<PAGE>  1

=============================================================================

                                 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 September 30, 1997

[     ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITES 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.)

    Burglistrasse 6, Zurich, Switzerland                    CH 8002   
  (Address of principal executive offices)                 (Zip Code)

                                41(1) 201 7710
              (Registrant's telephone number, including area code)

                 Brandschenke Str. 64, Zurich, Switzerland
           (Former name, former address and former fiscal year, 
                      if changed since last report)

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            
                           -----                      -----

The Registrant had 14,924,222 shares of beneficial interest outstanding as at 
November 10, 1997.

============================================================================= 







<PAGE>  2


FORWARD-LOOKING STATEMENTS

Statements in this report, to the extent they are not based on historical 
events, constitute forward-looking statements.  Forward-looking statements 
include, without limitation, statements regarding the outlook for future 
operations, forecasts of future costs and expenditures, evaluation of market 
conditions, the outcome of legal proceedings, the adequacy of reserves, or 
other business plans.  Investors are cautioned that forward-looking 
statements are subject to an inherent risk that actual results may vary 
materially from those described herein.  Factors that may result in such 
variance, in addition to those accompanying the forward-looking statements, 
include changes in general economic and business conditions, cyclical changes 
in supply and demand for pulp and paper products, government regulations, the 
ability of management to execute its business plan, product prices, interest 
rates, and other economic conditions; actions by competitors; changing 
weather conditions and other natural phenomena; actions by government 
authorities; uncertainties associated with legal proceedings; technological 
development; future decisions by management in response to changing 
conditions; and misjudgments in the course of preparing forward-looking 
statements.

                      PART I.  FINANCIAL INFORMATION
                               ---------------------
 
ITEM 1.    FINANCIAL STATEMENTS


                          MERCER INTERNATIONAL INC.

                      CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997





                                (Unaudited)















FORM 10-Q
QUARTERLY REPORT - PAGE 2

<PAGE>  3


                           MERCER INTERNATIONAL INC.

                          CONSOLIDATED BALANCE SHEETS
                As at September 30, 1997 and December 31, 1996
                                  (Unaudited)
                            (dollars in thousands)


                                                September 30,   December 31,
                                                    1997           1996
                                                -------------   ------------

                                    ASSETS

Current Assets
   Cash and cash equivalents                      $     5,109    $     9,967
   Investments                                         67,292         83,359
   Receivables                                         16,391         18,366
   Inventories                                         14,957         20,668
   Other                                                  259            291
                                                  -----------    -----------
                                                      104,008        132,651

Long-Term Assets
   Investments                                          4,245          3,759
   Properties                                         121,095        125,116
   Deferred income tax assets                          16,059         18,313
                                                  -----------    -----------
                                                      141,399        147,188
                                                  -----------    -----------
                                                  $   245,407    $   279,839
                                                  ===========    ===========



















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

FORM 10-Q
QUARTERLY REPORT - PAGE 3

<PAGE>  4

                           MERCER INTERNATIONAL INC.

                          CONSOLIDATED BALANCE SHEETS
                                  (Continued)
                As at September 30, 1997 and December 31, 1996
                                  (Unaudited)
                            (dollars in thousands)

                                                 September 30,  December 31,
                                                     1997          1996
                                                 -------------  ------------

                                  LIABILITIES

Current Liabilities
   Accounts payable and accrued expenses           $    36,800   $    45,324
   Notes payable                                         3,058         6,017
   Current portion of long-term debt                     6,827         2,647
                                                   -----------   -----------
                                                        46,685        53,988

Long-Term Liabilities
   Debt                                                 14,259        28,610
   Due to spun-off operations                               58           368
   Other                                                 2,034         2,334
                                                   -----------   -----------
                                                        16,351        31,312
                                                   -----------   -----------

Total Liabilities                                       63,036        85,300

                            SHAREHOLDERS' EQUITY

Shares of beneficial interest                           87,672        85,965
Cumulative translation adjustment                      (38,220)      (12,014)
Net unrealized loss on investments valuation            (1,518)       (2,250) 
Retained earnings                                      134,437       122,838 
                                                   -----------   ----------- 
                                                       182,371       194,539
                                                   -----------   -----------
                                                   $   245,407   $   279,839
                                                   ===========   ===========










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

FORM 10-Q
QUARTERLY REPORT - PAGE 4

<PAGE>  5

                           MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
              For Nine Months Ended September 30, 1997 and 1996
                                (Unaudited)
            (dollars in thousands, except for earnings per share)


                                                       1997          1996
                                                   -----------   -----------

