================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

                                       OR

[ ]               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE TRANSITION PERIOD FROM _______ TO _______

                         COMMISSION FILE NO.: 000-09409

                            MERCER INTERNATIONAL INC.
             (Exact name of Registrant as specified in its charter)

                WASHINGTON                    91-6087550
       (State or other jurisdiction        (I.R.S.  Employer
     of incorporation or organization)     Identification  No.)

          14900 INTERURBAN AVENUE SOUTH, SUITE 282, SEATTLE, WA 98168
                              (Address of office)

                                 (206) 674-4639
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the Registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.   YES  X      NO
                                              ---        ---

Indicate  by  check  mark  whether  the  Registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Act).  YES  X      NO
                                              ---        ---

The  Registrant  had  16,794,899 shares of beneficial interest outstanding as at
August  14,  2003.
================================================================================


<PAGE>


                         PART I.  FINANCIAL INFORMATION
                                  ---------------------

ITEM  1.     FINANCIAL  STATEMENTS


                            MERCER INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                     FOR THE SIX MONTHS ENDED JUNE 30, 2003

                                  (Unaudited)


FORM 10-Q
QUARTERLY REPORT - PAGE 2


<PAGE>

                            MERCER INTERNATIONAL INC.
                           CONSOLIDATED BALANCE SHEETS
                    As at June 30, 2003 and December 31, 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                         June 30,     December 31,
                                                           2003           2002
                                                        ----------    ------------
                                     ASSETS
<S>                                                     <C>           <C>
Current Assets
   Cash and cash equivalents                            E   21,951    E   30,261
   Cash restricted                                          13,234         9,459
   Investments                                                 333           307
   Receivables                                              52,427        31,924
   Inventories                                              20,514        16,375
   Prepaid and other                                         6,339         7,891
                                                        ----------    ----------
    Total current assets                                   114,798        96,217

Long-Term Assets
   Cash restricted                                          40,859        38,795
   Properties                                              518,248       441,990
   Investments                                               5,391         5,592
   Equity method investment                                  7,159         7,019
   Deferred income tax                                      10,054        10,137
                                                        ----------    ----------
                                                           581,711       503,533
                                                        ----------    ----------
                                                        E  696,509    E  599,750
                                                        ==========    ==========

                                  LIABILITIES
Current Liabilities
   Accounts payable and accrued expenses                E   39,785    E   32,866
   Construction in progress costs payable                   62,339        24,885
   Note payable                                              1,997           832
   Note payable, construction in progress                   45,000        15,000
   Debt, current portion                                    21,852        16,306
                                                        ----------    ----------
    Total current liabilities                              170,973        89,889

Long-Term Liabilities
   Debt, construction in progress, less current portion    150,506       146,485
   Debt, less current portion                              193,186       205,393
   Derivative financial instruments, construction
     in progress                                            58,052        30,108
   Other                                                     2,497         2,906
                                                        ----------    ----------
                                                           404,241       384,892
                                                        ----------    ----------
    Total liabilities                                      575,214       474,781

Minority interest                                                -             -

                              SHAREHOLDERS' EQUITY
Shares of beneficial interest                               76,995        76,995
Accumulated other comprehensive income (loss)                1,560        (4,815)
Retained earnings                                           42,740        52,789
                                                        ----------    ----------
                                                           121,295       124,969
                                                        ----------    ----------
                                                        E  696,509    E  599,750
                                                        ==========    ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 3


<PAGE>


                            MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                   For Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)
               (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                                        2003         2002
                                                     ----------    ----------
<S>                                                  <C>           <C>
Revenues
   Sales of pulp and paper                           E   91,274    E  119,535
   Transportation                                         2,022         2,753
   Other                                                  5,018         3,849
                                                     ----------    ----------
                                                         98,314       126,137
Cost of sales
   Pulp and paper                                        86,472       104,603
   Transportation                                         1,863         2,478
                                                     ----------    ----------
     Gross profit                                         9,979        19,056
General, administrative and other                        (8,730)      (14,396)
                                                     ----------    ----------
     Income from operations                               1,249         4,660

Other income (expense)
   Interest expense                                      (4,651)       (8,099)
   Investment income (loss)                                 639          (667)
   Gain on derivative contracts                          14,601        14,881
   Loss on derivative contracts, construction
     in progress                                        (27,944)            -
   Impairment of available-for-sale securities           (5,511)            -
   Other                                                  1,387         2,392
                                                     ----------    ----------
     Total other income (expense)                       (21,479)        8,507
                                                     ----------    ----------
     Income (loss) before income taxes and
       minority interest                                (20,230)       13,167
Income tax                                                 (198)          (11)
                                                     ----------    ----------
     Income (loss) before minority interest             (20,428)       13,156
Minority interest                                        10,379             -
                                                     ----------    ----------
     Net income (loss)                                  (10,049)       13,156

Retained earnings, beginning of period                   52,789        59,111
                                                     ----------    ----------
Retained earnings, end of period                     E   42,740    E   72,267
                                                     ==========    ==========

Income (loss) per share
   Basic                                             E    (0.60)   E     0.78
                                                     ==========    ==========
   Diluted                                           E    (0.60)   E     0.77
                                                     ==========    ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 4


<PAGE>


                            MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                  For Three Months Ended June 30, 2003 and 2002
                                   (Unaudited)
               (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>



                                                        2003          2002
                                                     ----------    ----------

<S>                                                  <C>           <C>
Revenues
   Sales of pulp and paper                           E   45,041    E   60,328
   Transportation                                           980         1,337
   Other                                                  1,892         1,995
                                                     ----------    ----------
                                                         47,913        63,660
Cost of sales
   Pulp and paper                                        41,472        50,684
   Transportation                                           797         1,436
                                                     ----------    ----------
     Gross profit                                         5,644        11,540
General, administrative and other                        (3,923)       (7,766)
                                                     ----------    ----------
     Income from operations                               1,721         3,774

Other income (expense)
   Interest expense                                      (2,188)       (4,081)
   Investment income (loss)                                 102           (28)
   Gain on derivative contracts                          12,805        18,948
   Loss on derivative contracts, construction
     in progress                                        (17,582)            -
   Other                                                   (342)          (57)
                                                     ----------    ----------
     Total other income (expense)                        (7,205)       14,782
                                                     ----------    ----------
     Income (loss) before income taxes and
       minority interest                                 (5,484)       18,556
Income tax                                                 (186)          (11)
                                                     ----------    ----------
     Income (loss) before minority interest              (5,670)       18,545
Minority interest                                         6,543             -
                                                     ----------    ----------
     Net income                                             873        18,545

Retained earnings, beginning of period                   41,867        53,722
                                                     ----------    ----------
Retained earnings, end of period                     E   42,740    E   72,267
                                                     ==========    ==========

Income per share
   Basic                                             E     0.05    E     1.10
                                                     ==========    ==========
   Diluted                                           E     0.05    E     1.08
                                                     ==========    ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 5


<PAGE>


                            MERCER INTERNATIONAL INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   For Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                        2003          2002
                                                     ----------    ----------

<S>                                                  <C>           <C>
Net income (loss)                                    E  (10,049)   E   13,156

Other comprehensive income:
   Foreign currency translation adjustments               1,125         3,513
   Unrealized gain (loss) on securities
     Unrealized holding loss arising during
       the period                                          (261)       (1,289)
     Adjustment for other than temporary decline
       in value                                           5,511             -
                                                     ----------    ----------
                                                          5,250        (1,289)
                                                     ----------    ----------

   Other comprehensive income                             6,375         2,224
                                                     ----------    ----------

Total comprehensive income (loss)                    E   (3,674)    E  15,380
                                                     ==========    ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 6


<PAGE>


                            MERCER INTERNATIONAL INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  For Three Months Ended June 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>


                                                        2003          2002
                                                     ----------    ----------

<S>                                                  <C>           <C>
Net income                                           E      873    E   18,545

Other comprehensive income:
   Foreign currency translation adjustments               1,016         2,186
   Unrealized loss on securities                           (148)       (2,148)
                                                     ----------    ----------

   Other comprehensive income                               868            38
                                                     ----------    ----------

Total comprehensive income                           E    1,741    E   18,583
                                                     ==========    ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 7


<PAGE>


                            MERCER INTERNATIONAL INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   For Six Months Ended June 30, 2003 and 2002
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                        2003          2002
                                                     ----------    ----------
<S>                                                  <C>           <C>
Cash Flows from Operating Activities:
   Net income (loss)                                 E  (10,049)   E   13,156
   Adjustments to reconcile net income (loss)
     to cash flows from operating activities
      Unrealized loss on derivative financial
        instruments, construction in progress            27,944             -
      Depreciation and amortization                      11,881        13,489
      Impairment of securities                            5,511             -
      Minority interest                                 (10,379)            -
      Loss from equity investee                             546             -

