Good morning, my name is Kirk, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q2 2012 conference call. [Operator Instructions] Mr. David Gandossi, you may begin your conference.

Yes. Thank you, Kirk. Good morning, and welcome to the Mercer International's Q2 2012 Quarter Earnings Conference Call. My name is David Gandossi, I'm Mercer's Executive Vice President, Chief Financial Officer and Secretary, and on the call with me today is Jimmy Lee, President and Chief Executive Officer. As usual, we'll begin with formal remarks, after which we'll take your questions. Please note this morning’s conference call, we will make forward-looking statements similar to those that were made in the press release, according to Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks related to these statements which are more fully described in the press release and with the company’s filings with the Securities and Exchange Commission. As you will have seen from our press release, our second quarter results were generally positive given the current market conditions. Relative to the first quarter of 2011, average NBSK pricing was flat. However, we saw pricing fall off noticeably in China in June. Our mills ran well at near record levels during the quarter despite a couple of days of unplanned downtime, and the cost of key inputs such as fiber and energy were down this quarter. In addition, foreign exchange movements, most notably the weakening euro, created a positive movement relative to Q1. Consequently, given the lower pulp prices in Q2, we're satisfied with our overall operating results. Beginning in Q2, we've decided to reclassify certain by-product chemical sales out of operating costs and into revenue. We made this decision because chemical sales have grown to the point where they are now material. Energy and chemical by-product revenues are a distinguishing feature for Mercer, and we believe our focus on various bio-economy related initiatives will continue to develop further…

Thanks, David. Good morning to everyone. As David mentioned, we're satisfied with our second quarter results given the current recent market turmoil. We increased our cash balance this quarter despite making a significant capital investment in Rosenthal's recovery boiler and repurchasing a small amount of our senior notes. I'm also pleased that our continuing focus on reliability has resulted in another strong production quarter. We still have work to do in this area, but I'm satisfied that we're moving in the right direction. We also achieved our highest quarterly energy sales volume this quarter, suppressing the previous record set last quarter. This marks the third quarter in a row where we have set an energy sales volume record. And this record was set despite Rosenthal being down for 23 days for its annual maintenance and recovery boiler rebuild. Although Q2 energy sales volume was only slightly higher than Q1, we're very pleased with this trend. Another way of looking at our energy and chemical revenues is that in Q2, it exceeded our interest expense by over EUR 4 million, which is significant given current pulp prices. That is, our by-product sales suppressed our -- surpassed our debt-carrying charges. in the second quarter, average NBSK list prices were essentially flat in all markets, with the European Q2 average list price remaining at USD 837. In North America, the average list price rose USD 30 to USD 900. While in China, the quarterly average list price rose slightly to USD 690 per tonne. Despite the quarterly averages, we saw prices come off late in the quarter and producers selling at spot prices well below list. I'll talk a little bit more about recent pricing developments in a moment, but first let me comment on the mills. All 3 mills ran at near-record…

[Operator Instructions] Your first question comes from the line of Phil Hoffman (sic) [Bill Hoffman].

I wonder if you would talk a little bit about the pulp market buying patterns? I mean, obviously, the Chinese sort of come and go from the markets. Can you -- any sense of where they are right now, inventory-wise? We're assuming they would have depleted inventories at this point. But I'm also wondering if you're seeing different buying patterns by other buyers at this -- in the market?

Well, I mean, the demand side, if you look at the shipment, volume rate, certainly, year-over-year, you're seeing double-digit type of percentage increases in terms of overall pulp importations into China. And so on that trend, things haven't really changed. I think if you look at it on a monthly basis, of course they'd be very optimistic in the sense that when they believe that prices of course are very close to where many of the high-cost producers are operating at a loss, they seem to be opportunistically buying fairly large volumes and then withhold the buying for a period to see if they can keep the prices at those levels. We know that, of course, certain number of trading firms had purchased earlier on, so they have been in the process of liquidating the inventories as well. So I think that there's a general feeling, certainly, from the markets, that we are close to bottom and, therefore, there would probably be additional volumes to speculate on the fact that prices will start to move upwards. So I'm -- these are very difficult to monitor, but all we can say is that, as we can see from the port levels, inventory-wise and producer levels, inventories are, in fact, reasonably low. So we don't expect any particular reason why all off of a sudden the dynamics will turn more negative. I think it's probably near what we would call a turning point.

And what about just the other buyers, the European market, North American market? Any change in buying patterns?

