<B>Pulp Substitutes Seeing Downturn Due to Uncertain Pulp Markets</B>

Pulp substitutes have benefited from surging pulp prices over the past several quarters. With market pulp prices climbing on an almost quarter by quarter basis, many consumers opted to purchase more direct entry pulp substitutes due to the price advantage.

Lately, however, some pulp producers are rolling back prices, while others are deferring previously announced price increases. This swing is knocking many of these pulp substitute grades back down.

Several sources add that on recent visits to Europe and Asia inventory levels are sharply higher, indicating that the strong demand for market pulp is easing back. Part of the reason is the slowing economy, which is reducing overall demand for many finished products.

It is still too early to find out if other announced pulp price increases will hold. However, it seems that resistance to higher prices are taking hold. As the prices start to back up, there could be further softening in pulp substitutes through the end of this year.