "We have a return on operating capital of 37 per cent and that is enough. You should not drive the business further," Mr Hagglund said. The turnround has been caused by a sharp rise in the price of pulp, the basic raw material used in most paper products. The list price of benchmark Northern Bleached Softwood Kraft (NBSK) has risen from a low of Dollars 460 a tonne to its present level of Dollars 670. With NBSK changing hands for up to Dollars 800 a tonne on the small but influential spot market, it is expected that list prices will move to Dollars 700 a tonne this summer. In dollar terms, prices have some way to go until they hit the Dollars 1,000 a tonne levels they reached briefly in 1995, but in euro terms 1995 levels have already been surpassed due to the weakness of the single European currency. Deutsche Bank analyst Catarina Ihre points out that a tonne of NBSK cost around DM1,400 at its peak in November 1995 compared to DM1,465 today. Behind the recent rise is the pick-up in world demand for paper and packaging products that has been fuelled by strong economic growth in North America, Europe and Asia. At the same time pulp capacity has remained stable. According to Credit Lyonnais the outlook is for almost no capacity growth in market pulp production before 2002. The bank predicts capacity utilisation rates among pulp producers in 2000 and 2001 of around 95 per cent, surpassing even the exceptional year of 1994. Despite industry protestations to the contrary, in the medium term high profit margins are likely to tempt producers into building new capacity or at least into "de-bottlenecking" existing facilities. Yet the prospect of a glut of pulp is still some way off. Another factor pushing prices is the low level of inventories held by both producers and paper manufacturers. Along with pulp, the price of waste paper, one of the key ingredients in newsprint, container board, tissue and magazine paper, has also soared. From DM40 a tonne for undelivered waste paper in January 1999 the price has now reached DM225 (Euros 115, Dollars 103), according to Credit Lyonnais. The rise in pulp costs has caused real problems for non-integrated paper producers who do not have in-house pulp supplies. So far, manufacturers have been able to pass on most of the increases to end-customers, but several are starting to feel the squeeze on margins, with analysts expecting the smaller European producers to have to struggle to survive. But why should Stora-Enso's Bjorn Hagglund be so concerned? After all, the company, Europe's largest forestry group, is an integrated paper group which in fact is a net seller of pulp. His calls for stability in the pulp price have more to do with the dynamics of the industry in general. Rapid rises in pulp prices have historically prompted customers to build up inventories, which can then be used to force down the cost of the raw material. This has led to price spikes in the past with pulp prices halving over six months. So far there has been little evidence of inventory building by paper producers, though Sverker Martin-Lof, chief executive of paper group SCA, suggested recently that there was evidence of speculative buying. He predicted a correction in pulp prices but few analysts see this coming in the near future, with estimates for year-end prices for NBSK at between Dollars 700 and Dollars 800 a tonne. The industry claims that pulp price rises are being better managed this time round, but it is difficult to see what can be done to prevent volatility. "It is a commodity and we have to live with it," says Mrs Ihre. LANGUAGE: ENGLISH LOAD-DATE: May 8, 2000 ÿ