No, not really. I mean, clearly, the European paper demand is continuing to be fairly soft. So what you're seeing could be a continued trend of, let say, prior integrated pulp making its way. So you're seeing that certainly, shipment rates out in North Europe, primarily from the Scandinavian countries, have increased, of course assisted, like we have been. If you look at it, a primary benefactor has been Finland, of course, it's like we have, because of the euro -- I think, [indiscernible], of course, because of the strengthening of the kroner is having probably more desires for higher pricing overall. I think the euro certainly is helping us. It's helping the Fins. So you're seeing increased volume into China year-over-year from the Finnish kind of area. And so no, we haven't seen anything in particular that really changes that. I mean, we're getting good growth in China, weakness in Europe and a kind of flat type of situation in the U.S.

And then just one question on the wood cost. You said -- I guess, up in Celgar, pretty comfortable of where the situation is. Any thoughts on the incremental cost pressure in Europe from the reduced harvest over there?

No. I mean, we're getting the benefit of the fact that our competitors are certainly in a much weaker position, and the sawmill activity seems to have stabilized, albeit at a much lower level. These sawmills are producing primarily for the domestic European market. And in particular, the Germans are mainly for the German type of do-it-yourself type of business. So they have stabilized, and so we don't really expect any real change in terms of availability of sawmill residuals. Of course the forest owner is motivated to see if they can get better pricing. But I think everybody is aware that the economic conditions are not conducive to that type of focus. So yes, we're not expecting any real increase in fiber cost. In fact, to the contrary, we think that we continue to do the job better. And hopefully, we can further reduce our overall fiber costs.

Your next question comes from the line of Andrew Shapiro.

A few items here. In the NAFTA claim on the arbitration, can you update us on the status and what the next steps and milestones are since our last call?

Sure. Well, I guess -- I mean, it's a pretty formal process, Andy. We're at the stage of picking arbitrators. So we picked ours. I think Canada has picked one for themselves, and now there's a process where those could get together and they pick the third, which is the President of the Council. So that's on the administrative side. There's lots of information that's been pushed across to Canada, so they're going to their learning curve process. We've been -- we've had some minor engagement with the province, but they don't seem all that interested in having a discussion at this point in time. I think it might have something to do with the timing of elections and so on. So really, not a lot else to report. It's moving forward, and we believe very strongly in our position and just wish we could get the provincial government to wake up and realize how...

So in terms of milestones, when are the elections?

It's May of next year.

Okay. And in terms of -- any deadline for the arbitrators to be picked by all sides? Is there a deadline?

Yes, the schedule floats depending on how certain things develop. I mean, ultimately, there will be a deadline, but I can't really indicate what that would be. But you know it'll be within a couple of months, I would assume.

Okay. Regarding the industry, are you yet seeing any high-cost producers going offline due to the NBSK price declines? I know you've mentioned frustration that some, you think, should go offline haven't yet, but are you seeing anyone go offline yet?

Yes. I mean, certainly, the high-cost producers domestically in China, the softwood guys, I wouldn't rate them exactly NBSK. But clearly, in competition to some of our customer base, I guess they've taken production downtime as well as switching some of their production to dissolving if they've already implemented the conversions. So certainly, in those areas, you're already seeing the adjustments. I think where we need to get further adjustments is, of course -- traditionally have been the guys in North America. And of course, I do believe that there's going to be significant pressure. As you know, the Canadian dollars has been relatively strong against the euro and, therefore, really, I think these producers are under pressure in terms of the production costs. I do believe that there is going to be further announcements, of course. In the last couple of years, the market has been fairly attractive and, therefore, there has been profitability, even to marginal producers. And there's probably some anticipation that there may be some recovery because, of course, the inventory balances are pretty good. So they're probably hanging on, expecting that the turn is going to happen soon. So I do believe if it doesn't turn, that they will take downtime. And so if they do take downtime, then, of course, the market will turn. So, I think, in a way, they are inducing their own pain, because without that kind of movement, things could be flatter for a longer period. And if they do go off, then things will recover. So it's kind of a perverse situation, if you may.

Now with the August price cuts already announced, I guess really bringing it down to where the spot was anyway, it looks from the prior year cost estimate, graphs you guys have put up on investor presentations, that maybe 10% to 12% of the overall industry capacity may be at loss levels? Does that sound about right?

