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

                                  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, 2002

                                       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.)

  One Renton Place, 555 S. Renton Village Place, Suite 700, Renton, Washington
                                      98055
                               (Address of office)

                                 (425) 687-4229
              (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
                                              ---        ---

The  Registrant  had  16,794,899 shares of beneficial interest outstanding as at
November  14,  2002.

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

<PAGE>


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

ITEM 1.   FINANCIAL STATEMENTS




                            MERCER INTERNATIONAL INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002

                                  (UNAUDITED)


FORM 10-Q
QUARTERLY REPORT - PAGE 2


<PAGE>


                            MERCER INTERNATIONAL INC.

                          CONSOLIDATED BALANCE SHEETS
                 As at September 30, 2002 and December 31, 2001
                                  (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                        September 30,     December 31,
                                            2002              2001
                                        -------------     ------------
                                     ASSETS
<S>                                       <C>              <C>
Current Assets
  Cash and cash equivalents               E  22,936        E  11,741
  Cash restricted, Stendal project
    under construction                       24,041                -
  Investments                                 1,586            4,549
  Receivables                                43,494           47,892
  Inventories                                25,833           25,062
  Prepaid and other                           3,707            3,968
                                          ---------        ---------
      Total current assets                  121,597           93,212

Long-Term Assets
  Cash restricted                            38,608           33,388
  Properties                                267,213          278,617
  Stendal project under construction        145,943                -
  Investments                                 7,654            8,598
  Notes receivable                                -            5,475
  Deferred income tax                        10,194           10,303
                                          ---------        ---------
                                            469,612          336,381
                                          ---------        ---------
                                          E 591,209        E 429,593
                                          =========        =========

                                  LIABILITIES

Current Liabilities
  Accounts payable and accrued expenses   E  40,960        E  51,916
  Stendal project costs payable              51,826                -
  Notes payable                               2,701            7,392
  Debt                                       20,116           18,360
                                          ---------        ---------
      Total current liabilities             115,603           77,668

Long-Term Liabilities
  Debt                                      212,022          216,871
  Debt, Stendal project
    under construction                       91,000                -
  Provision for interest rate swap
    contracts, Stendal project under
    construction                             22,011                -
  Other                                       2,843            3,441
                                          ---------        ---------
                                            327,876          220,312
                                          ---------        ---------
      Total liabilities                     443,479          297,980

Minority Interest                            22,599                -

                              SHAREHOLDERS' EQUITY

Shares of beneficial interest                76,722           76,722
Retained earnings                            51,670           59,111
Accumulated other comprehensive loss         (3,261)          (4,220)
                                          ---------        ---------
                                            125,131          131,613
                                          ---------        ---------
                                          E 591,209        E 429,593
                                          =========        =========

</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 Nine Months Ended September 30, 2002 and 2001
                                  (Unaudited)
              (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                               2002             2001
                                            ----------       ----------

<S>                                         <C>              <C>
Revenues
  Sales                                     E 174,289        E 160,333
  Transportation                                3,885            4,225
  Other                                         6,898            9,258
                                            ---------        ---------
                                              185,072          173,816
Expenses
  Cost of sales                               152,270          136,715
  Transportation                                3,747            3,063
  General and administrative                   20,400           14,765
  Interest expenses                            10,838           12,172
  Litigation claim                                  -            1,026
  Flooding loss                                 2,107                -
                                            ---------        ---------
                                              189,362          167,741
                                            ---------        ---------

(Loss) income from operations                  (4,290)           6,075
Gain (loss) on interest and currency
  contracts                                    10,855             (817)
Loss on interest rate swap contracts,
  Stendal project                             (22,011)               -
                                            ---------        ---------

(Loss) income before income taxes             (15,446)           5,258
Income taxes                                       11               38
                                            ---------        ---------

(Loss) income before minority interest        (15,457)           5,220
Minority interest                               8,016                -
                                            ---------        ---------

Net (loss) income                              (7,441)           5,220
Retained earnings, beginning of period         59,111           61,934
                                            ---------        ---------

Retained earnings, end of period            E  51,670        E  67,154
                                            =========        =========

