<B>Newsprint Holding its Own</B>

Defying many other grades, the old news market seems to be holding up fairly well. This is most noteworthy when the OCC market has dropped by as much as $100 a ton over the past several months.

Demand from a variety of sources have helped keep the flow of the grade steady. Additionally, mixed paper markets have remained in balance, although there has been some price slippage.

Domestic mills continue to buy steady amounts of the two grades. What are helping keep these two grades afloat have been the steady to strong buying by building products companies, as well as newsprint operations.

For newsprint producers markets are in much better shape than they have been over the past several years. The consolidation, which resulted in a handful of major producers, have had the net effect of pulling a significant number of older machines off the market.

The move to reduce the supply is coming as a number of newsprint producers gear up to push through a price increase for finished newsprint.

There also have been a number of building products companies which have been purchasing steady amounts of material, which has kept the flow of ONP and mixed paper at a decent clip.

Factoring in the decline in generation of these two grades during the typically slow summer generation has resulted in a steadying influence on markets.

Whether these two grades will be able to hold firm while other low grades continue to see erosion in prices, however, are uncertain. The return to higher generation could flood markets, causing prices to slip. Also, the downward spiral in OCC prices could work to push down ONP and mixed paper prices.

Finally, while the export market has held enough promise to keep domestic mills buying, the problems with paper stock exports to China could have a sharp impact on mixed paper markets. America Chung Nam had been buying ample amounts of the grade. However, production shutdowns will cut into the short-term demand for the grades, resulting in more material being redirected to domestic sources.