Revenues
   Sales                                           $   130,234   $   136,488
   Investments                                           8,166         9,978
                                                   -----------   -----------
                                                       138,400       146,466

Expenses
   Cost of sales                                       106,587       112,298
   General and administrative                           17,574        19,286
   Interest expense                                      2,149         2,899
                                                   -----------   -----------
                                                       126,310       134,483
                                                   -----------   -----------

Income from continuing operations 
   before income taxes                                  12,090        11,983
Income taxes                                                41           110
                                                   -----------   -----------

Income from continuing operations                       12,049        11,873
Income from spun-off operations                              -           466
                                                   -----------   -----------

Net income                                              12,049        12,339

Retained earnings, beginning of period                 122,838       160,956
Dividend                                                  (450)      (54,143)
                                                   -----------   -----------

Retained earnings, end of period                   $   134,437   $   119,152
                                                   ===========   ===========

Earnings per share 
   Income from continuing operations               $      0.80   $      0.87
   Income from spun-off operations                           -          0.03
                                                   -----------   -----------
                                                   $      0.80   $      0.90
                                                   ===========   ===========



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

FORM 10-Q
QUARTERLY REPORT - PAGE 5

 <PAGE>  6

                           MERCER INTERNATIONAL INC.

           CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
              For Three Months Ended September 30, 1997 and 1996
                                 (Unaudited)
             (dollars in thousands, except for earnings per share)

                                                       1997          1996
                                                   -----------   -----------
Revenues
   Sales                                           $    45,515   $    44,175
   Investments                                           2,791         2,741
                                                   -----------   -----------
                                                        48,306        46,916
 
Expenses
   Cost of sales                                        37,328        36,304
   General and administrative                            5,465         6,498
   Interest expense                                        746           945
                                                   -----------   -----------
                                                        43,539        43,747
                                                   -----------   -----------

Income from continuing operations 
   before income taxes                                   4,767         3,169
Income taxes                                                13            29
                                                   -----------   -----------

Net income                                               4,754         3,140

Retained earnings, beginning of period                 129,683       116,012
                                                   -----------   -----------

Retained earnings, end of period                   $   134,437   $   119,152
                                                   ===========   ===========

Earnings per share                                 $      0.31   $      0.23
                                                   ===========   ===========
 













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

FORM 10-Q
QUARTERLY REPORT - PAGE 6

<PAGE>  7

                           MERCER INTERNATIONAL INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               For Nine Months Ended September 30, 1997 and 1996
                                 (Unaudited)
                            (dollars in thousands)

                                                       1997          1996
                                                   -----------   -----------

Cash Flows from Continuing Operating Activities:
   Net income from continuing operations           $    12,049   $    11,873
   Adjustments to reconcile net income from
    continuing operations to cash
      Depreciation and amortization                     (2,790)       (6,363)
      Gain on investments                               (6,169)       (5,926)
                                                   -----------   -----------
                                                         3,090          (416)

   Changes in current assets and liabilities
      Inventories                                        3,118         5,346
      Receivables                                       (2,319)          947
      Accounts payable and accrued expenses             (6,314)        6,844
      Other                                                112           492
                                                   -----------   -----------
                                                        (2,313)       13,213

   Proceeds from the sales of trading securities        34,529        24,676
   Purchase of trading securities                      (25,688)      (40,091)
                                                   -----------   -----------
       Net cash provided by (used in) operating
         activities of continuing operations             6,528        (2,202)

Cash Flows from Investing Activities of Continuing
 Operations:
   Proceeds from sales of available-for-sale
     securities                                              -         1,942
   Purchase of fixed assets                             (8,496)      (16,124)
   Other                                                    26            32
                                                   -----------   -----------
       Net cash used in investing activities
         of continuing operations                  $    (8,470)  $   (14,150)










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

FORM 10-Q
QUARTERLY REPORT - PAGE 7

<PAGE>  8

                           MERCER INTERNATIONAL INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Continued)
               For Nine Months Ended September 30, 1997 and 1996
                                 (Unaudited)
                            (dollars in thousands)

                                                        1997          1996
                                                   -----------   -----------

Cash Flows from Financing Activities of Continuing
 Operations:
  Increase in bank indebtedness                    $     6,471   $     6,134
  Decrease in bank indebtedness                         (8,854)         (150)
  Net proceeds on issuance (cost to repurchase) 
      of shares of beneficial interest                     487        (1,070)
  Payment of dividend                                     (450)            -
                                                   -----------   -----------
    Net cash (used in) provided by financing
        activities of continuing operations             (2,346)        4,914