(Loss) earnings per share
  Basic                                     E   (0.44)       E    0.31
                                            =========        =========
  Diluted                                   E   (0.44)       E    0.30
                                            =========        =========

</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 September 30, 2002 and 2001
                                  (Unaudited)
              (Euros in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                                   2002          2001
                                                ---------     ---------
<S>                                             <C>          <C>
Revenues
  Sales                                         E  54,754     E  47,929
  Transportation                                    1,132         1,453
  Other                                             1,324         3,683
                                                ---------     ---------
                                                   57,210        53,065
Expenses
  Cost of sales                                    47,667        43,711
  Transportation                                    1,269         1,032
  General and administrative                        6,004         5,313
  Interest expenses                                 2,739         3,806
  Litigation claim                                      -         1,026
  Flooding loss                                     2,107             -
                                                ---------     ---------
                                                   59,786        54,888
                                                ---------     ---------

Loss from operations                               (2,576)       (1,823)
(Loss) gain on interest and currency contracts     (4,026)        2,029
Loss on interest rate swap contracts,
  Stendal project                                 (22,011)            -
                                                ---------     ---------

(Loss) income before income taxes                 (28,613)          206
Income taxes                                            -             9
                                                ---------     ---------

(Loss) income before minority interest            (28,613)          197
Minority interest                                   8,016             -
                                                ---------     ---------

Net (loss) income                                 (20,597)          197
Retained earnings, beginning of period             72,267        66,957
                                                ---------     ---------

Retained earnings, end of period                E  51,670     E  67,154
                                                =========     =========

(Loss) earnings per share, basic and diluted    E   (1.23)    E    0.01
                                                =========     =========

</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 Nine Months Ended September 30, 2002 and 2001
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                          2002          2001
                                                       ---------     ---------

<S>                                                    <C>           <C>
Net (loss) income                                      E  (7,441)    E   5,220

Other comprehensive income:
  Foreign currency translation adjustments                 3,894            92
  Unrealized (loss) gain on securities                    (2,935)        1,412
                                                       ---------     ---------
                                                             959         1,504
                                                       ---------     ---------

Total comprehensive (loss) income                      E  (6,482)    E   6,724
                                                       =========     =========

</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 September 30, 2002 and 2001
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                          2002          2001
                                                       ----------    ---------
<S>                                                    <C>           <C>
Net (loss) income                                      E  (20,597)   E     197

Other comprehensive income (loss):
  Foreign currency translation adjustments                    381         (141)
  Unrealized (loss) gain on securities                     (1,646)         424
                                                       ----------    ---------
                                                           (1,265)         283
                                                       ----------    ---------

Total comprehensive (loss) income                      E  (21,862)   E     480
                                                       ==========    =========

</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 Nine Months Ended September 30, 2002 and 2001
                                   (Unaudited)
                              (Euros in thousands)

<TABLE>
<CAPTION>

                                                        2002         2001
                                                     ----------    ---------
<S>                                                  <C>           <C>
Cash Flows from Operating Activities:
  Net (loss) income                                   E  (7,441)    E  5,220
  Adjustments to reconcile net (loss) income from
   operations to cash
    Depreciation and amortization                        20,231       17,323
    Loss on interest rate swap contracts,
     Stendal project                                     22,011            -
    Minority interest                                    (8,016)           -

  Changes in current assets and liabilities
    Investments                                           4,004         (881)
    Inventories                                            (675)       5,277
    Receivables                                           5,623        6,980
    Accounts payable and accrued expenses               (12,363)      (4,526)
    Other                                                   651          412
                                                      ---------    ---------
        Net cash provided by operating activities        24,025       29,805

Cash Flows from Investing Activities:
  Purchase of fixed assets, net of investment grants     (7,070)      (5,651)
  Construction of Stendal project                      (145,943)           -
  Purchase of long-term investments                      (3,000)        (636)
  Sales of available-for-sale investments                   966            -
  Decrease in notes receivable                                -        4,799
  Other                                                       -           65
                                                      ---------    ---------
        Net cash used in investing activities          (155,047)      (1,423)

