<B>Chinese Mill Problems May Last Three Months</B>

The problems with the Nine Dragons mill, widely reported throughout the press, has put a major crimp in the flow of raw materials into China. To feed the mill buyers had been shipping tens of thousands of tons of recovered fiber a month to China.

However, sources report that the mill has had significant problems with their headbox. One source said that the company was in a hurry to install the equipment, which resulted in the equipment not being installed correctly.

The equipment problems have had a significant impact on the U.S. paper stock market. Since late last year strong buying of low grades in anticipation of the machine's start up have helped propel paper stock markets.

A number of exporters have cited anywhere between 35,000-50,000 tons of recovered fiber were ordered a month to build up inventory. Lately, however, reports are coming in that huge inventories through Asia, especially China, have been forcing a change in buying habits. Containers are reportedly backed up all the way through the supply chain, forcing a sharp reduction in new orders. While this has helped drive OCC prices downward, some exporters are reporting a modest uptick in inquiries and orders for some paper stock grades to the Pacific Rim.

The piece of equipment has since been removed and has been shipped to Valmet, a large European-based paper equipment company, for repairs. Expectations are that the repairs will take around three months to be complete.

While the machine is being repaired the mill will be producing corrugated medium instead of kraft linerboard