Recent raw material price rises will be short-lived, and pulp will tumble back to below 306 ($480) per tonne, said Get Reel!, a report from Credit Lyonnais Securities Europe. Waste paper prices are already starting to fall after buying sprees by China.

Paper demand will remain weak until the end of the year, while publication paper prices will fall at least another 10% due to advertising volume declines in Europe and the US, the report adds.

Portucel, the Portugese producer of uncoated fine paper, is highlighted as one to watch because of further expansion planned for 2003-2004.

But the report said that M-real chief executive Jouko Jaakkola faces an uphill task to turn around under-performing assets, with the groups financial position remaining a
concern.

More production downtime will also be required, as market leaders suffer from the lack of a recovery in publication paper demand and increasing competition from new suppliers.

The report concludes that earnings will continue to fall in the second half of 2002 by as much as 40%.

Get Reel!s key findings

• Pulp prices set to fall back to below 306 per tonne


• Publication paper prices to fall another 10%


• Advertising depression to continue into next year


• More production downtime forecast due to weak demand


Story by Andy Scott