Effect of exchange rate changes on cash and cash
 equivalents                                              (570)       (1,041)
                                                   -----------   -----------

Net cash used in continuing operations                  (4,858)      (12,479)
Net cash used in (provided by) spun-off operations           -        (1,472)
                                                   -----------   -----------

Net decrease in cash and cash equivalents               (4,858)      (13,951)

Cash and cash equivalents, beginning of period           9,967        29,230
                                                   -----------   -----------
Cash and cash equivalents, end of period           $     5,109   $    15,279
                                                   ===========   ===========
















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

FORM 10-Q
QUARTERLY REPORT - PAGE 8

<PAGE>  9

                           MERCER INTERNATIONAL INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR NINE MONTHS ENDED SEPTEMBER 30, 1997

                                 (Unaudited)


Note 1.    Basis of Presentation
           ---------------------

The consolidated financial statements include the accounts of Mercer 
International Inc. and its 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 
generally accepted accounting principles have been condensed or omitted 
pursuant to such SEC rules and regulations.  These interim period statements 
should be read together with the audited financial statements and the 
accompanying notes included in the Company's latest annual report on Form 10-
K.  In the opinion of the Company, its unaudited interim consolidated 
financial statements contain all adjustments necessary in order to present a 
fair statement of the results of the interim periods presented.

Previously reported financial statements for all periods and certain amounts 
in the Company's financial statements and related notes have been restated to 
conform to the current presentation.  The Company's interest in the operating 
results and net assets of MFC Bancorp Ltd. ("MFC") are classified separately 
within these financial statements as "spun-off operations" and are excluded 
from amounts for "continuing operations" (see "Note 2. Spun-Off Operations").  
In addition, the Company's cash flow statements exclude the activities of 
MFC.  Intercompany transactions with MFC, which were eliminated in previous 
consolidated financial statements, are now reflected in these financial 
statements. 

Note 2.    Spun-Off Operations
           -------------------

Effective June 3, 1996, the Company completed the spin-off of its financial 
services segment by distributing a stock dividend (the "Distribution") of 
shares of MFC as announced on December 28, 1995.  The Distribution was 
recorded as a stock dividend from shareholders' equity at the carrying amount 
of the net assets of the spun-off operations.  As a result, the Company's 
total assets and shareholders' equity were each reduced by approximately 
$50.7 million after the Distribution.







FORM 10-Q
QUARTERLY REPORT - PAGE 9

<PAGE> 10

The operations of MFC have been classified separately within the Company's 
financial statements as "spun-off operations" and are excluded from the 
amounts of revenues and expenses of the Company's continuing operations. 

Note 3.    Earnings Per Share
           ------------------

Earnings per share is computed on the weighted average number of shares 
outstanding during the period after considering convertible securities, 
warrants and options.  The weighted average number of shares was 15,069,200 
and 13,629,664 for the nine months ended September 30, 1997 and 1996, 
respectively, and 15,093,523 and 13,922,180 for the three months ended 
September 30, 1997 and 1996, respectively.









































FORM 10-Q
QUARTERLY REPORT - PAGE 10

<PAGE>  11

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

Mercer International Inc. is a pulp and paper company headquartered in 
Zurich, Switzerland and its operations are primarily located in Germany.  In 
this document: (i) unless the context otherwise requires, the "Company" 
refers to Mercer International Inc. and its subsidiaries; and (ii) a "tonne" 
is one metric ton or 2,204.6 pounds.  In June 1996, the Company completed the 
spin-off of its financial services segment, which has been classified 
separately within the Company's financial statements as "spun-off operations" 
and is excluded from the amounts of revenues and expenses of the Company's 
continuing operations. 

The following discussion and analysis of the results of operations and the 
financial condition of the Company for the nine months and quarter ended 
September 30, 1997 should be read in conjunction with the consolidated 
financial statements and related notes included elsewhere herein.

RESULTS OF OPERATIONS - Nine Months Ended September 30, 1997
                        ------------------------------------

In the first nine months of 1997, revenues decreased to $138.4 million from 
$146.5 million in the same period in 1996, primarily as a result of lower 
pulp and paper prices.  As the Company's products are principally sold in 
deutschmarks, the depreciation of the deutschmark against the U.S. dollar by 
approximately 12.0% in the first nine months of 1997 also contributed to 
lower revenues. See "Foreign Currency".