   Changes in current assets and liabilities
      Investments                                            14         3,965
      Inventories                                        (4,139)         (629)
      Receivables                                       (20,582)       (2,639)
      Accounts payable and accrued expenses               4,649       (16,797)
      Other                                               1,579           374
                                                     ----------    ----------
        Net cash provided by operating activities         6,975        10,919

Cash Flows from Investing Activities:
   Purchase of properties, net of investment
     grants received                                    (88,456)       (5,223)
   Sale of properties                                         -         3,513
   Other                                                    (30)          (11)
                                                     ----------    ----------
        Net cash used in investing activities           (88,486)       (1,721)

Cash Flows from Financing Activities:
   Cash restricted                                       (5,839)        7,532
   Increase in construction in progress costs payable    38,931             -
   Increase in notes payable and debt                    49,253         4,170
   Decrease in notes payable and debt                    (9,266)       (9,727)
                                                     ----------    ----------
        Net cash provided by financing activities        73,079         1,975

Effect of exchange rate changes on cash and
  cash equivalents                                          122           (41)
                                                     ----------    ----------
Net (decrease) increase in cash and cash equivalents     (8,310)       11,132
Cash and cash equivalents, beginning of period           30,261        11,741
                                                     ----------    ----------
Cash and cash equivalents, end of period             E   21,951    E   22,873
                                                     ==========    ==========

</TABLE>


   The accompanying notes are an integral part of these financial statements.


FORM 10-Q
QUARTERLY REPORT - PAGE 8


<PAGE>


                            MERCER INTERNATIONAL INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR SIX MONTHS ENDED JUNE 30, 2003
                                   (Unaudited)

Note 1.  Basis of Presentation

The  interim  period  consolidated financial statements contained herein include
the  accounts  of  Mercer  International  Inc.  and  its  wholly-owned  and
majority-owned  subsidiaries  (the  "Company").

The  interim  period consolidated financial statements have been prepared by the
Company  pursuant  to  the  rules  and  regulations  of  the U.S. Securities and
Exchange  Commission  (the  "SEC").  Certain information and footnote disclosure
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in  the  United  States  have been condensed or
omitted  pursuant  to  such  SEC  rules  and  regulations.  The  interim  period
consolidated  financial  statements  should  be  read  together with the audited
consolidated  financial  statements  and  accompanying  notes  included  in  the
Company's  latest  annual report on Form 10-K for the fiscal year ended December
31,  2002.  In  the opinion of the Company, the unaudited consolidated financial
statements  contained herein contain all adjustments necessary to present a fair
statement  of the results of the interim periods presented.  The results for the
periods  presented  herein  may  not be indicative of the results for the entire
year.

Note 2.  Stock-Based Compensation

The  Company  has  a  stock-based employee compensation plan, which is described
more  fully  in  our  annual report on Form 10-K for the year ended December 31,
2002.  The  Company  accounts for the plan under the recognition and measurement
principles  of  APB  Opinion No. 25, "Accounting for Stock Issued to Employees,"
and  related  interpretations.  No  stock-based  employee  compensation  cost is
reflected  in  net income, as all options granted under the plan had an exercise
price  equal to or greater than the market value of the underlying common shares
on  the date of grant.  The following tables illustrate the effect on net income
(loss)  and  income  (loss)  per share if the Company had applied the fair value
recognition  provisions  of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation:

<TABLE>
<CAPTION>

                                          Six Months Ended June 30,
                                        -----------------------------
                                           2003              2002
                                        ----------        -----------
                                  (Euros in thousands, except per share amounts)
<S>                                     <C>               <C>
Net (Loss) Income
   As reported                          E  (10,049)       E    13,156
   Deduct:  Total stock-based employee
     compensation expense determined
     under fair value based methods for
     all awards, net of any related
     tax effects                                (8)                (4)
                                        ----------        -----------
     Pro forma                          E  (10,057)       E    13,152
                                        ==========        ===========

Basic (Loss) Income Per Share
   As reported                          E    (0.60)       E      0.78
                                        ==========        ===========
   Pro forma                            E    (0.60)       E      0.78
                                        ==========        ===========

Diluted (Loss) Income Per Share
   As reported                          E    (0.60)       E      0.77
                                        ==========        ===========
   Pro Forma                            E    (0.60)       E      0.77
                                        ==========        ===========

</TABLE>


FORM 10-Q
QUARTERLY REPORT - PAGE 9


<PAGE>


<TABLE>
<CAPTION>

                                         Three Months Ended June 30,
                                        -----------------------------
                                           2003              2002
                                        ----------        -----------
                                  (Euros in thousands, except per share amounts)
<S>                                     <C>               <C>
Net Income
   As reported                           E     873        E    18,545
   Deduct:  Total stock-based employee
     compensation expense determined
     under fair value based methods for
     all awards, net of any related tax
     effects                                    (6)                (2)
                                         ---------        -----------
   Pro forma                             E     867        E    18,543
                                         =========        ===========

Basic Income Per Share
   As reported                           E    0.05        E      1.10
                                         =========        ===========
   Pro forma                             E    0.05        E      1.10
                                         =========        ===========

Diluted Income Per Share
   As reported                           E    0.05        E      1.08
                                         =========        ===========
   Pro Forma                             E    0.05        E      1.08
                                         =========        ===========

</TABLE>

Note 3.  Earnings  Per  Share

Basic  earnings  per  share  is  computed by dividing income available to common
shareholders  by  the  weighted  average  number  of shares outstanding during a
period.  Diluted  earnings per share takes into consideration shares outstanding
(computed  under  basic earnings per share) and potentially dilutive shares. The
weighted  average  number  of shares outstanding for the purposes of calculating
basic  earnings  per  share  was  16,874,899 for the six months and three months
ended  June  30,  2003  and  2002, respectively.  The weighted average number of
shares  outstanding  for  the purposes of calculating diluted earnings per share
was  16,874,899  and 17,054,998 for the six months ended June 30, 2003 and 2002,
respectively,  and 16,874,899 and 17,093,390 for the three months ended June 30,
2003  and  2002,  respectively.

Note 4.  Stendal  Pulp  Mill  Project

In  August  2002,  the  Company completed financing arrangements for the design,
development,  financing, construction and operation of a "greenfield" project to
construct  and  operate  a  552,000-tonne softwood kraft pulp mill to be located
near  Stendal,  Germany  (the  "Stendal Project").  The Stendal Project is being
implemented through an approximately 63.6% owned subsidiary of the Company.  Two
minority  shareholders  own  approximately  29.4%  and  7%, respectively, of the
project  company.  Accordingly,  the  results of the subsidiary are consolidated
into  the  results of the Company.  Mercer currently capitalizes the majority of
the  expenses  and  all  of the interest related to the Stendal Project as it is
classified  as  construction in progress.  The construction costs of the Stendal
Project  will  commence  to depreciate when the Stendal Project is completed and
commences  its  commercial  production.  Minority interests on the balance sheet
represent  the  share  capital  contribution  from  the  minority  shareholders,
adjusted  for  their  proportionate  share  of  income  and  loss.


FORM 10-Q
QUARTERLY REPORT - PAGE 10


<PAGE>


Note 5.  Landqart  AG

The  Company  acquired  all  of  the  shares  of Landqart AG ("Landqart"), which
operates  a  specialty  paper mill in Graubunden, Switzerland, in December 2001.
The  results  of  Landqart  were consolidated into the results of the Company in
2002.  The  Company  reorganized  its  interest  in Landqart in December 2002 by
selling  a  20% interest to a Swiss bank and exchanging the remaining 80% for an
indirect  39%  minority  interest  through  a  limited partnership on a non-cash
basis.  As of December 31, 2002, the Company's interest in Landqart is no longer
consolidated  and is included in the Company's results on an equity basis within
other  income  (expense).

Note 6.  New  Accounting  Standards

In  April  2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standard  ("SFAS")  No.  149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.  SFAS 149 amends
and  clarifies  financial  accounting  and reporting for derivative instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities  under  SFAS  133, Accounting for Derivative Instruments and
Hedging  Activities.  This  Statement is effective for contracts entered into or
modified  after  June  30,  2003, and for hedging relationships designated after
June  30,  2003. In addition, all provisions of this Statement should be applied
prospectively.  The  Company does not anticipate that this Statement will have a
material  impact  on  the  Company's  financial  statements.