Cash Flows from Financing Activities:
  Cash restricted                                       (29,261)       2,049
  Increase in indebtedness                               16,053            -
  Increase in indebtedness, Stendal project              91,000            -
  Decrease in indebtedness                              (17,570)     (28,961)
  Decrease in pulp mill conversion costs payable              -       (1,008)
  Increase in Stendal project costs payable              51,826            -
  Equity and loans from minority shareholders            30,615            -
                                                      ---------    ---------
        Net cash provided by (used in)
          financing activities                          142,663      (27,920)

Effect of exchange rate changes on cash and
  cash equivalents                                         (446)          61
                                                      ---------    ---------

Net increase in cash and cash equivalents                11,195          523

Cash and cash equivalents, beginning of period           11,741       19,691
                                                      ---------    ---------
Cash and cash equivalents, end of period              E  22,936    E  20,214
                                                      =========    =========

</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 NINE MONTHS ENDED SEPTEMBER 30, 2002
                                  (UNAUDITED)

Note 1.  Basis of Presentation

The  interim  period  consolidated financial statements contained herein 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 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,  2001.  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.

Note 2.  Reporting Currency

Effective  January  1, 2002, the Company changed its reporting currency from the
U.S.  dollar  to  the  Euro. The reason for this change is because a significant
majority  of  the  Company's business transactions are originally denominated in
Euros.  The  Company's  functional  currency  and reporting currency are now the
same.  Prior  years' financial statements had been reported in U.S. dollars, but
have  been  restated  into  Euros  using  the guidance of Statement of Financial
Accounting  Standards  No.  52,  "Foreign  Currency  Translation"  ("SFAS  52").
Therefore,  the financial statements for prior years depict the same trends that
the  previous  financial  statements  presented  in  U.S.  dollars  show.

The Euro was initially implemented by the European Community on January 1, 1999.
By adopting the Euro as the Company's reporting currency, most of the cumulative
foreign  currency  translation losses were eliminated from the Company's balance
sheets  and most of the foreign currency translation losses were eliminated from
the  Company's statements of comprehensive income.  Prior to the restatement, at
December  31,  2001, there was a cumulative foreign currency translation loss of
$64,016  (in thousands of U.S. dollars) included as part of shareholders' equity
in the balance sheet.  In conjunction with the restatement, the majority of this
amount  was  eliminated.  During the nine months ended September 30, 2001, there
was a foreign currency translation loss of $3,992 (in thousands of U.S. dollars)
included  as  part  of  comprehensive  income  (loss).  In  conjunction with the
restatement,  the  majority  of  this  amount  was  eliminated.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  9

<PAGE>

For periods prior to 1999, when the Company's functional currency was the German
deutschmark, the financial statements were restated using a fixed rate of 0.5113
Euros  to  each  deutschmark.  As a result of using the fixed exchange rate, the
Company's  consolidated  financial  statements  for  those  periods  may  not be
comparable  to  the  financial  statements  of  companies  from  other countries
reporting  in  the  Euro.

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 16,794,899 for nine months and three months ended
September  30,  2002, respectively, and 16,874,899 for the nine months and three
months  ended  September 30, 2001, respectively.  The weighted average number of
shares  outstanding  for  the purposes of calculating diluted earnings per share
was  16,794,899  and 17,181,616 for the nine months ended September 30, 2002 and
2001,  respectively,  and  16,794,899  and 17,236,295 for the three months ended
September 30, 2002 and 2001, respectively.  For the nine months and three months
ended  September  30,  2002,  warrants  and  options  were  not  included in the
computation  of  diluted  earnings  per  share  because they were anti-dilutive.

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 at
Stendal,  Germany  (the  "Stendal  Project").   The  Stendal  Project  is  being
implemented through an approximately 63.6% owned subsidiary of the Company.  Two
other 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.  Construction costs of the Stendal Project
include  costs  relating  to  the  financing  of  the  Stendal Project which are
incurred  during the construction period.  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  and  loans  from  the  minority
shareholders,  adjusted  for  their  proportionate  share  of  income  and loss.