Pulp and paper costs decreased to $106.6 million in the first nine months of 
1997 from $112.3 million in the same period in 1996, primarily as a result of 
decreased fibre costs (raw materials).  General and administrative expenses 
decreased to $17.6 million for the nine months ended September 30, 1997 from 
$19.3 million in the same period in 1996.  Interest expense decreased to $2.1 
million for the nine months ended September 30, 1997 from $2.9 million for 
the comparative period of 1996 as a result of reduced indebtedness.

For the nine months ended September 30, 1997, net earnings from continuing 
operations were $12.0 million or $0.80 per share, compared to $11.9 million 
or $0.87 per share for the nine months ended September 30, 1996.















FORM 10-Q
QUARTERLY REPORT - PAGE 11

<PAGE>  12

The distribution of the Company's sales by product class, geographic area and 
volume is set out in the following table for the periods indicated:

                                      Nine Months Ended    Nine Months Ended
                                      September 30, 1997   September 30, 1996  
                                      ------------------   ------------------
                                               (dollars in thousands)
Sales by Product Class
----------------------
Packaging papers                          $    22,483        $   25,672
Specialty papers                               21,419            21,638
Printing papers                                26,744            27,891
Pulp                                           56,706            57,152
Other                                           2,882             4,135
                                          -----------        ----------
Total(1)                                  $   130,234        $  136,488
                                          ===========        ==========

Sales by Geographic Area
------------------------
Germany                                   $    71,125        $   78,311
European Union(2)                              46,933            38,052
Other                                          12,176            20,125
                                          -----------        ----------
Total                                     $   130,234        $  136,488
                                          ===========        ==========

Sales by Volume                                      (tonnes)
---------------
Packaging papers                               84,099            83,332
Specialty papers                               27,092            20,303
Printing papers                                40,647            34,477
Pulp                                          125,571           101,183
                                          -----------        ----------
Total                                         277,409           239,295
                                          ===========        ==========
-----------------------------------
(1) Excluding intercompany sales.
(2) Not including Germany.

Pulp and paper markets were generally weak in the first nine months of 1997 
and product prices were lower than in the same period in 1996.  Sales volumes 
were 16% higher in the first nine months of 1997, compared to the same period 
in 1996, but only partially compensated for the price weakness. See "Cyclical 
Nature of Business; Competitive Position".

Demand for market pulp improved during the current period and pulp sales by 
volume in the first nine months of 1997 increased by 24% compared to the same 
period in 1996.  In the first nine months of 1997, list prices for pulp were, 
on average, down approximately 20% from the same period in 1996. Pulp prices 
stabilized during the third quarter of 1997 and were 12% higher than in the 
second quarter of 1997.  In addition, some pulp producers have announced 
price increases for 

FORM 10-Q
QUARTERLY REPORT - PAGE 12

<PAGE>  13

the fourth quarter of 1997, although there can be no assurances that such 
price increases will be achieved.

The average net selling price for the Company's paper products decreased, on 
average, by approximately 14% in the first nine months of 1997 from the 
comparative period in 1996.  Paper sales by volume in the first nine months 
of 1997 increased by 10%, compared to the same period in 1996.  Improvements 
in paper markets were primarily for speciality and printing papers.  The 
markets and prices for packaging papers continued to be generally weak.  As a 
result, the Company, in conjunction with its plan to convert its pulp mill 
(the "Pulp mill") to produce kraft pulp, also intends to review its other 
product lines, including commodity grade packaging papers.  See "Liquidity 
and Capital Resources - Investing Activities".

On average, the Company's fibre (wood chips and pulpwood) costs for pulp 
operations decreased by approximately 12% in the first nine months of 1997, 
compared to the comparative period in 1996. Overall, reduced fibre prices 
were reflected in lower pulp prices.  Recycled fibre (wastepaper) costs for 
paper operations decreased by approximately 33% in the first nine months of 
1997, compared to the same period in 1996.  Fibre costs remained relatively 
low in the first nine months of 1997, but there can be no assurance that they 
will not escalate in the future.  During the third quarter of 1997, there 
were signs of upward pressure for wastepaper and pulpwood.  

Since acquisition, the Company has been implementing operational changes to 
its operations to improve efficiency, increase export sales and upgrade its 
product mix.  These changes have continued in 1997 and resulted in the 
further elimination of employee positions .  In conjunction with its 
conversion of the Pulp mill, and due to the weak margins for packaging paper 
products and competitive pressures resulting from the small size of the 
Company's packaging-grade paper machines, the Company is reviewing various 
potential alternatives with respect to its paper operations which may 
include, among other things, the divestiture of certain of its paper mills.  
See "Liquidity and Capital Resources - Investing Activities".

