<B>Slide Continues</B>

Paper stock markets are still looking fairly anemic. Despite a sharp drop in prices over the past two months, weaknesses are still apparent. Offshore, movement has become more difficult. This is in spite of a relative freeing up of containers. The drop in export orders is resulting in less than stellar domestic demand.

The biggest motivator has been the improvement in shipments to China. However, there still doesn't appear to be any indication that bigger buyers of the grade will be placing larger orders.

A number of paperboard mills are looking to take advantage of the slide by further adjusting their own paper stock intake. Factoring in the steady decline in prices has been the amount of downtime that continues to crop up across the country. The lack of orders by many paperboard mills is reflected in the inventory of raw materials on hand. According to the most recent figures from the American Forest and Paper Association, inventory has been jumping over the past month, leading to a number of mills opting to cut prices even further.

The $85 a ton OCC in the East is feeling some downward pressure, with a number of vendors feeling the price will continue to decline through August.

The slide in OCC prices is also having a negative impact on old news prices. Both regular news and deinked news are seeing further erosion of prices. Newsprint mills, while not seeing the sluggish orders being experienced by many board mills, are still expected to sharply curtail their intake of raw material through the rest of the summer.

What has been most painful for many vendors is the how rapidly markets deteriorated. OCC was moving for more than $150 a ton less than three months ago. In fact, some vendors were reporting OCC approaching the $200-a-ton-level the middle of this spring. However, the crest has passed, and now no one seems to think

High Grades Show Little Relief.

High grades continue to struggle, although the short term outlook is better than for bulk grades. Prices have come down, although some vendors are seeing slightly better movement. Offshore, while not a total panacea, has shown some improvements in pockets.

Although there are mixed opinions on where many of the deinking grades will be in the next few months, there is more of a sense that prices have stabilized.

Despite some signs of optimism there still are some difficult markets for many paper stock grades. Coated book stock continues to be a difficult grade to move. Prices have been coming off since early this spring when the grade, along with office pack and sorted white ledger, hit their near term high.

Since then these grades collectively have been sliding downward. Presently highs for these grades are anywhere from 30-50 percent off from where they were in April. Despite the slide, the mill prices are still at a level where it is still possible to profitably amass material.