In  May 2003, FASB issued SFAS 150, Accounting for Certain Financial Instruments
with  Characteristics  of  both  Liabilities  and  Equity.  SFAS 150 establishes
standards  for  how  an  issuer  classifies  and  measures  certain  financial
instruments with characteristics of both liabilities and equity.  This Statement
is  effective  for  financial instruments entered into or modified after May 31,
2003,  and  otherwise  is effective at the beginning of the first interim period
beginning after June 15, 2003.  This Statement did not have a material impact on
the  Company's  financial  statements.

 In  January  2003,  the  FASB  issued  Interpretation  No.  46  ("FIN  46"),
Consolidation  of  Variable  Interest Entities, an Interpretation of ARB No. 51.
FIN  46  requires  certain  variable interest entities to be consolidated by the
primary  beneficiary  of the entity if the equity investors in the entity do not
have  the  characteristics  of  a  controlling financial interest or do not have
sufficient  equity  at  risk  for  the  entity to finance its activities without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective  for  all  new  variable  interest  entities created or acquired after
January  31,  2003.  For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003.  The Company does not anticipate
that  the  adoption  of  FIN  46  will  have a material impact on the results of
operations  and  financial  condition  of  the  Company.

Note 7.  Business  Segment  Information

The  Company  operates  in two reportable business segments: pulp and paper. The
segments  are  managed  separately  because  each  business  requires  different
production  and  marketing  strategies.


FORM 10-Q
QUARTERLY REPORT - PAGE 11


<PAGE>


Summarized  financial  information  concerning  the  segments  is  shown  in the
following  table:

<TABLE>
<CAPTION>
                                                Pulp        Paper        Total
                                              --------    ---------    ---------
                                                     (Euros in thousands)
<S>                                           <C>         <C>          <C>
SIX MONTHS ENDED JUNE 30, 2003
Sales to external customers                   E 62,414    E  28,860    E  91,274
Intersegment net sales                           1,545            -        1,545
Income from operations                           1,171        1,303        2,474
Segment profit                                  10,552        2,804       13,356

Reconciliation of profit:
   Total profit for reportable segments                                E  13,356
   Elimination of intersegment profits                                     3,152
   Loss on derivative financial instruments,
     construction in progress financing                                 (27,944)
   Impairment of available-for-sale securities                           (5,511)
   Unallocated amounts, other corporate expenses                         (3,283)
                                                                      ---------

     Consolidated loss before income taxes and
       minority interest                                              E (20,230)
                                                                      =========

The total assets for the Stendal pulp mill under
construction was E322,580 thousand and E223,386
thousand as at June 30, 2003 and December 31, 2002,
respectively.

SIX MONTHS ENDED JUNE 30, 2002
Sales to external customers                   E 68,084    E  51,451   E 119,535
Intersegment net sales                           2,925            -       2,925
Income from operations                           5,574        1,330       6,904
Segment profit                                  13,039        3,376      16,415

Reconciliation of profit:
   Total profit for reportable segments                               E  16,415
   Elimination of intersegment profits                                      833
   Unallocated amounts, other corporate expenses                         (4,081)
                                                                      ----------

     Consolidated income before income taxes and
       minority interest                                              E  13,167
                                                                      =========

</TABLE>


FORM 10-Q
QUARTERLY REPORT - PAGE 12


<PAGE>

<TABLE>
<CAPTION>

                                                Pulp        Paper        Total
                                              --------    ---------    ---------
                                                     (Euros in thousands)
THREE MONTHS ENDED JUNE 30, 2003
<S>                                           <C>         <C>          <C>
Sales to external customers                   E 31,029    E  14,012    E  45,041
Intersegment net sales                             675            -          675
Income (loss) from operations                    2,609         (763)       1,846
Segment profit (loss)                           12,691         (909)      11,782

Reconciliation of profit:
   Total profit for reportable segments                                E  11,782
   Elimination of intersegment profits                                     1,923
   Loss on derivative financial instruments,
     construction in progress financing                                  (17,582)
   Unallocated amounts, other corporate expenses                          (1,607)
                                                                       ---------

     Consolidated loss before income taxes and
       minority interest                                               E  (5,484)
                                                                       =========

THREE MONTHS ENDED JUNE 30, 2002
Sales to external customers                   E 34,451    E  25,877    E  60,328
Intersegment net sales                           1,524            -        1,524
Income from operations                           3,388          738        4,126
Segment profit                                  18,906          596       19,502

Reconciliation of profit:
   Total profit for reportable segments                                E  19,502
   Elimination of intersegment profits                                       456
   Unallocated amounts, other corporate expenses                          (1,402)
                                                                       ---------

     Consolidated income before income taxes and
       minority interest                                               E  18,556
                                                                       =========

</TABLE>

Note 8.  Reclassifications

Certain  prior  period  amounts  in  the  interim  period consolidated financial
statements  contained  herein  have  been reclassified to conform to the current
period's  presentation.


FORM 10-Q
QUARTERLY REPORT - PAGE 13


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF  OPERATIONS

Mercer  International  Inc.  is  a pulp and paper company and its operations are
primarily  located  in  Germany.  The  following  discussion and analysis of our
results  of  operations  and  financial  condition  for the six months and three
months  ended  June 30, 2003 should be read in conjunction with our consolidated
financial  statements  and  related  notes included in this quarterly report, as
well  as  our  most  recent annual report on Form 10-K for the fiscal year ended
December  31,  2002  filed  with the Securities and Exchange Commission, or SEC.
Certain  reclassifications  have  been  made  to  the  prior  period  financial
statements  to  conform  with  the  current  period  presentation.

In this document:  (i) unless the context otherwise requires, "we", "our", "us",
the  "Company"  or "Mercer" mean Mercer International Inc. and its subsidiaries;
(ii) information is provided as of June 30, 2003, unless otherwise stated; (iii)
all  references  to monetary amounts are to "Euros", the lawful currency adopted
by  most members of the European Union, unless otherwise stated; (iv) "E" refers
to  Euros;  and  (v)  a  "tonne"  is  one  metric  ton  or  2,204.6  pounds.

RESULTS  OF  OPERATIONS  -  SIX  MONTHS  ENDED  JUNE  30,  2003

Selected  sales  data  for  the  six  months  ended June 30, 2003 and 2002 is as
follows:

<TABLE>
<CAPTION>

                                       Six Months Ended June 30,
                                       -------------------------
                                          2003           2002
                                       --------       ----------
                                              (unaudited)
                                          (Euros in thousands)
REVENUES BY PRODUCT CLASS
<S>                                    <C>            <C>
Pulp(1)                                E 62,414       E   68,084
Papers
  Specialty papers(2)                    21,575           40,986
  Printing papers                         7,285           10,465
                                       --------       ----------
    Total papers                         28,860           51,451
                                       --------       ----------
Total(1)                               E 91,274       E  119,535
                                       ========       ==========

REVENUES BY GEOGRAPHIC AREA
Germany                                E 40,914       E   46,925
European Union(3)                        38,062           40,170
Eastern Europe and Other                 12,298           32,440
                                       --------       ----------
Total(1)                               E 91,274       E  119,535
                                       ========       ==========

SALES VOLUME BY PRODUCT CLASS                  (tonnes)
Pulp(1)                                 148,179         149,798
Papers
  Specialty papers(2)                    21,675          31,870
  Printing papers                         9,334          12,207
                                       --------       ---------
    Total papers                         31,009          44,077
                                       --------       ---------
Total(1)                                179,188         193,875
                                       ========       =========

</TABLE>
-----------
(1)  Excluding  intercompany sales volumes of 3,611 and 6,370 tonnes of pulp and
     intercompany  net  sales  revenues  of approximately E1.5  million and E2.9
     million  in  the  six  months  ended  June 30, 2003 and 2002, respectively.
(2)  As  of  December  31,  2002,  our  interest  in  Landqart  AG  is no longer
     consolidated  and  is included in our financial results on an equity basis.
     Accordingly,  sales from the Landqart specialty paper mill are not included
     in our results for the six months ended June 30, 2003, but are included for
     the  six months ended June 30, 2002. The Landqart specialty paper mill sold
     approximately 9,060 tonnes for  approximately  E20.6  million  in  the  six
     months ended  June  30,  2002.
(3)  Not  including  Germany.


FORM 10-Q
QUARTERLY REPORT - PAGE 14


<PAGE>


In the six months ended June 30, 2003, total revenues decreased to E98.3 million
from E126.1  million  in  the  six  months ended June 30, 2002, primarily as the
current  period  does  not  include the revenues of the Landqart specialty paper
mill.  We  reorganized our interest therein in December 2002 and now account for
it  under  the  equity  method.  In  the current period, pulp and paper revenues
decreased  to E91.3  million  from E119.5  million  in the comparative period in
2002,  primarily  as  a  result  of  the  deconsolidation  of  Landqart.