RESULTS OF OPERATIONS - Quarter Ended September 30, 1997
                        --------------------------------

Revenues in the third quarter of 1997 increased to $48.3 million from $46.9 
million in the comparative quarter of 1996.  The increase in revenues 
reflects higher pulp and paper sales volumes. The devaluation of the 
deutschmark against the U.S. dollar in the third quarter of 1997, compared to 
the third quarter of 1996, contributed to lower revenues and expenses during 
the period. On average, the deutschmark decreased by approximately 21% in the 
current period of 1997 from the comparative period of 1996.

Pulp and paper costs and expenses increased to $37.3 million in the current 
quarter from $36.3 million in the same period in 1996.  General and 
administrative expenses decreased to $5.5 million in the current quarter from 
$6.5 million in the same quarter of 1996.  Interest expense decreased to 




FORM 10-Q
QUARTERLY REPORT - PAGE 13

<PAGE>  14

$0.7 million in the three months ended September 30, 1997 from $0.9 million 
in the comparative quarter in 1996 as a result of reduced indebtedness.

Net earnings in the quarter ended September 30, 1997 increased to $4.8 
million or $0.31 per share from $3.1 million or $0.23 per share in the same 
quarter in 1996.

The distribution of the Company's sales by product class, geographic area and 
volume is set out in the following table for the periods indicated:


                                        Quarter Ended        Quarter Ended 
                                      September 30, 1997   September 30, 1996
                                      ------------------   ------------------
                                              (dollars in thousands)

Sales by Product Class 
----------------------
Packaging papers                        $        7,469       $       9,008
Specialty papers                                 7,089               6,128
Printing papers                                  8,877               8,444
Pulp                                            20,924              19,492
Other                                            1,156               1,103
                                        --------------       -------------
Total(1)                                $       45,515       $      44,175
                                        ==============       =============

Sales by Geographic Area
------------------------
Germany                                 $       23,064       $      25,530
European Union(2)                               16,800              14,484
Other                                            5,651               4,161
                                        --------------       -------------
Total                                   $       45,515       $      44,175
                                        ==============       =============
 
                                        Quarter Ended        Quarter Ended 
                                      September 30, 1997   September 30, 1996
                                      ------------------   ------------------
                                                     (tonnes)
Sales by Volume
---------------
Packaging papers                                28,499              29,702
Specialty papers                                 9,360               6,112
Printing papers                                 14,099              11,167
Pulp                                            43,603              36,198
                                        --------------        ------------
Total                                           95,561              83,179
                                        ==============        ============
-----------------------------------
(1) Excluding intercompany sales.
(2) Not including Germany.

While pulp and paper prices in the third quarter of 1997 were lower than the 
comparative period of 1996, sales by volume increased by approximately 15%.  
During the third quarter of 1997, pulp and paper prices remained stable and 
there was some improvement over the second quarter of 1997. 

FORM 10-Q
QUARTERLY REPORT - PAGE 14

<PAGE>  15

In the third quarter of 1997, list prices for pulp were, on average, down 
approximately 11% from the same period in 1996.  On average, the Company's 
fibre costs for pulp operations were up approximately 1% in the current 
quarter, compared to the same period in 1996.  Pulp sales by volume in the 
third quarter of 1997 increased by 20%, compared to the same period in 1996.  
Dissolving pulp sales were lower during the current period as a result of 
weakness in the textile sector and the cessation of operations by one of the 
Company's major buyers.

The average net selling price for the Company's paper products decreased, on 
average, by approximately 11% in the third quarter of 1997 from the 
comparative period in 1996.  Although recycled fibre (wastepaper) costs for 
paper operations decreased by approximately 25% in the third quarter of 1997 
from the same period in 1996, they increased marginally in the current 
quarter of 1997, compared to the second quarter of 1997.  While paper prices 
appear to be improving, margins will continue to be under pressure as a 
result of expected increases in fibre costs and the time lag in price 
increases to the end purchaser.  Paper sales by volume in the third quarter 
of 1997 increased by 11%, compared to the same period in 1996.  Improvements 
in paper markets were primarily for speciality and printing papers, and 
prices and markets for packaging papers remained weak.  See "Liquidity and 
Capital Resources - Investing Activities".