Note 5.  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  10


<PAGE>


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

<TABLE>
<CAPTION>

                                                   Pulp       Paper       Total
                                                 --------   ---------   ---------
                                                        (Euros in thousands)
<S>                                              <C>        <C>         <C>
Nine Months Ended September 30, 2002
------------------------------------
Sales to external customers                      E 98,962   E 75,327     E174,289
Intersegment net sales                              3,919          -        3,919
Segment profit                                     10,659        133       10,792

Reconciliation of profit:
  Total profit for reportable segments                                   E 10,792
  Elimination of intersegment profits                                       1,295
  Loss on interest rate swap contracts, Stendal project                   (22,011)
  Unallocated amounts, other corporate expenses                            (5,522)
                                                                         --------

    Consolidated loss before income taxes and
      minority interest                                                  E(15,446)
                                                                         ========

Nine Months Ended September 30, 2001
------------------------------------
Sales to external customers                      E114,130   E 46,203     E160,333
Intersegment net sales                              4,778          -        4,778
Segment profit                                      8,867      1,298       10,165

Reconciliation of profit:
  Total profit for reportable segments                                   E 10,165
  Elimination of intersegment profits                                         673
  Unallocated amounts, other corporate expenses                            (5,580)
                                                                         --------

    Consolidated income before income taxes                              E  5,258
                                                                         ========

Three Months Ended September 30, 2002
-------------------------------------
Sales to external customers                      E 30,878   E 23,876     E 54,754
Intersegment net sales                                994          -          994
Segment loss                                       (2,380)    (3,243)      (5,623)

Reconciliation of loss:
  Total loss for reportable segments                                     E (5,623)
  Elimination of intersegment profits                                         462
  Loss on interest rate swap contracts, Stendal project                   (22,011)
  Unallocated amounts, other corporate expenses                            (1,441)
                                                                         --------

    Consolidated loss before income taxes and
      minority interest                                                  E(28,613)
                                                                         ========

</TABLE>

FORM  10-Q
QUARTERLY  REPORT  -  PAGE  11


<PAGE>

<TABLE>
<CAPTION>

                                                   Pulp       Paper       Total
                                                 --------   ---------   ---------
                                                        (Euros in thousands)
<S>                                              <C>        <C>         <C>
Three Months Ended September 30, 2001
-------------------------------------
Sales to external customers                      E 33,681   E 14,248     E 47,929
Intersegment net sales                              1,170          -        1,170
Segment profit                                      1,616        422        2,038

Reconciliation of profit:
  Total profit for reportable segments                                   E  2,038
  Elimination of intersegment profits                                           2
  Unallocated amounts, other corporate expenses                            (1,834)
                                                                         --------

    Consolidated income before income taxes                              E    206
                                                                         ========

</TABLE>

The pulp mill under construction in connection with the Stendal Project incurred
capital expenditures  of E 145,943  (thousand)  during  the  nine  months  ended
September 30, 2002 and had assets of E 196,573 (thousand) at September 30, 2002.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  12


<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 the
results of operations and financial condition of the Company for the nine months
and three months ended September 30, 2002 should be read in conjunction with the
consolidated  financial  statements and related notes included in this quarterly
report,  as well as the Company's most recent annual report on Form 10-K for the
fiscal  year ended December 31, 2001 filed with the U.S. Securities and Exchange
Commission  (the  "SEC").  In  this  document:  (i) unless the context otherwise
requires, references to the "Company" or "Mercer" mean Mercer International Inc.
and its subsidiaries; (ii) "Euro" or "E" means Euros, the lawful currency of the
European  Economic  Union;  and  (iii)  a  "tonne"  is one metric ton or 2,204.6
pounds.