Cost  of pulp and paper sales in the six months ended June 30, 2003 decreased to
E86.5 million  from E104.6  million  in  the  six  months  ended  June 30, 2002,
primarily  as  a  result  of  the  deconsolidation  of  Landqart.

Pulp  sales  in the current period were E62.4 million, compared to E68.1 million
in  the  comparative  period  of  2002.  U.S. dollar denominated list pulp price
increases  were  more than offset by an 18.7% decline in the U.S. dollar against
the  Euro  for  the  current  period  versus  the  comparative period last year.
Average  list  prices  for  northern  bleached  softwood  kraft ("NBSK") pulp in
Europe,  which were approximately E477 ($470) per tonne in the second quarter of
2002,  decreased  to  approximately E420  ($440)  per  tonne at the end of 2002,
before  improving to approximately E441 ($480) per tonne in the first quarter of
2003 and approximately E484 ($550) per tonne in the second quarter of 2003.  The
Company's  pulp sales realizations were E421 per tonne on average in the current
period,  compared to E455 per tonne in the first six months of 2002.  Pulp sales
by  volume  decreased  marginally  to  148,179 tonnes in the current period from
149,798  tonnes  in  the  comparative  period  of  2002.

Cost  of  sales  and  general,  administrative  and  other expenses for the pulp
operations  were E67.5  million for the six months ended June 30, 2003, compared
to E69.0  million for the six months ended June 30, 2002.  On average, per tonne
fiber  costs for pulp production increased by approximately 4.0% compared to the
six  months ended June 30, 2002.  Depreciation within the pulp segment was E10.9
million  in  the  current  period,  compared to E10.8 million in the comparative
period  of  2002.

The  Company's pulp operations generated operating income of E1.2 million in the
six months ended June 30, 2003, compared to E5.6 million in the six months ended
June  30,  2002.

Results  for  the  Company's paper segment during the current period reflect the
aforementioned  exclusion of the results from the Landqart specialty paper mill,
which  were  included  in  the  results  for the six months ended June 30, 2002.
Paper  sales in the current period decreased to E28.9 million from E51.5 million
in  the comparative period in 2002.  Sales of specialty papers in the six months
ended  June  30,  2003  decreased to E21.6 million from E41.0 million in the six
months  ended  June  30,  2002.  Total  paper  sales volumes decreased to 31,009
tonnes  in  the  six  months  ended  June 30, 2003 from 44,077 tonnes in the six
months ended June 30, 2002.  On average, prices for specialty papers realized in
the  six  months  ended  June  30,  2003 decreased by approximately 22.6% as our
product  mix  changed  upon  the  deconsolidation  of the Landqart mill, and for
printing  papers  decreased  by  approximately  9.0%, compared to the six months
ended  June  30,  2002.

Cost  of  sales  and  general,  administrative  and other expenses for the paper
operations  decreased  to E28.1 million in the current period from E50.7 million
in  the  comparative  period  of  2002  as a result of lower paper sales.  Paper
segment  depreciation decreased to E1.0 million in the six months ended June 30,
2003  from E2.7  million  in  the  prior  period.

The  Company's  paper  operations  generated operating income of E1.3 million in
each  of  the  six  months  ended  June  30,  2003  and  2002.


FORM 10-Q
QUARTERLY REPORT - PAGE 15


<PAGE>


Consolidated  general  and  administrative expenses decreased to E8.7 million in
the  six  months  ended June 30, 2003 from E14.4 million in the six months ended
June  30,  2002,  primarily  as  a result of the exclusion of the results of the
Landqart  mill  and  a  decrease  in  professional  fees  in the current period.

For  the  six  months  ended  June  30,  2003,  the Company reported income from
operations  of E1.2  million, compared to E4.7 million in the comparative period
of  2002.  Interest  expense  (excluding capitalized interest of E7.2 million in
respect  of the Stendal project) in the current period decreased to E4.7 million
from E8.1  million  in  the comparative period of 2002, primarily as a result of
lower  borrowing  costs  and lower indebtedness for our operating units.  During
the  current  period,  the  Company made principal repayments of E6.5 million in
respect  of  the  indebtedness  of  the  Rosenthal  NBSK  pulp  mill.

Pursuant to the E828 million loan facility (the "Stendal Loan Facility") for the
Company's  greenfield  project  (the  "Stendal  project")  to  construct  an
approximately  552,000 tonne NBSK pulp mill near Stendal, Germany, the Company's
63.6%  owned  subsidiary,  Zellstoff  Stendal  GmbH  ("Stendal"),  entered  into
variable-to-fixed  rate  interest  swaps  (the  "Stendal  Interest  Rate  Swap
Agreements")  for the full term of the facility to manage the risk exposure with
respect  to  an  aggregate maximum amount of approximately E612.6 million of the
principal  amount of the Stendal Loan Facility.  Under these swaps, Stendal pays
a  fixed  rate  and  receives  a floating rate with respect to interest payments
calculated  on  a  notional amount.  These swaps manage the exposure to variable
cash  flow  risk  from  the  variable  interest  payments under the Stendal Loan
Facility.  The  swaps  are  marked to market at the end of each reporting period
and  all unrealized gains and losses are recognized in earnings for such period.
A  holding  loss  of E27.9  million  before minority interests was recognized in
respect  of  these  swaps  for the six months ended June 30, 2003.  We determine
market  valuations  based  primarily upon values provided by our counterparties.

In  addition,  the Company's wholly-owned subsidiary that operates the Rosenthal
NBSK  pulp  mill,  Zellstoff-und  Papierfabrik  Rosenthal  GmbH  &  Co.,  KG
("Rosenthal"),  has entered into currency swaps (the "Rosenthal Currency Swaps")
to  manage  its  exposure  with  respect to an aggregate amount of approximately
E198.4 million  of  the  principal  long-term indebtedness of the Rosenthal mill
(the "Rosenthal Loan  Facility").  Rosenthal  has  also  entered  into  currency
forward  contracts,  forward  interest  rate  and  interest  cap  contracts  in
connection with certain indebtedness  relating  to  the  Rosenthal  mill.  These
derivative instruments  are  also marked to market at the  end of each reporting
period, and all  gains  and  losses  are recognized in earnings for such period.
In the six months  ended  June 30, 2003, the Company recognized a  net  gain  of
E14.6 million from  these  derivative  contracts.

Minority  interest  in  the  six  months  ended  June 30, 2003 amounted to E10.4
million  and  represented  the  proportion  of  the  loss of the Stendal project
allocated  to  the  two  minority shareholders of Stendal. There was no minority
interest  in  the  six  months  ended  June  30,  2002.

Our results for the six months ended June 30, 2003 include an adjustment of E5.5
million  for  the  non-cash  aggregate  pre-tax  earnings  impact  of
other-than-temporary  impairment  losses  on  certain  of our available-for-sale
securities.  This  adjustment  was  recorded  in  other  income (expense) in our
consolidated  statement  of  operations.  This  adjustment  did  not  affect our
shareholders'  equity  since all of our available-for-sale securities are marked
to  market  on  a  quarterly  basis  and unrealized gains or losses are reported
through  the  statement  of comprehensive income in our financial statements and
recorded in other comprehensive income (loss) within shareholders' equity on our
balance  sheet.  Such  unrealized gains or losses, the cost base and the current
marked  to  market  value  of  our  available-for-sale  securities  are  further
described  in  the  notes  to our annual financial statements.  These are legacy
investments and are unrelated to our pulp and paper operations.  The majority of


FORM 10-Q
QUARTERLY REPORT - PAGE 16


<PAGE>


this  adjustment  relates to an investment in a company operating in China.  The
Company could not quantify the long-term effect of the SARS outbreak in China on
such  investment and, accordingly, the Company wrote down such investment to its
fair  value.

SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, EITF
03-1,  The  Meaning  of  Other-Than-Temporary  Impairment and its Application to
Certain  Investments,  and  SEC  Staff  Accounting  Bulletin  59, Accounting for
Noncurrent Marketable Equity Securities, provide guidance on determining when an
impairment  is  other-than-temporary,  which  requires judgment.  In making this
judgment, we evaluate, among other factors, the duration and extent to which the
fair  value  of an investment is less than its cost; the financial health of and
business outlook for the investee, including factors such as industry and sector
performance,  changes  in  technology,  operational and financing cash flow, the
investee's  financial  position  including  its  appraisal  and net asset value,
market  prices,  its  business  plan and investment strategy; and our intent and
ability  to  hold  the  investment.

For the six months ended June 30, 2003, the Company reported a net loss of E10.0
million,  or E0.60  per  share  on  a basic and diluted basis, compared to a net
income  of E13.2 million, or E0.78 per share on a basic basis or E0.77 per share
on  a  diluted  basis,  in  the  six  months  ended  June  30,  2002.