Well, I mean, it's very difficult to gauge because you're taking a very static type of position. And if you -- all of those numbers are just for currency and all that. So you can't -- I can't really give you a percentage. All I can say is that clearly, based on the fact that in prior cycles, if you look at the mills that have closed, they were a handful of Canadian and European mills. Now the European ones clearly have benefited this time around because of the euro being significantly weaker, and it has disadvantaged the Canadian ones. So the likely scenario is that first, you get the high-cost domestic Chinese production curtailing, next would likely be the Canadian production because of the currency impact. And then if it continues further, the European type of high cost. So that's all I can say about that.

Okay. I'll ask one more question and then get back into the question queue. I do have a few more, so please come back to us afterwards. But regarding the accumulated grants that the company has received over the last several years from the German and the Canadian governments for all your respective plants -- I don't know if you want to answer this offline or if you guys have it pretty available -- you guys published at the end of the year, the annual report, approximately EUR 292 million or about EUR 6.50 a share of unamortized government grant value that is embedded in your plants that is not, because of accounting standards, reflected in your PP&E. Are you able to provide a breakdown of this either by plants or, preferably, at least between the Restricted Group and Stendal as to those amounts? And also, is that EUR 292 million, since it was in the annual report, it would seem like, can you please confirm, that's before the incremental EUR 12 million grants you've either booked or expect to book for the Blue Mill project on Stendal?

Yes, great question, Andy. I mean, I can give -- today I can give some general guidance and then I can help you in more detail offline if you like. So general picture is -- the Stendal Mill, first of all, the grant was EUR 276 million. The mill was completed in September of 2004. And so that would have been capitalized at that point in time, it amortizes over 25 years. There's been smaller trickle-in amounts for adjustments to close out agreements, but that's the big chunk there. For Rosenthal, which was completed in 1999, the number was about EUR 102 million. Again, 25 years. And Celgar -- and that was 1999. Celgar had about CAD 58 million that it received over the course of the last year and a bit. And all of them amortized at 25 years. And if you add them all up, you'd get pretty close to the EUR 290 million. There's been other little trickle-in things all over the place, but those are the big numbers.

So Celgar's starting date would be mid-2011 on average?

Sure.

Okay. And for Rosenthal, where in 1999 might that be? Same thing?

Yes.

[Operator Instructions] Your next question comes from the line of Mark Kennedy.

Just first question, just on this tall oil breakout. Am I correct in assuming that most of this is coming from Stendal? And if it is, is there the possibility to grow this line from either your Rosenthal or Celgar mills?

Yes, the tall oil plant is at Stendal, Mark, but we transfer soap from Rosenthal down to Stendal for processing. So really, the only increases will be production improvements or pricing improvements.

And production -- more consumption of pine.

Yes, or more consumption of pine, as Jimmy mentioned, in the mix. Tall oil prices, having said that, have nicely doubled in the last 2 or 3 years. It's a feedstock for a number of interesting chemical products. So I think that's a good sustainable business. The mix in the Celgar region really doesn't warrant putting in a tall oil plant. There just wouldn't be enough feedstock to justify it at this stage.

Okay. And then following your work here in this quarter on the Rosenthal recovery boiler, is there any capacity bump at Rosenthal you expect out of that?

Yes.

Yes. I mean, there's going to be an incremental capacity increase. The exact number kind of slips me. But really, the benefit of that particular project was not just the capacity increase, but also the fact that we had a significant amount of steam that because the present turbine was limited, we basically had to, of course, look for productive use for that steam. And so this new turbine will allow us not just to consume the steam that previously we are not using. Also, we would be able to increase the, of course, steam production from the power boilers as well. So we think that's really the big potential there. I think in terms of pulp production, our target is to go move Rosenthal more to the 345, 350 type of range. And so really, that's kind of the direction that we're trying to move towards in terms of overall capacity at Rosenthal.

Okay. And Jimmy, you mentioned in your comments there that as you looked towards the end of the year, you think your German mills on the fiber side, there might be reduced harvesting levels? Can you just explain that thought further?

Well, I mean, we believe that, in terms of the harvesting activity, only because, of course, prices have been under pressure because of the reduced consumption generally coming out of the board, as well as the saw millers. And so the private as well as the public forest owners, of course, are motivated to see if they can at least get better pricing. And so there has been a trend to see if they can get better pricing by reducing the harvesting activity. We do believe that it's not going to be that significant, so it's not going to be something where we're going to get an end result where prices are going to increase significantly. In fact, all we are seeing is that probably, the trend will stabilize where prices stabilize at these type of levels.