Effective  January  1, 2002, the Company changed its reporting currency from the
U.S.  dollar  to  the  Euro, as a significant majority of the Company's business
transactions  are  originally  denominated in Euros.  As a result, the Company's
financial  statements  for  prior periods included in this quarterly report have
been  restated  in  Euros,  but depict the same trends as previously shown.  The
Company translates foreign assets and liabilities 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.  The period end exchange rate for the
U.S.  dollar  to  the Euro as at September 30, 2002 was Euro 1.0123.  The period
average  exchange  rates  for the U.S. dollar to the Euro for the nine month and
three  month  periods ended September 30, 2002 were Euro 1.0817 and Euro 1.0164,
respectively.  See  Note  2  to  the  interim  period  consolidated  financial
statements  included  in  this  quarterly  report.

RESULTS  OF  OPERATIONS  -  Nine  Months  Ended  September  30,  2002
---------------------------------------------------------------------

The  following  table  sets  forth  selected  sales data for the Company for the
periods  indicated:

<TABLE>
<CAPTION>

                                           Nine Months Ended September 30,
                                         -----------------------------------
                                            2002                     2001
                                         ----------               ----------
                                                     (unaudited)
                                                (Euros in thousands)
<S>                                      <C>                      <C>
Sales by Product Class
Specialty papers(1)                      E  60,816                E  28,014
Printing papers                             14,511                   18,189
Pulp                                        98,962                  114,130
                                         ---------                ---------
Total(2)                                 E 174,289                E 160,333
                                         =========                =========
Sales by Geographic Area
Germany                                  E  70,178                E  74,226
European Union(3)                           56,967                   55,565
Eastern Europe and other                    47,144                   30,542
                                         ---------                ---------
Total(2)                                 E 174,289                E 160,333
                                         =========                =========
Sales by Volume                                       (tonnes)
Specialty papers(1)                         47,135                   30,320
Printing papers                             17,922                   20,666
Pulp                                       217,555                  216,019
                                         ---------                ---------
Total(2)                                   282,612                  267,005
                                         =========                =========

</TABLE>

------------------
(1)  The  Company  acquired  its  specialty  paper mill in Landqart, Switzerland
     in December 2001. These amounts include the results  from the Landqart mill
     as  of  January  1,  2002.
(2)  Excluding  intercompany  sales.
(3)  Not  including  Germany.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  13


<PAGE>

In the nine months ended September 30, 2002, revenues increased by approximately
6.5% to E 185.1  million from E 173.8 million in the nine months ended September
30, 2001, primarily as a result of increased sales of specialty papers resulting
from  the  acquisition  of  the  paper mill in Landqart, Switzerland in December
2001.  In the current period, pulp and paper revenues increased by approximately
8.7% from the comparable period of 2001, on a 13.3% decrease in pulp sales and a
63.0%  increase  in  paper  sales.

Pulp  sales  in  the  nine  months  ended September 30, 2002 decreased to E 99.0
million  from  E  114.1  million  in  the  comparable  period of 2001, as global
economic  weakness and high producer inventory levels lead to lower prices. List
prices  for  kraft  pulp in Europe decreased from approximately E 528 (U.S.$470)
per  tonne at the end of 2001 to approximately E 505 (U.S.$440) per tonne at the
end of the first quarter of 2002 and approximately E 477 (U.S.$470) per tonne at
the  end  of  the  second  quarter  of  2002,  before  improving  marginally  to
approximately  E  486  (U.S.$480)  per  tonne at the end of the third quarter of
2002.

Paper  sales  in  the  nine  months ended September 30, 2002 increased to E 75.3
million from E 46.2 million in the comparable period of 2001. Sales of specialty
papers  in  the nine months ended September 30, 2002 increased to E 60.8 million
from E 28.0 million  in  the nine months ended September 30, 2001 as a result of
the  acquisition  of the Landqart mill.  On average, prices for specialty papers
realized  by  the  Company in the nine months ended September 30, 2002 increased
by  approximately 39.7% and for printing papers decreased by approximately 8.0%,
compared  to  the  same  period  in  2001.