As  the  Stendal  project  is  currently  under  construction and because of its
overall  size  relative  to  the  Company's  other  facilities,  management uses
consolidated  operating  results  excluding  derivative  items  relating  to the
Stendal  project  to  measure  the  performance  and  results  of  the Company's
operating  units.  Management  believes  this  measure  provides  meaningful
information  on  the  performance  of  its  operating facilities for a reporting
period.  For the six months ended June 30, 2003, the Company reported a net loss
of  E10.0  million  or E0.60 per share on a diluted basis.  If the  Company  had
excluded items  relating to the Stendal project by adding the loss on derivative
financial instruments  of E27.9 million to, and subtracting minority interest of
E10.4 million from, the  reported  net  loss of E10.0 million, the Company would
have reported net income of E7.5 million or E0.45 per share on a diluted basis.

The  Company  generated  operating earnings before interest, taxes, depreciation
and  amortization  ("Operating  EBITDA") of E13.1 million in the current period,
compared to Operating EBITDA of E18.1 million in the comparative period of 2002.
Operating  EBITDA  is defined as income (loss) from operations plus depreciation
and  amortization.  Operating  EBITDA  is  calculated by adding depreciation and
amortization  of E11.9  million  and E13.5  million to income from operations of
E1.2 million and E4.7 million for each of the six months ended June 30, 2003 and
2002, respectively.  Management uses Operating EBITDA as a benchmark measurement
of  its  own  operating results, and as a benchmark relative to its competitors.
Management  considers  it to be a meaningful supplement to operating income as a
performance measure primarily because depreciation expense is not an actual cash
cost,  and  varies  widely  from  company to company in a manner that management
considers  largely  independent  of  the  underlying  cost  efficiency  of their
operating  facilities.  In  addition,  the  Company believes Operating EBITDA is
commonly  used by securities analysts, investors and other interested parties to
evaluate the Company's financial performance.  Operating EBITDA does not reflect
the  impact  of  a  number of items that affect the Company's net income (loss),
including  financing  costs and the effect of derivative instruments.  Operating
EBITDA  is  not  a  measure of financial performance under accounting principles
generally  accepted  in  the  United  States, and should not be considered as an
alternative  to  net income (loss) or income (loss) from operations as a measure
of performance, nor as an alternative to net cash from operating activities as a
measure  of  liquidity.  Because all companies do not calculate Operating EBITDA
in  the  same  manner,  Operating EBITDA as calculated by the Company may differ
from  Operating  EBITDA  as  calculated  by  other  companies.


FORM 10-Q
QUARTERLY REPORT - PAGE 17


<PAGE>


The following table provides a reconciliation of Operating EBITDA to income from
operations  for  the  periods  indicated:

<TABLE>
<CAPTION>

                                               Six Months Ended June 30,
                                               -------------------------
                                                   2003          2002
                                               -----------    ----------
                                                       (unaudited)
                                                  (Euros in thousands)
<S>                                            <C>            <C>
Income from operations, per income statement   E     1,249    E    4,660
   Add:  Depreciation and amortization              11,881        13,489
                                               -----------    ----------
Operating EBITDA                               E    13,130    E   18,149
                                               ===========    ==========

</TABLE>


RESULTS  OF  OPERATIONS  -  THREE  MONTHS  ENDED  JUNE  30,  2003

Selected  sales  data  for  the  three months ended June 30, 2003 and 2002 is as
follows:

<TABLE>
<CAPTION>

                                       Three Months Ended June 30,
                                       ---------------------------
                                          2003             2002
                                       ----------       ----------
                                              (unaudited)
                                          (Euros in thousands)
REVENUES BY PRODUCT CLASS
<S>                                    <C>              <C>
Pulp(1)                                E   31,029       E   34,451
Papers
   Specialty papers(2)                     10,519           20,549
   Printing papers                          3,493            5,328
                                       ----------       ----------
     Total papers                          14,012           25,877
                                       ----------       ----------
Total(1)                               E   45,041       E   60,328
                                       ==========       ==========

REVENUES BY GEOGRAPHIC AREA
Germany                                E   20,743       E   22,556
European Union(3)                          17,246           22,402
Eastern Europe and Other                    7,052           15,370
                                       ----------       ----------
Total(1)                               E   45,041       E   60,328
                                       ==========       ==========

SALES VOLUME BY PRODUCT CLASS                   (tonnes)
Pulp(1)                                    69,700           76,300
Papers
   Specialty papers(2)                     10,539           15,432
   Printing papers                          4,763            6,093
                                       ----------       ----------
     Total papers                          15,302           21,525
                                       ----------       ----------
Total(1)                                   85,002           97,825
                                       ==========       ==========

</TABLE>
--------
(1)  Excluding  intercompany sales volumes of 1,482 and 3,359 tonnes of pulp and
     intercompany  net  sales  revenues  of approximately E0.6  million and E1.5
     million  in  the  three  months ended June 30, 2003 and 2002, respectively.
(2)  As  of  December  31,  2002,  our  interest  in  Landqart  AG  is no longer
     consolidated  and  is included in our financial results on an equity basis.
     Accordingly,  sales from the Landqart specialty paper mill are not included
     in  our  results for the three months ended June 30, 2003, but are included
     for the three months ended June 30, 2002. The Landqart specialty paper mill
     sold approximately 4,498 tonnes for  approximately  E10.6  million  in  the
     three months  ended  June  30,  2002.
(3)  Not  including  Germany.

In  the  three  months  ended  June  30, 2003, total revenues decreased to E47.9
million from E63.7 million in the three months ended June 30, 2002, primarily as
the current period does not include the revenues of the Landqart specialty paper
mill.  In the current period, pulp and paper revenues decreased to E45.0 million
from E60.3  million  in the comparative period in 2002, primarily as a result of
the  deconsolidation  of  Landqart.


FORM 10-Q
QUARTERLY REPORT - PAGE 18


<PAGE>


Cost  of  pulp and paper sales in the three months ended June 30, 2003 decreased
to E41.5  million  from E50.7  million  in the three months ended June 30, 2002,
primarily  as  a  result  of  the  deconsolidation  of  Landqart.

Pulp  sales  in the current period were E31.0 million, compared to E31.4 million
in  the  first  quarter  of  2003 and E34.5 million in the comparative period of
2002.  U.S.  dollar  denominated list pulp price increases were more than offset
by  a  19.1%  decline in the U.S. dollar against the Euro for the current period
versus  the  comparative period last year.  Average list prices for NBSK pulp in
Europe,  which were approximately E477 ($470) per tonne at the end of the second
quarter  of 2002, decreased to approximately E420 ($440) per tonne at the end of
2002,  before  improving  to approximately  E484 ($550) per tonne in the current
period.  The Company's pulp sales realizations were E445 per tonne on average in
the  current  period, compared to E400 per tonne in the three months ended March
31, 2003 and E452 per tonne in the second quarter of 2002.  Pulp sales by volume
decreased to 69,700 tonnes in the current period from 78,479 tonnes in the first
quarter of 2003 and 76,300 tonnes in the comparative period of 2002, as a result
of  lower  demand.

Cost  of  sales  and  general,  administrative  and  other expenses for the pulp
operations were E31.1 million for the three months ended June 30, 2003, compared
to E34.3 million in the three months ended June 30, 2002.  On average, per tonne
fiber  costs for pulp production decreased by approximately 3.8% compared to the
three  months ended March 31, 2003, and increased by approximately 4.1% compared
to  the  three months ended June 30, 2002.  Depreciation within the pulp segment
was E5.5  million  in  the  current  period,  compared  to E5.4  million  in the
comparative  period  of  2002.

The  Company's pulp operations generated operating income of E2.6 million in the
three  months ended June 30, 2003, compared to an operating loss of E1.4 million
in  the preceding three months and operating income of E3.4 million in the three
months  ended  June  30,  2002.

Results  for  the  Company's paper segment during the current period exclude the
results  from  the  Landqart  specialty  paper  mill, which were included in the
results  for  the  three months ended June 30, 2002.  Paper sales in the current
period  decreased  to E14.0 million from E25.9 million in the comparative period
in  2002.  Sales  of  specialty  papers  in the three months ended June 30, 2003
decreased to E10.5 million from E20.5 million in the three months ended June 30,
2002.  Total  paper sales volumes decreased to 15,302 tonnes in the three months
ended  June 30, 2003 from 21,525 tonnes in the three months ended June 30, 2002.
On  average, prices for specialty papers realized in the three months ended June
30,  2003  decreased  by approximately 25.0% as our product mix changed upon the
deconsolidation  of  the  Landqart  mill,  and  for printing papers decreased by
approximately  16.1%,  compared  to  the  three  months  ended  June  30,  2002.

