A Bumpy Road Ahead
The second half of February demonstrated a dead cat bounce from what appeared to be a sustainable price recovery was short lived.  There are a combination of reasons for this:
- finished paper prices remain low as inventories are dumped into many markets
- more USA and Canadian mills are facing Chapter 11 or worse closure
- many Chinese mills have still not renewed import licences
- banks have not been lending to finance inventories and restructuring
- pulp prices may not have bottomed forcing buyers to wait and see.
In addition, shipping lines are reducing vessels and claiming equipment shortages to force up oceanfreight rates.
On the positive side inventories should be back to normal by late April or May, although production is still down ten to fifty percent depending on the commodity.  Return to full production optimistically can be during the fourth quarter.  It is also possible that recovery can be prolonged until the second half 2010, along the way we can expect a bumpy ride.