Yes, but I guess the important point is, any reduction is a voluntary reduction? It isn't like they've been overcutting their harvest?

No, no, no. This is more of a voluntary, so it's not an imposed in terms of availability of fiber or anything like that.

Right. Okay. And then one last question, David. You'd mentioned last quarter, a comment in your reporting that the Stendal might be in violation of its debt-to-EBITDA covenant? Is there any update on that for us at -- you have at this point?

Yes I do, Mark. Yes. So we were close to that line. So we applied for waiver, which we received. But having said that, Stendal did make its covenants. So...

Your next question comes from the line of Paul Quinn.

Just wanted to ask a question about what you guys have been experiencing with discounts on list prices in the marketplace and what levels those are increasing to if they there?

Well, I mean, you're seeing additional pressure for discounts to list. They have, of course, now trended to the high-double digits...

High teens.

Yes, and those have high teens. We basically feel that prices are moving to reflect, I guess, to discounting. So we're not going to see prices hold up with the discount increase. You're going to get essentially discounts widen and then ultimately, the list prices are just for the discounts. Certainly, in terms of the China market, I think present prices spot-wise, you're seeing somewhere around slightly under the 600-type of range. I think that's probably where things are going to stay. I can't see prices with current exchange rates going much lower because essentially, a lot of produces are going to be losing money. So I think that discounts will stay kind of like at these high teens and then the prices will drop to reflect. Any further pressures to widen that.

And just a question on other cost inflation. You guys mentioned fiber. What about chemicals? Are you seeing anything there or other areas?

No, I think fiber for us, of course, is a big focus. So we think that we have certain programs, both in our German, as well as our Canadian mills, to further make very good progress in reducing fiber costs. So I think, moving forward, we're very confident that you're going to see fiber actually become a very good positive type of development, certainly, we think, at our Canadian situation. In terms of chemical cost pressures, no, we are not seeing any real pressures from any chemical producers. I think the focus has been to reduce our chemical cost, and I think they are trending in the right direction. So we don't have any expectations that chemical costs will increase. In fact, it's more likely they will further decline.

Your last question comes from the line of Andrew Shapiro.

Two follow-up questions. I think you answered someone else's question on the maintenance and CapEx monies in Rosenthal, that it was substantive improvements to Rosenthal that you did in addition to recurring maintenance. Was that correct? Did I hear that right?

Yes. I mean, basically, it was not really a maintenance side of it. It was one, a big chunk of that investment offset certain cost or expenses that we would have had to pay and were accrued. So...

Wastewater fees.

Yes, which was the wastewater fees. And so in effect, that facility that we built and modernized didn't really cost us, from our own perspective, a lot of money. In fact, most of that came from offsetting expenses that we would have otherwise paid if we didn't make such investments. And at the same time, it provides not just incremental increases in pulp production, but really further growth in our electricity revenue, both from the incremental tonnages that we, of course, have out of pulp production, but also additional power generation from just burning biomass. So I think, all in all, the project was an extremely attractive and very accretive one.

Yes. So in internally analyzing this or figuring this out, what would you then kind of say the payback period or return on investment was?

Well, I mean, because most of the costs you had offsetting expenses, your cost is very low. So the incremental benefit or the return on investment is.

[indiscernible]

Yes, it's very high.

Okay. On your financials, I just want to understand what's may be going on here. Am I correct in observing the minority interest allocation for this quarter increased from last quarter? It seems at a substantially greater rate than the income. So if that's correct, can you explain?

Yes. So I guess you'd be looking at the page in our press release where we talk -- where we show you that -- the Restricted and the Unrestricted Group. So investors should look at the net income before the net income attributable to controlling interest. And in this quarter, it was EUR 5.7 million. If you multiply that by 25%, you'd get EUR 14.25 million or something like that. And in our case, it was EUR 16.25 million. So the difference is only -- really accounted for by -- we have Stendal, which has a subsidiary parent company called Stendal Pulp Holdings. And then you've got that SG -- the mill. So the minority interest to the -- is only on the mill level. So any activities at the parent level don't get picked up in this calculation. So it's helped by EUR 100,000 -- EUR 200,000, and it has everything to do with this parent company adjustment. There's an amortization element of capitalized startup costs and things like that.

All right. I'm just wondering if there was a policy change. Now when you state that you expected the sales of tall oil to be stable in future periods, can you clarify whether this is stable in terms of euro amount in revenues? Or stable in terms of percentage of pulp production or some other thing?