Cost  of  sales  and  general,  administrative  and other expenses for the paper
operations  decreased  to E14.9 million in the current period from E25.4 million
in  the  comparative  period  of  2002  as a result of lower paper sales.  Paper
segment  depreciation  decreased  to E0.5 million in the three months ended June
30,  2003  from E1.3  million  in  the  prior  period.

The  Company's  paper  operations generated an operating loss of E0.8 million in
the  three  months  ended June 30, 2003, compared with operating income of  E0.7
million  in  the  comparative  period  of  2002.


FORM 10-Q
QUARTERLY REPORT - PAGE 19


<PAGE>


Consolidated  general  and  administrative expenses decreased to E3.9 million in
the three months ended June 30, 2003 from E7.8 million in the three months ended
June  30,  2002,  primarily  as  a result of the exclusion of the results of the
Landqart mill and a decrease in professional fees in the three months ended June
30,  2003.

For  the  three  months  ended  June  30, 2003, the Company reported income from
operations  of E1.7  million, compared to E3.8 million in the comparative period
of  2002.  Interest  expense  (excluding capitalized interest of E4.0 million in
respect  of the Stendal project) in the current period decreased to E2.2 million
from E4.1  million  in  the comparative period of 2002, primarily as a result of
lower  borrowing  costs  and  lower  indebtedness  for  our  operating  units.

Pursuant to the Stendal Loan Facility, Stendal entered into the Stendal Interest
Rate  Swap  Agreements  for  the  full  term  of the facility to manage the risk
exposure  with  respect  to  an aggregate maximum amount of approximately E612.6
million  of  the  principal  amount of the Stendal Loan Facility.  The swaps are
marked  to  market  at the end of each reporting period and all unrealized gains
and  losses are recognized in earnings for such period.  A holding loss of E17.6
million  before  minority interests was recognized in respect of these swaps for
the  three  months  ended  June  30, 2003.  We determine market valuations based
primarily  upon  values  provided  by  our  counterparties.

In  addition,  Rosenthal has entered into the Rosenthal Currency Swaps to manage
its exposure with respect to an aggregate amount of approximately E198.4 million
of  the  principal  long-term  indebtedness  under  the Rosenthal Loan Facility.
Rosenthal  has  also  entered  into currency forward contracts, forward interest
rate and interest cap contracts in connection with certain indebtedness relating
to  the  Rosenthal mill.  These derivative instruments are also marked to market
at  the end of each reporting period, and all gains and losses are recognized in
earnings  for  such period. In the three months ended June 30, 2003, the Company
recognized  a  net  gain  of E12.8  million  from  these  derivative  contracts.

The  results of Landqart did not have a material impact on the Company's results
for the three months ended June 30, 2003.  Minority interest in the three months
ended  June  30, 2003 amounted to E6.5 million and represented the proportion of
the  loss  of  the Stendal project allocated to the two minority shareholders of
Stendal.  There  was  no  minority  interest  in the three months ended June 30,
2002.

For  the  three  months  ended June 30, 2003, the Company reported net income of
E0.9 million, or E0.05 per share on a basic and diluted basis, compared to a net
income  of E18.5 million, or E1.10 per share on a basic basis or E1.08 per share
on  a  diluted  basis,  in  the  three  months  ended  June  30,  2002.

As  the  Stendal  project  is  currently  under  construction and because of its
overall  size  relative  to  the  Company's  other  facilities,  management uses
consolidated  operating  results  excluding  derivative  items  relating  to the
Stendal  project  to  measure  the  performance  and  results  of  the Company's
operating  units.  Management  believes  this  measure  provides  meaningful
information  on  the  performance  of  its  operating facilities for a reporting
period.  For  the  three  months ended June 30, 2003, the  Company  reported net
income of E0.9 million or E0.05 per share on a diluted basis. If the Company had
excluded items relating to the Stendal project by adding the  loss on derivative
financial instruments of E17.6 million to, and subtracting  minority interest of
E6.5 million from, the reported net income of E0.9 million,  the  Company  would
have reported net income of E11.9 million or E0.71 per share on a diluted basis.


FORM 10-Q
QUARTERLY REPORT - PAGE 20


<PAGE>


The  Company  generated Operating EBITDA of E7.7 million in the current quarter,
compared to an Operating EBITDA of E5.5 million in the first quarter of 2003 and
Operating EBITDA of E10.5 million in the comparative quarter of 2002.  Operating
EBITDA  is  calculated  by adding depreciation and amortization of E6.0 million,
E5.9 million and E6.7 million to the income from  operations  of  E1.7  million,
loss from operations of E0.5 million and income from operations of  E3.8 million
for  each  of  the three months ended June 30, 2003, March 31, 2003 and June 30,
2002, respectively.  Management uses Operating EBITDA as a benchmark measurement
of its own operating results,  and  as  a benchmark relative to its competitors.
Management  considers  it to be a meaningful supplement to operating income as a
performance measure primarily because depreciation expense is not an actual cash
cost,  and  varies  widely  from  company to company in a manner that management
considers  largely  independent  of  the  underlying  cost  efficiency  of their
operating facilities. Because all companies do not calculate Operating EBITDA in
the  same  manner, Operating EBITDA as calculated by the Company may differ from
Operating  EBITDA  as  calculated  by  other  companies.

The following table provides a reconciliation of Operating EBITDA to income from
operations  for  the  periods  indicated:

<TABLE>
<CAPTION>

                                               Three Months Ended June 30,
                                               ---------------------------
                                                  2003             2002
                                               ----------       ----------
                                                       (unaudited)
                                                  (Euros in thousands)
<S>                                            <C>              <C>
Income from operations, per income statement   E    1,721       E    3,774
   Add:  Depreciation and amortization              5,960            6,720
                                               ----------       ----------
Operating EBITDA                               E    7,681       E   10,494
                                               ==========       ==========

</TABLE>

Stendal  Project  Status
------------------------

We  are  implementing  the  Stendal  project, which is a "greenfield" project to
construct  a  new state-of-the-art NBSK pulp mill.  The mill will have an annual
production capacity of approximately 552,000 tonnes and will be located near the
town  of  Stendal  in  Germany.  As  at  June  30, 2003, progress on the Stendal
project  was  substantially on schedule and there were no significant deviations
from  the  project  budget.  At June 30, 2003, the project was approximately 68%
completed  and  approximately  91%  of  the  total engineering was finished.  In
addition, approximately 65% of the civil works was completed.  Progress was made
in  a  number  of  areas  including  the installation of the batch digesters and
towers for the bleach plant, commencement of the erection of the recovery boiler
and power boiler and assembly of large storage tanks.  In addition, progress was
made  in connection with the construction of the infrastructure of the mill site
including  power,  gas  and  road  connections.

At  the  end  of June 2003, Stendal employed 30 people, most of whom are part of
the  management  organization  charged  with  supervising the implementation and
completion  of  the  Stendal  project.

During  the second quarter, the Company filled many key positions, including for
the  production  and  maintenance  management and wood procurement and logistics
operations, and the recruitment process for operating personnel for the mill was
commenced.


FORM 10-Q
QUARTERLY REPORT - PAGE 21


<PAGE>


LIQUIDITY  AND  CAPITAL  RESOURCES

The  following  table  is  a  summary  of selected financial information for the
periods  indicated:

<TABLE>
<CAPTION>

                              As at                as at
                          June 30, 2003      December 31, 2002
                        -----------------    -----------------
                                     (unaudited)
                                 (Euros in thousands)

FINANCIAL POSITION
<S>                      <C>                   <C>
Working capital          E   (56,175)          E   6,328
Properties                   518,248             441,990
Total assets(1)              696,509             599,750
Long-term debt(2)            343,692             351,878
Shareholders' equity         121,295             124,969

</TABLE>

---------
(1)  Includes  approximately  E270.5  million  and  E186.9  million  related  to
     properties  construction  in progress at the site of the Stendal mill as at
     June  30,  2003  and  December  31,  2002,  respectively.
(2)  Includes  approximately  E150.5  million  and  E146.5  million  related  to
     construction  in  progress  at  the site of the Stendal mill as at June 30,
     2003  and  December  31,  2002,  respectively.