LIQUIDITY AND CAPITAL RESOURCES

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

                                            As at                As at
                                      September 30, 1997    December 31, 1996
                                      ------------------    -----------------
                                                   (in thousands)
Financial Position
------------------
Working capital                        $     57,323            $   78,663
Total assets                                245,407               279,839
Long-term government debt                     7,997                 9,184
Long-term debt - other                        6,262                19,426

At September 30, 1997, the Company's cash and cash equivalents decreased to 
$5.1 million from $15.3 million at September 30, 1996 and from $10.0 million 
at December 31, 1996. At September 30, 1997, the Company had short-term 
trading securities totalling $67.3 million, compared to $78.3 million at 
September 30, 1996 and $83.4 million as at December 31, 1996.

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

Cash used in operating activities before net purchases of trading securities 
was $2.3 million in the nine months ended September 30, 1997, compared to 
cash provided of $13.2 million in the same period in 1996.  Cash flow from 
operations provided cash of $6.5 million in the first nine months of 1997, 
compared to using cash of $2.2 million for the same period in 1996.  During 
the current 

FORM 10-Q
QUARTERLY REPORT - PAGE 15

<PAGE>  16

period, the reduction of accounts payable and accrued expenses used cash of 
$6.3 million, and net sales of trading securities provided cash of $8.8 
million.  In the comparative period of 1996, an increase in accounts payable 
and accrued expenses provided cash of $6.8 million, and net purchases of 
trading securities used cash of $15.4 million.  A reduction in inventories 
provided cash of $3.1 million in the nine months ended September 30, 1997, 
compared to $5.3 million in the nine months ended September 30, 1996.  In the 
current period of 1997, an increase in receivables used cash of $2.3 million, 
compared to a decrease in receivables providing cash of $0.9 million in the 
comparative period of 1996.  The Company expects to generate sufficient cash 
flow from operations to meet its working capital requirements.

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

Investing activities in the first nine months of 1997 used cash of $8.5 
million, consisting primarily of capital expenditures for upgrades to the 
manufacturing plants, compared to $14.2 million in the same period in 1996.

The Company expects capital investments in 1997 to total approximately $10.7 
million. Approximately $8.9 million was expended therefor in the first nine 
months of 1997, compared to $18.8 million in the same period in 1996.  These 
investments are being partially financed through non-refundable grants made 
available by German federal and state governments to qualifying businesses 
operating in Germany.  These non-refundable grants are not recorded in the 
income of the Company, but instead reduce the cost base of the assets 
purchased with the proceeds thereof.  Loan guarantees are also available from 
state governments in Germany for up to 80% of the cost of qualified 
investments. Such guarantees permit businesses to obtain term loans at below 
market interest rates. The Company has not yet utilized any such state 
guarantees.  

The Company is proceeding with its plan to convert the production of the Pulp 
mill from sulphite pulp to sulphate (kraft) pulp.  The conversion is expected 
to increase its annual production capacity from 160,000 tonnes to 280,000 
tonnes, substantially reduce effluent and sulphur dioxide emissions and 
reduce energy costs.  The estimated cost for the conversion is approximately 
$300 million, which will be financed through a combination of non-refundable 
governmental grants, governmental assistance and guarantees for long-term 
project financing and cash flow from operations. 

In mid-1997, the Company completed its engineering and related studies and 
submitted its formal application for project approval and operating permits.  
In addition, the State of Thuringia pledged grants and subsidies totalling 
approximately $96 million in support of the project and provided commitments 
for the additional fibre required by the mill after conversion.  The overall 
financing package, including bank financing, for the conversion is being 
negotiated.  Although the Company's conversion project has and continues to 
receive favourable support from all applicable governmental agencies, there 
can be no assurance that current governmental assistance programs will not be 
amended in the future or that financial assistance will be provided to the 
Company on terms satisfactory to it, or that all necessary environmental and 
operating permits will be received on 

FORM 10-Q
QUARTERLY REPORT - PAGE 16

<PAGE>  17

satisfactory terms, or in time to permit the Company to proceed with and 
complete the project as currently planned. A final decision to proceed with 
the conversion will be made upon receipt of all necessary environmental and 
operating permits and approvals, which are now expected to be received in 
early 1998.  The Company estimates that its costs in respect of the project 
in 1997 will be approximately $4.5 million. In addition, the Company is 
continuing discussions with a strategic investor to acquire a minority 
participation in the project.