Well, I mean it's -- we know what our fiber diet is, we know what the history of the tall oil plant is, and we know the trend line for the tall oil pricing. Still, the metrics are solid in our mind that this activity will continue.

So is this a stable form of cash flow that one should look at or look to like your power generation versus the volatility that goes on with your cash flows that come from the movements in pulp pricing?

Yes, I think so, Andy. For sure, that's really one of the reasons we wanted to try to highlight it. It's a stable cash flow that is not susceptible to the cycles as pulp is.

Okay. And lastly, you had this unrealized gain on your pulp price swap that you entered into, which I think, in all my years of following you, might be the first time I've seen this. Or -- yes, I don't think I've ever seen it from you guys. Can you explain your thinking here? Obviously, it was a good move as the prices moved down. What the breakout is between Stendal, Rosenthal -- or Stendal in the Restricted Group as to where the gains fall, or if it's up at the corporate and spread out equally? How do you do that?

Well, I mean, it was done at the corporate level, so it wasn't done at the mill level. This was essentially a financial hedge. What we believe is that if you look at presently what we do in terms of sale, sometimes, depending on the customer, we may enter into a fixed price contract for a year. And so, of course, the prices, in our mind, have to be reasonable. So this is really just a financial duplication of what we would do otherwise from a physical perspective. And so when we were essentially given this opportunity early on this year, and certainly from talking with our sales guys and the outlook, we felt that the pricing for the year period, because it's entered into -- in April, so from May to delivery to the end of the year, shorter than the year, but it represented for us essentially an opportunity where we felt that the pricing scenario for the year-type of scenario was attractive in the sense we felt it was a fair price. We didn't think...

Where does the gain go then if it's corporate? If it's [indiscernible]...

Well, I mean, it goes to the corporate level, of course.

No, is it in cost of goods sold? Does it come through as a reduction of SG&A? Was it a below-the-line amount?

Yes, it just comes through the bottom line.

What is it below -- in the income statement, is it found in the below-the-line area?

Yes, it does. Yes, right below where rate is right now. So it's a realized.

And it's a combination of the net between the interest rate swap at Stendal and this forward sale.

Oh, okay. It's netted with the interest rate.

Yes. So we think that incrementally, we do believe that also on that interest rate, things have to start to recover, unless interest rates in Europe go to a further -- from a German perspective, down and stays down. I mean, we have a situation where as you know, German interest rates are at unbelievable historic low. So the trend should be more in the other direction in the coming years. We've suffered in terms of valuation, but I think, probably, moving forward is more likely that we should have some recovery of that valuation.

And did you -- I don't know if you broke it out and if you -- as you've done in other calls, the sales and production numbers by mill?

I haven't been asked yet, but I'm happy to do it for you, Andy. So the production volumes starting with Rosenthal was 65.9, Stendal was 171,000 and Celgar was 128.2 for a total of 365. On the sales volumes, Rosenthal was 77.4, Stendal was 152.7 and Celgar was 119.3 for a total of 349.2.

And then I think -- you brought back during this quarter some debt but no stock yet. You've announced the reauthorization of the buyback and, in terms of your cash needs for various projects, I know that some of this might have been on hold because you were looking at the sizable Fibrek merger opportunity. Do you have strategic opportunities like that in front of you now that would impede with moving forward with the buyback? What are the factors that you'll be thinking about in terms of when and if to be buying back some shares?

We always have a lot of things on the go, Andy. And of course, it's a combination of accretive type of projects, which, of course, are very high return. We see a lot of potential there. There's a lot of things we're doing in terms of the fiber situation where we do believe that, given certain investments, that this will further strengthen our position. So the second half of this year, there's a lot of things in the air, not just in terms of what the market conditions are, but a lot of projects that we had initiated a couple of years ago. Not just for BRIC but also internally, there's a lot of things that we are working on, not necessarily external type of projects but really a lot of internal things as well. And so we really have to weigh all of these issues in terms of deployment of our cash resources. What we've always found is that when you need the cash, no one seems to give it to you. And so we have been a little bit more cautious of course in terms spending our cash. Because as you know, our prior experience hasn't been favorable when we've kind of been a little bit more aggressive in terms of our liquidity. And so I think there is a desire to be a lot more conservative so that everybody benefits from that. And so I think we will have to weigh all of these factors in determining which -- whether it's debt or equity and the aggressiveness of such repurchases. That's all I can really say, Andy.

