These small signs of optimism come against a background of financial reports for January-March 2006 from two international paper manufacturing companies who are seeing higher prices for some of the paper grades they sell.
As a consequence of any firming of demand overseas UK board mills could face increased pressure to raise prices marginally. An added factor here is that domestic board mills have relatively low stocks at present and arisings in the early summer are traditionally slower than the post-Christmas period. But, the value of the paper PRN (packaging waste recovery note), currently worth about 9, will influence the direction of the market. There is little expectation that paper PRN prices will rise and any downward trend in the PRN would not favour those wanting a higher price for used-KLS.
Newsprint
Almost the only grade seeing some price strengthening, albeit only a few pounds, has been used newsprint and overissue newsprint which is in demand for mills in the sub-continent and China.
Two paper giants – Stora Enso and Abitibi Consolidated – have reported first quarter figures today. Both pointed to higher finished product prices for some grades although there is already some uncertainty in the market as to whether these price increases will continue to be maintained.
Jukka Hrml, chief executive of Scandinavia's Stora Enso said: “In Europe the increase in advertising and direct marketing evidenced early in the year should continue to stimulate demand for advertising-driven paper grades. Demand for publication paper remains good with prices stable. Fine paper demand during the second quarter is expected to be somewhat weaker than in the first quarter due to seasonal reasons.
“Some price increases for certain uncoated grades have been announced. Demand for packaging boards is forecast to remain good and some price increases for industrial packaging grades have also been announced. The demand for wood products is generally good, allowing for some price increases. Notwithstanding these factors, it is anticipated that overall trading conditions in Europe may not strengthen further from those experienced in the first quarter.”
Mr Hrml added that: “In Asia seasonal improvement in coated fine paper demand should keep prices quite stable.”
Higher prices
Canada's Abitibi-Consolidated today reported an operating profit in the first quarter of 2006 of 20 million, compared with 5.5 million in the same quarter of 2005. The improvement is mainly due to higher prices in the company's two paper business segments as well as lower rates for countervailing and anti-dumping duties.
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These gains were partially offset, said Abitibi, by the continued strength of the Canadian dollar, higher cost of goods sold in the newsprint business and lower prices in the wood products
segment.
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