In conjunction with the aforesaid conversion of the Pulp mill to produce 
kraft pulp, the Company also intends to review its product lines, including 
commodity grade packaging papers, in order to streamline operations and focus 
upon higher margin grades, options for forward integration, capacity upgrades 
and the modernization of its packaging paper mills.  The Company's results 
for packaging grade commodity papers have been generally weak in 1997 and 
performance has been hindered by, among other things, limited demand as a 
result of soft economic conditions in Europe, market over-supply and 
operational limitations resulting from small capacities and the current trim 
width of the Company's packaging paper machines.  Such a review could result 
in the Company pursuing initiatives with both BVS (as defined below) and the 
State of Saxony in Germany to enhance the performance of such mills. There 
can be no assurance that, after completing its review and pursuing such 
initiatives to enhance the performance of its commodity grade packaging paper 
results, the Company may not divest such mills by sale or other disposition 
or discontinuance.  Any such divestment may result in the Company taking 
restructuring charges relating thereto for, among other things, severance 
costs, write-downs, the loss from the disposal of fixed assets and other 
related charges.  The amount of such charges, if any, are not determinable at 
this time but may, if incurred or taken, have a material effect on the 
Company's financial and other results.

In July 1997, the Company purchased a $3.3 million senior secured convertible 
debenture from Concert Industries Ltd. ("Concert"), a Canadian manufacturer 
of air-laid, non-woven paper products. The debenture is due in July 2000, and 
is convertible into common shares of Concert at a price of $1.65 per share.  
The Company also entered into an agreement (the "Concert Purchase Agreement") 
with Concert to acquire, subject to conditions which were not satisfied, 
3,300,000 units of Concert, each unit consisting of one common share and one 
share purchase warrant of Concert, for an aggregate purchase price of $5.1 
million.  The Concert Purchase Agreement expired by its terms.

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

Cash used by financing activities was $2.3 million in the first nine months 
of 1997, compared to cash provided of $4.9 million in the same period in 
1996.  The Company decreased its bank indebtedness by $2.4 million in the 
first nine months of 1997, compared to a net increase of $6.0 million in the 
comparative period in 1996.  During the first nine months of 1997, the 
Company received proceeds on the issuance of shares of $0.5 million, compared 
to expending $1.1 million on repurchases of the Company's shares in the same 
period in 1996.  During the nine months ended September 30, 1997, the 
Company used $0.5 million to pay a cash dividend to its shareholders.

The depreciation of the deutschmark against the U.S. dollar in the first nine 
months of 1997 resulted in an unrealized foreign exchange translation loss of 
$0.6 million on cash and cash equivalents, 

FORM 10-Q
QUARTERLY REPORT - PAGE 17

<PAGE>  18

which is part of the cumulative translation adjustment of $38.2 million 
included as shareholders' equity in the Company's balance sheet and does not 
affect the Company's net earnings.  See "Foreign Currency". 

The Company's pulp and paper operations had net operating tax losses of 
approximately $242.0 million at December 31, 1996, which under German tax 
laws may be carried forward indefinitely. Such tax losses may result in a 
substantial deferred tax benefit being recognized which, under FASB Statement 
No. 109, may be reflected as an increase to earnings.  The German government 
has proposed amendments to its tax laws which would limit the amount of tax 
losses that may be utilized in any one year.  Until such amendments are 
finalized and proclaimed effective, the Company cannot determine with 
certainty the impact of these proposed changes under FASB Statement No. 109.
The Company is currently in discussions with Bundesanstalt fur 
Vereignigungsbedingte Sonderaufgaben ("BVS"), the German privatization 
agency, with respect to certain matters arising from the purchase agreement 
for the Company's paper operations, including the reversal of accruals 
established at the time of acquisition by the paper operation for effluent 
costs and potential reimbursement therefor to BVS.  The Company does not 
believe it is responsible for any such reimbursement obligation under the 
purchase agreement but can give no assurance that BVS will not seek to make a 
claim for the same.  In the event that BVS were to proceed with and 
successfully enforce such a claim before the courts, the same could have an 
adverse effect on the Company's paper operations.  In addition, in the 
current period, BVS commenced action to recover approximately $1.0 million in 
periodic interest and principal payments due from the Company's paper 
operations.  The Company has fully provided for the claim and is reviewing 
various options for its packaging paper operations, including pursuing 
initiatives with BVS to enhance their performance, which may include revising 
the terms of the government assistance relating to the Company's Trebsen 
mill.

The Company anticipates that there will be additional acquisitions of 
businesses or commitments to projects during the remainder of 1997.  To 
achieve its long-term goal of expanding its asset and earnings base through 
mergers and acquisitions, the Company will require substantial capital 
resources. The  necessary resources will be generated from cash flow from 
operations, cash on hand, borrowing against its assets and/or the sale of 
assets.