Well, if the other strategic projects are not in the way of the stock buyback, but you have these considerations and it would sound like that at least even more aggressive retirements of debt ought to be pursued to get that out of the way since that seems to be in the way of many analysts, rightly or wrongly, when it comes to your equity anyway.

Yes. I mean, if you look at our debt repurchases, we try to find reasonable pricing scenarios so that we'd be opportunistically repurchasing that. Right now, of course, the debt side seems to be certainly stronger than the equity side. So we have to monitor that closely moving forward, as well as the general markets to see, of course, how aggressive we may be on the debt. And...

Is there another debt refinancing opportunity available at lower rates, then?

Well, I mean, unfortunately, the way that the bond was structured, it'll be expensive for us to be refinancing this existing debt. So it isn't of course just the interest rate, but there is a lot of soft cost, as you know, related to these activities. So we think that there will be a time. If timing as well as the market conditions is right, that we may look towards a refi where it's much more attractive. But right now, we would have to pay a fairly expensive type of premiums.

Right. Well, then your equity is the cheapest of the options and maybe in terms of returns on the underlying assets, because these assets are greatly being mispriced in the market right now.

Yes. I mean, we have to look at where the markets are and what the other use of proceeds, et cetera. And certainly, we will take consideration in all of these factors, in determining what should be kind of the actions that we take. I think, as I said, from the experiences we've had, I think we tend to, of course, lean more towards the conservative side, mindful of the fact that we are a small company and it's a very cyclical business, as you know. And therefore, we need to be very careful in terms of husbanding our resources.

Your next question comes from the line of Joe Licursi.

I just had a quick question. David. Could you tell us what the capital expenditures will be for 2012?

Okay, Joe, I will. Yes. So really, the majority of our capital spending, I guess, would be Rosenthal and Stendal, Rosenthal finishing off their capital project of EUR 7 million to EUR 8 million in the second half of the year. And Stendal is ramping up the mill, so that'll be EUR 12 million to EUR 13 million for the remainder of the year and with the grant offsets on that coming in, in a slightly lagged -- one quarter lag approach.

Okay. And so, like in total, in total for the year, net of grants, David, would you have that number?

Yes, about EUR 38 million for the year.

Okay. And that's net of grants, right?

Yes.

Jimmy, I had one question for you like very quickly. We see this phenomenon of the BHK prices in China being higher than NBSK. How do you see that situation developing now?

Well, I think there -- from a tissue manufacturer's perspective, there is certain benefits in substituting hard -- softwood for hardwood if you got the same pricing. So I think what the trend will be is that they will consume certainly a lot more softwood than -- in their furnish and get the benefit of reduced cost and still have the same quality. So I think that it's going to benefit us where softwood consumption, of course, will be a lot more at the expense of hardwood. And then hardwood prices either have to start to weaken, or softwood prices will go up to a further established that gap that normally exists.

Okay. A final question, what is your view on the wood cost in Europe and in British Columbia?

Well, from our perspective, we believe that wood prices in British Columbia, if we don't take, of course, a lot of the things -- actions that we are presently taking, we'll likely trend upwards, but because of course the reduction in terms of harvesting availability. But from our perspective, we do believe we have certain projects at hand that will actually allow us to further reduce our fiber cost. In terms of the European situation, we really don't see any reason why we will see price of fiber increase, and we don't expect fiber prices really generally to reduce significantly. So we think that fiber prices probably will stay similar to where we are now.

Even with the -- what we read, like with the expected production in [indiscernible] demand from pulp producers in Germany?

Yes. I mean, there has been a lot of talk of biomass and, of course, there's been a lot of issues related to the environmental of -- as well as the best-use issues. And so you're not really seeing many of the projects that were originally on the drawing board really coming to reality yet. And so yes, there's going to be ongoing pressure for biomass, but I don't think it's going to be as extreme as one would have thought earlier on. And certainly, the cost of the fossil fuels, of course natural gas being one of them, in Europe is such that it's not as attractive with the combination of the carbon credits. If you look at the carbon credit market, it's collapsed. Yes. So the benefits that would have otherwise been there certainly isn't as attractive.

Okay. So basically, you're saying flat in Germany and slightly lower in BC, right?

Yes, we think that we can make the right type of decisions to make a good dent in our fiber cost in Canada over time. I won't happen overnight.

There are no further questions at this time, I'll turn the call back over to the presenters.

Well, we thank everyone for attending today's conference call. And I would like to end it, thank you very much.

This concludes today's conference call. You may now disconnect.