<b>April Showers Likely to Rain on High Grades</b>

The bleak economic news hitting the United States is matched by continued problems with most paper stock grades. There are only a few exceptions to the steady decline in paper stock markets. Old news and mixed paper seem to be showing some modest strength through many parts of the country. Movement is still possible, although prices are flat at best.

High grades continue to plummet. Preliminary indications are that many pulp substitutes and deinking grades will decline by anywhere between $20-$40 a ton. Markets have become more and more difficult, with many handlers of the grade reporting greater difficulty moving material.

Moving into April, several handlers of the grade say the market is getting even murkier, with very little in the way of optimism.

On the export side, shipments of ledger grades and office pack grades to South Korea have declined. Some sources are going as far as to claim Korean purchases are non-existent. However, a number of larger movers of the grade note that more than anything the Korean market has pulled back sharply from new orders. While still purchasing SWL and other office grades, there isn’t a strong emphasis on new orders.

The lack of any substance to many of the orders is disconcerting for some vendors as freight rates have come down, making the shipment of recovered fiber cheaper.

Although Korea is the key buyer for many paper stock grades, other regions of Asia also have been on an active prowl for various higher grades. These countries also are suffering from the difficult economic environment. India, which has been a steady buyer of coated book, has sliced its orders, causing this grade to back off on the West Coast.

Another secondary buyer that has helped keep the flow of material on the West Coast is the Philippines. This country also is suffering from a slowing economy, and is curtailing a large portion of its deinking grade intake.

Domestically, many deinking grades are suffering along with the overall paper industry. With the huge problems in the paper business, a number of paper stock dealers are expressing grave concern about the financial health of a number of independent operations. According to one large handler of SWL, one of the larger deinking operations has stopped purchasing. At the same time the very same mill had been garnering a reputation as a source where payment was becoming more difficult.

Exacerbating the situation is the expectation that market pulp prices will continue to decline in April. As pulp prices continue to fall, prices for deinked pulp also are coming way off. This is leading to a growing money crunch for a number of stand-alone mills.

Where the prices will end up is still uncertain. According to a number of vendors high grades have plenty of room to continue their descent – a fairly ominous situation for an already beleaguered industry.

As the price continues to fall and markets become more difficult to ship, some paper stock dealers are making some significant moves.

The situation at Canadian mills also has been muted at best. A number of consumers of coated book stock, office pack and office grades have yet to indicate where there orders will be in April. Some mills are taking downtime off and on through the spring. This is forcing some vendors to reduce the amount of these grades they are collecting.