Foreign Currency
----------------

Substantially all of the Company's operations are conducted in international 
markets and, therefore, its consolidated financial results are subject to 
foreign currency exchange rate fluctuations.  As primarily all of the 
Company's revenues are received in deutschmarks, the financial position of 
the Company for any given period, when reported in U.S. dollars, can be 
significantly affected by the exchange rate for deutschmarks prevailing 
during that period.  In the nine months ended September 30, 1997, 
approximately 99% of the Company's revenues were recorded in deutschmarks. 

The Company translates foreign assets and liabilities into U.S. dollars at 
the rate of exchange on the balance sheet date.  Revenues and expenses are 
translated at the average rate of exchange prevailing during the period.  
Unrealized gains or losses from these translations are recorded as 
shareholders' 


FORM 10-Q
QUARTERLY REPORT - PAGE 18

<PAGE>  19

equity on the balance sheet and do not affect the net earnings of the Company.  
At December 31, 1996, the cumulative foreign exchange translation resulted in a 
loss of $12.0 million.  In the nine months ended September 30, 1997, the 
overall depreciation of the deutschmark against the U.S. dollar resulted in a 
net $26.2 million foreign exchange translation loss, and as a result, the 
cumulative foreign exchange translation loss was increased from $12.0 million 
at December 31, 1996 to $38.2 million at September 30, 1997.   

As both the Company's principal sources of revenues and expenses are in 
deutschmarks, the Company does not currently enter into any currency hedging 
arrangements for exchange rate fluctuations. The period average and period 
ending exchange rates for the deutschmark to the U.S. dollar for the periods 
indicated are as follows:


<TABLE>
<CAPTION>

                             Period From                 Quarter Ended              Quarter Ended
                       Sept. 30 to Nov. 10 , 1997      September 30, 1997         September 30, 1996 
                       Period End  Period Average  Period End  Period Average  Period End  Period Average
                       ----------  --------------  ----------  --------------  ----------  --------------
<S>                 <C>        <C>            <C>       <C>            <C>       <C> 
Rate of Exchange
Deutschmark              1.7077        1.7160        1.7670        1.7241        1.5268        1.4999

</TABLE


Based upon the period average exchange rate in the first nine months of 1997, 
the U.S. dollar increased by approximately 12.0% in value against the 
deutschmark since December 31, 1996. 

Cyclical Nature of Business; Competitive Position
-------------------------------------------------

The pulp and paper business is cyclical in nature and markets for the 
Company's principal products are affected by fluctuations in supply and 
demand in each cycle, 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 economy, both of which can have a significant 
influence on selling prices and the earnings of the Company.  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. The 
competitive position of the Company is influenced by the availability and 
quality of raw materials (fibre) and its experience in relation to other 
producers with respect to inflation, energy, labour costs and productivity.

FORM 10-Q
QUARTERLY REPORT - PAGE 19

<PAGE>  20

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

ITEM 1.    LEGAL PROCEEDINGS

The Company is subject to routine litigation incidental to its business, 
including a claim by BVS. See "Liquidity and Capital Resources - Financing 
Activities".  The Company does not believe that the outcome of such 
litigation will have a material adverse effect on its business or financial 
condition.


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

In July 1997, the Company issued, in reliance on exemptions from registration
under the Securities Act of 1933, as amended (the "Securities Act") and the 
rules promulgated thereunder, as transactions not involving a public offering
under section 3(a)(9) of the Securities Act, 4,853 shares of beneficial 
interest as payment in kind for interest obligations due on September 30, 1997
under the Corporation's bonds, and under section 4(2) of the Securities Act, 
11,000 shares of beneficial interest as payment in kind for investment banking
fees owing by the Company to MFC Merchant Bank S.A. in connection with the 
Company's transactions with Concert.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit
     Number         Description
     -------        -----------
 
     27             Article 5 - Financial Data Schedule for the 3rd Quarter 1997
                                Form 10-Q.

(b)  Reports on Form 8-K

None.


























FORM 10-Q
QUARTERLY REPORT - PAGE 20

<PAGE>  21

                                 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.

Dated:  November 13, 1997           MERCER INTERNATIONAL INC.

                                    By:  /s/ Maarten Reidel
                                         ----------------------------
                                         Maarten Reidel
                                         Secretary and Chief Financial Officer









































FORM 10-Q
QUARTERLY REPORT - PAGE 21

<PAGE>  22

                               EXHIBIT INDEX

Exhibit
Number      Description
-------     -----------

 27         Article 5 - Financial Data Schedule for the 3rd Quarter 1997 Form
                        10-Q.




</TABLE>