At  June 30, 2003, our cash and cash equivalents were E22.0 million, compared to
E30.3 million at the end of 2002.  We  also had E13.2 million of cash restricted
to  pay  construction  in  progress  costs  payable  and  E19.1 million  of cash
restricted  in  a  debt  service  account,  both relating to the construction in
progress at the site  of  the Stendal mill. In addition, we had E21.8 million of
cash  restricted  in  a  debt  service  account  relating to the Rosenthal mill.
Short-term trading securities  were E0.3  million  at  both  June  30,  2003 and
December 31, 2002.  We had a working capital deficit of E56.2 million (including
Stendal construction costs  payable of E62.3  million  and  bridge financing and
related expenses of E54.9 million) at June 30, 2003, compared to working capital
of  E6.3  million  at  December 31, 2002.  However,  the  Stendal  Loan Facility
provides the necessary resources for the continued construction  of  the Stendal
project.

We  expect  to  continue to generate sufficient cash flow from operations to pay
our  interest  and  debt  service  expenses and meet the working and maintenance
capital requirements for our operations.  We currently do not have any revolving
credit  facilities.  From  time  to  time, we have entered into project specific
credit  facilities  to finance capital projects and expect to continue to do so,
subject  to  availability.

In  connection with our obligation to repay or refinance two bridge loans in the
principal  amounts  of E15  million and E30 million which mature in October 2003
and April 2004, respectively, and fees and accrued interest thereon, incurred in
connection  with  the  Stendal  project,  we intend to issue new debt, equity or
convertible  securities  in  2003  (the  "Financing").  As at June 30, 2003, the
aggregate  principal amount, fees and accrued interest relating to the repayment
of  the  bridge  loans  was E54.9  million,  subject  to  reduction  in  limited
exceptions  for  capital  raising activities using the services of affiliates of
the  bridge lenders.  The bridge loan in the principal amount of E15 million may
be  extended  to  April  2004 with the consent of the lender.  We intend to seek
such  consent  if  the  Financing is not completed prior to the maturity of such
bridge  loan.  There  can  be no assurance that such consent will be obtained or
that  the  Financing will be completed.  We may also pursue asset sales to raise
capital  to  repay  the  bridge  loan.  If  we  do not obtain the consent of the
lender,  complete  the Financing or raise sufficient capital through asset sales
to  repay  the  bridge  loan, this could have a materially adverse effect on our
results  of  operations  and  financial  condition.


FORM 10-Q
QUARTERLY REPORT - PAGE 22


<PAGE>


Operating  Activities
---------------------

Operating activities in the six months ended June 30, 2003 provided cash of E7.0
million,  compared  to E10.9  million in the six months ended June 30, 2002. Net
changes in trading securities provided nominal cash in the six months ended June
30,  2003,  compared  to E4.0  million  in  the  six months ended June 30, 2002.
Receivables in the current period and in the six months ended June 30, 2002 used
cash of E20.6 million and E2.6 million, respectively. An increase in inventories
used cash of E4.1 million in the current period, compared to E0.6 million in the
comparable  period of 2002. An increase in accounts payable and accrued expenses
provided cash of E4.6 million in the six months ended June 30, 2003, compared to
a  decrease in the same using cash of E16.8 million in the six months ended June
30,  2002.

Investing  Activities
---------------------

Investing  activities  in  the six months ended June 30, 2003 used cash of E88.5
million,  primarily  as  a  result  of  the  acquisition  of  properties, net of
investment  grants  received,  of  which E84.0  million  was attributable to the
Stendal  project.  The  sale  of properties provided cash of E3.5 million in the
six  months  ended  June  30,  2002.

We  have applied for investment grants from the federal and state governments of
Germany  and have claims of E50.9 million outstanding  as  of June 30, 2003.  We
received E28.8  million  with  respect  to the Stendal project in the six months
ended June 30, 2003, which reduced the acquisition costs relating to the Stendal
project.  We  expect  to  receive  the  full amount of our currently outstanding
claims  in  the second half of 2003. In accordance with our accounting policies,
we  do  not  record  these  grants  until  they  are  received.

Our  Paper mills have or will have to replace certain equipment that was damaged
as a result of flooding in parts of Germany and other eastern European countries
during the third quarter of 2002. The aggregate equipment costs are estimated to
be  approximately E3.3 million, of which approximately E0.7 million was incurred
in  the  six  months  ended June 30, 2003. We have applied for German government
grants and for assistance under special credit programs instituted by the German
government  for  flooding victims in connection with these costs. As at June 30,
2003,  we  had received approximately E2.4 million of such grants, of which E1.7
million  was recognized as income in the current period and the balance has been
deferred.  Although  we have received approval for the full amount of the grants
and  assistance  applied for, there can be no assurance that we will receive any
unpaid  amounts  of  such  grants  and  assistance.

Financing  Activities
---------------------

Financing activities provided cash of E73.1 million in the six months ended June
30,  2003.  An  increase  in  construction costs payable relating to the Stendal
project  provided  cash  of E38.9  million  and  an  increase  in  indebtedness,
primarily in connection with the Stendal project, provided cash of E49.3 million
in the six months ended June 30, 2003.  An increase in restricted cash used cash
of E5.8  million  in  the  current period.  We made principal repayments of E6.5
million  in  connection with the Rosenthal Loan Facility in the six months ended
June  30,  2003.  Financing  activities provided cash of E2.0 million in the six
months  ended  June  30, 2002, primarily as a result of a decrease in restricted
cash  and  an  increase  in  indebtedness  during  the  period.


FORM 10-Q
QUARTERLY REPORT - PAGE 23


<PAGE>


Other  than  the  agreements  entered  into  by  Stendal relating to the Stendal
project,  we  had  no  material  commitments  to  acquire  assets  or  operating
businesses  at  June  30, 2003. We anticipate that there will be acquisitions of
businesses  or  commitments  to projects in the future. To achieve our long-term
goals  of  expanding  our  asset  and  earnings  base through the acquisition of
interests  in companies and assets in the pulp and paper and related businesses,
and  organically  through  high  return  capital  expenditures  at our operating
facilities,  we  will  require  substantial  capital  resources.  The  required
necessary  resources  for  such long-term goals will be generated from cash flow
from  operations,  cash  on hand, borrowing against our assets, the sale of debt
and/or  equity  securities  and/or  asset  sales.

FOREIGN  CURRENCY

We  hold  certain assets and liabilities in U.S. dollars, Swiss francs and, to a
lesser  extent,  in  Canadian  dollars.  Accordingly, our consolidated financial
results  are  subject  to  foreign  currency  exchange  rate  fluctuations.

We  translate  foreign denominated assets and liabilities into Euros at the rate
of  exchange  on  the  balance sheet date. Unrealized gains or losses from these
translations  are  recorded  as shareholders' equity on the balance sheet and do
not  affect  our  net  earnings.

In  the  six  months ended June 30, 2003, we reported a net E1.1 million foreign
exchange  translation  gain  and,  as  a result, the cumulative foreign exchange
translation gain increased to E4.6 million at June 30, 2003 from E3.5 million at
December  31,  2002.

Based upon the average exchange rate for the six months ended June 30, 2003, the
U.S.  dollar decreased by approximately 18.7% in value against the Euro compared
to  the  same  period  in  2002.

CRITICAL  ACCOUNTING  POLICIES

The  preparation  of  financial statements in conformity with generally accepted
accounting  principles requires our management to make estimates and assumptions
that  affect  the  reported  amounts of assets and liabilities and disclosure of
contingent  assets  and  liabilities at the date of the financial statements and
the  reported  amounts  of  revenues  and expenses during the reporting periods.

Our  management  routinely  makes  judgments  and estimates about the effects of
matters  that  are  inherently  uncertain.  As  the  number  of  variables  and
assumptions  affecting  the  probable  future  resolution  of  the uncertainties
increase,  these  judgments  become  even  more  subjective and complex. We have
identified  certain  accounting  policies  that  are  the  most important to the
portrayal  of  our  financial  condition  and  results  of  operations.

For information about our critical accounting policies, see our annual report on
Form  10-K  for  the  year  ended  December  31,  2002.

CAUTIONARY  STATEMENT  REGARDING  FORWARD-LOOKING  INFORMATION

The  statements in this report that are not based on historical facts are called
"forward-looking  statements"  within  the  meaning of the United States Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
different  places  in  this  report  and  can  be  identified  by  words such as
"estimates",  "projects",  "expects",  "intends",  "believes", "plans", or their
negatives  or other comparable words. Also look for discussions of strategy that
involve  risks  and uncertainties. Forward-looking statements include statements
regarding  the  outlook for our future operations,


FORM 10-Q
QUARTERLY REPORT - PAGE 24


<PAGE>


forecasts of future costs and expenditures, the evaluation of market conditions,
the  outcome  of  legal proceedings, the adequacy of reserves, or other business
plans.  You  are  cautioned  that  any  such  forward-looking statements are not
guarantees  and  may  involve  risks  and  uncertainties. Our actual results may
differ  materially  from  those  in  the forward-looking statements due to risks
facing  us  or due to actual facts differing from the assumptions underlying our
estimates.  Some  of  these  risks  and  assumptions  include those set forth in
reports  and  other  documents  we  have  filed  with  or  furnished to the SEC,
including in our annual report on Form 10-K for the year ended December 31, 2002
and  current  report  on  Form 8-K furnished on May 12, 2003. We advise you that
these cautionary remarks expressly qualify in their entirety all forward-looking
statements  attributable  to us or persons acting on our behalf. Unless required
by  law,  we  do  not assume any obligation to update forward-looking statements
based  on  unanticipated  events  or  changed  expectations. However, you should
carefully  review the reports and other documents we file from time to time with
the  SEC.

