<b>High Grades Continue to Soften</b>

Prices for many pulp substitutes continue to slump, with sources throughout the country noting prices continue to decline.

The pulp substitute market is taking the brunt of the negative sentiment, as pulp producers continue to report slumping prices and slack demand for the finished product. A number of paper stock dealers note that hard white envelopes are declining, with very little sign of an improvement in the near future.

As pulp prices continue to decline, there is a growing concern that some deinked pulp producers are having a difficult time operating in a cutthroat environment.

Several sources note of some operations struggling financially. While speculation on survival rates are a constant in the industry, there appears to be a significant number of paper stock operations who feel more mills could close over the next several quarters.

The ledger market and the office pack market also are expected to continue their downward move. The lack of any significant offshore orders continue to clog domestic mills with excess material. Prices have been moving down between $10-$20 a ton over the past several months. There are no indications that these prices will stabilize or turn around in the near future. Some sources think prices for ledger and office pack could decline further through both April and May.

The problems with pulp substitutes also are being adversely affected by the continued dumping of pulp by a number of Asian mills. With Asian mills looking for currency, it is likely that pulp supplies will continue to flow into the United States.