CYCLICAL  NATURE  OF  BUSINESS;  COMPETITIVE  POSITION

The  pulp and paper business is cyclical in nature and markets for our principal
products  are  characterized by periods of supply and demand imbalance, which in
turn  affects  product  prices.  The  markets  for  pulp  and  paper  are highly
competitive  and  sensitive  to cyclical changes in industry capacity and in the
global  economy, all of which can have a significant influence on selling prices
and  our  earnings.  Demand  for  pulp  and paper products has historically been
determined  by the level of economic growth and has been closely tied to overall
business  activity.  During  the  past  three  years,  pulp  prices  have fallen
significantly.  Our  competitive  position is influenced by the availability and
quality  of raw materials and our experience in relation to other producers with
respect  to  inflation,  energy,  transportation,  labor costs, productivity and
currency  exchange  rates. There can be no assurance that we will continue to be
competitive  in  the  future,  as  a result of new technological advancements or
otherwise.

ITEM 3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT
         MARKET  RISK

We  are exposed to market risks from changes in interest rates, foreign currency
exchange  rates and equity prices which may affect our results of operations and
financial  condition  and,  consequently,  our fair value. We manage these risks
through  internal  risk  management  policies  as  well as the use of derivative
instruments.  We  use  derivative instruments to reduce or limit our exposure to
interest  rate  and  currency  risks.  We  may  in  the  future  use  derivative
instruments  to  reduce or limit our exposure to fluctuations in pulp prices. We
also  use  derivative  instruments  either  to augment our potential gains or to
reduce  our potential losses, depending on our management's perception of future
economic  events  and  developments.  These  types of derivative instruments are
generally  highly speculative in nature. They are also very volatile as they are
highly leveraged given that margin requirements are relatively low in proportion
to  notional  amounts.

Many  of  our  strategies,  including  the use of derivative instruments and the
types  of derivative instruments selected by us, are based on historical trading
patterns  and  correlations  and our management's expectations of future events.
However,  these strategies may not be fully effective in all market environments
or  against  all  types  of risks. Unexpected market developments may affect our
risk  management  strategies  during  this  time, and unanticipated developments
could impact our risk management strategies in the future. If any of the variety
of instruments and strategies we utilize are not effective, we may incur losses.


FORM 10-Q
QUARTERLY REPORT - PAGE 25


<PAGE>


Rosenthal  has  entered into the Rosenthal Currency Swaps in connection with our
long-term  indebtedness  relating to the conversion of the Rosenthal mill to the
production  of  kraft  pulp. These derivatives have been contracted by Rosenthal
using  a  dedicated  credit line within the Rosenthal Loan Facility and assigned
for  this  purpose,  and  are  subject to prescribed controls, including certain
maximum amounts for notional and at-risk amounts. As NBSK pulp prices are quoted
in U.S. dollars and the majority of our business transactions are denominated in
Euros,  Rosenthal  has  entered  into the Rosenthal Currency Swaps to reduce the
effects  of  exchange  rate fluctuations between the U.S. dollar and the Euro on
notional amounts under the Rosenthal Loan Facility. Under the Rosenthal Currency
Swaps, Rosenthal effectively pays the principal and interest in U.S. dollars and
at  U.S.  dollar  borrowing  rates.  In  the  six  months  ended  June 30, 2003,
Rosenthal  entered  into  an additional Rosenthal Currency Swap for the notional
amount  of E124.2  million  maturing  on  September  30,  2008.

In addition, Rosenthal has entered into interest rate contracts to either fix or
limit  the  interest  rates  in connection with certain of its indebtedness, and
various  currency forwards to reduce or limit its exposure to currency risks and
to  augment  its  potential  gains  or  to  reduce  its  potential  losses.

Stendal has entered into the Stendal Interest Rate Swap Agreements in connection
with  its  long-term  indebtedness  relating  to  the Stendal project to fix the
interest rate under the Stendal Loan Facility at the then low level, relative to
its  historical  trend  and projected variable interest rate.  Under the Stendal
Interest Rate Swap Agreements, Stendal pays a fixed rate and receives a floating
rate with interest payments being calculated on a notional amount.  The interest
rates  payable  under  the Stendal Loan Facility were swapped at the fixed rates
based  on  the  Eur-Euribor rate for the repayment periods of the tranches under
the  Stendal  Loan  Facility.  Stendal  effectively  converted  the Stendal Loan
Facility  from  a  variable  interest rate loan into a fixed interest rate loan,
thereby  reducing  interest  rate  uncertainty.

For  more information concerning market risk and our derivative instruments, see
the  Company's  annual report on Form 10-K for the year ended December 31, 2002.

ITEM 4.  DISCLOSURE  CONTROLS  AND  PROCEDURES

Within  90  days prior to the date of this report, we carried out an evaluation,
under  the  supervision  and  with  the participation of our principal executive
officer  and principal financial officer, of the effectiveness of the design and
operation  of our disclosure controls and procedures.  Based on this evaluation,
our  principal  executive officer and principal financial officer concluded that
our  disclosure controls and procedures are effective in timely alerting them to
material  information required to be included in our periodic reports filed with
the  SEC.  It should be noted that the design of any system of controls is based
in  part  upon  certain  assumptions about the likelihood of certain events, and
there  can  be no assurance that any design will succeed in achieving its stated
goals  under  all  future conditions, regardless of how remote.  In addition, we
reviewed  our  internal  controls, and there have been no significant changes in
our  internal controls or in other factors that could significantly affect those
controls  subsequent  to  the  date  of  their  last  evaluation.


FORM 10-Q
QUARTERLY REPORT - PAGE 26


<PAGE>


                           PART II.  OTHER INFORMATION
                                     -----------------

ITEM 1.  LEGAL  PROCEEDINGS

The  Company  is  subject to routine litigation incidental to its business.  The
Company  does  not  believe  that  the  outcome  of  such litigation will have a
material  adverse  effect  on  its  business  or  financial  condition.

ITEM 6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits

     31.1     Section  302  Certification  of  Chief  Executive  Officer

     31.2     Section  302  Certification  of  Chief  Financial  Officer

     32.1*    Section  906  Certification  of  Chief  Executive  Officer

     32.2*    Section  906  Certification  of  Chief  Financial  Officer

     -----------
     *In  accordance  with  Release  33-8212  of  the  Commission,  these
     Certifications:  (i)  are "furnished" to the Commission and are not "filed"
     for the purposes of liability under the Securities Exchange Act of 1934, as
     amended;  and  (ii)  are  not  to  be subject to automatic incorporation by
     reference into any of the Company's registration statements filed under the
     Securities Act of 1933, as amended for the purposes of liability thereunder
     or  any  offering  memorandum, unless the Company specifically incorporates
     them  by  reference  therein.

(b)  Reports  on  Form  8-K

     The  Company  filed  the following reports on Form 8-K with respect to the
     indicated  items  during  the  second  quarter  of  2003:

          Form  8-K  dated  May  5,  2003
             Item 7. Exhibits
             Item 9. Regulation FD Disclosure

          Form  8-K  dated  May  9,  2003
             Item  7.  Exhibits

          Form  8-K  dated  May  12,  2003
             Item  9.  Regulation  FD  Disclosure

          Form  8-K  dated  May  13,  2003
             Item  4.  Changes  in  Registrant's  Certifying  Accountant
             Item  7.  Exhibits

          Form  8-K  dated  June  18,  2003
             Item  5.  Other  Events  and  Regulation  FD  Disclosure
             Item  7.  Exhibits


FORM 10-Q
QUARTERLY REPORT - PAGE 27


<PAGE>


                                   SIGNATURES

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned,  thereunto  duly  authorized.


                                       MERCER  INTERNATIONAL  INC.


                                       By:     /s/  R.  Ian  Rigg
                                           -------------------------------------
                                           R.  Ian  Rigg
                                           Secretary and Chief Financial Officer


Date:  August  14,  2003


FORM 10-Q
QUARTERLY REPORT - PAGE 28


<PAGE>