Expenses  increased  to  E  189.4 million in the nine months ended September 30,
2002  from  E 167.7 million in the comparable period of 2001. Operating expenses
in the current period increased from the comparable period of 2001, primarily as
a result of the inclusion of the results of the Landqart mill. Flooding in parts
of  Germany and certain other Eastern European countries in the third quarter of
2002  resulted  in  damage  to  inventory  and  equipment  at  the  Heidenau and
Fahrbrucke  paper  mills and in their taking approximately 20 days and 3 days of
downtime, respectively, to  conduct repairs and cleaning and to  replace damaged
equipment.  Operating expenses  in the current period included a  loss  of E 2.1
million,   representing  inventory  losses  and  clean-up  and  repair  expenses
resulting  from  flooding damage at the Fahrbrucke and Heidenau paper mills.  On
average, the Company's unit  fibre  costs for pulp production in the nine months
ended  September 30, 2002  decreased by approximately 6.5%, compared to the same
period in 2001. As a result of the acquisition of the Landqart mill, waste paper
no longer represents a  significant  portion  of the fibre used at the Company's
paper  mills.

General  and  administrative  expenses  increased  to E 20.4 million in the nine
months  ended  September  30,  2002 from E 14.8 million in the nine months ended
September  30,  2001,  primarily  due  to increased administrative expenses as a
result  of  the acquisition of the Landqart mill and an increase in professional
fees,  costs  and  expenses. Interest expense in the nine months ended September
30,  2002  decreased  to  E  10.8  million from E 12.2 million in the comparable
period  of  2001,  primarily  as  a  result  of  payments  made  on  outstanding
indebtedness  during  the  current  period.

For the nine months ended September 30, 2002, the Company reported a net loss of
E 7.4 million, or E 0.44 per  basic and diluted share, compared to net income of
E 5.2 million, or E 0.31  per basic  share and E 0.30 per diluted share, for the
comparable  period  of  2001.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  14


<PAGE>

For  the  nine  months  ended September 30, 2002, excluding items related to its
"greenfield"  project  to  construct  and operate a 552,000-tonne softwood kraft
pulp  mill (the "Stendal mill") at Stendal, Germany (the "Stendal Project"), the
Company  reported net income of E 6.6 million. Total investment costs in respect
of  the  Stendal  Project  are  estimated to be approximately E 1.0 billion, the
majority of which is being financed under a senior project finance facility (the
"Facility")  in  the  aggregate  amount  of  E 828.0 million entered into by the
Company's  approximately 63.6% owned subsidiary in August 2002. See "- Liquidity
and  Capital  Resources  -  Financing Activities." Pursuant to the Facility, the
project  subsidiary  entered  into variable-to-fixed rate interest swaps for the
full  term  of  the  Facility  to  manage  its  risk exposure with respect to an
aggregate  maximum  amount  of  approximately  E  612.6 million of the principal
amount of the Facility (the "Stendal Interest Rate Swap Agreements"). Under such
swaps,  the  project  subsidiary  pays a fixed rate and receives a floating rate
with  respect  to interest payments calculated on a notional amount. These swaps
hedge  the variable cash flow risk from the variable interest payments under the
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 a reporting
period.  A  holding  loss  of  E 22.0  million  before  minority  interests  was
recognized  in  respect  of  the swaps in the Company's loss for the nine months
ended September 30, 2002. See "Item 3.  Quantitative and Qualitative Disclosures
about  Market  Risk."

As  the  Stendal  Project  is  currently  under  construction and because of its
overall  size  relative  to  the  Company's  other facilities, management of the
Company  uses its consolidated operating results excluding items relating to the
Stendal  Project  to measure the performance and results of its operating units.
Management  believes  this  measure  provides  meaningful  information  on  the
performance  of  its  operating  facilities  for  a  reporting  period.

RESULTS  OF  OPERATIONS  -  Three  Months  Ended  September  30,  2002
----------------------------------------------------------------------

The  following  table  sets  forth  selected  sales data for the Company for the
periods  indicated:

<TABLE>
<CAPTION>


                                           Three Months Ended September 30,
                                         -----------------------------------
                                            2002                     2001
                                         ----------               ----------
                                                     (unaudited)
                                                (Euros in thousands)
<S>                                      <C>                      <C>
SALES BY PRODUCT CLASS
Specialty papers(1)                      E  19,830                E   8,415
Printing papers                              4,046                    5,833
Pulp                                        30,878                   33,681
                                         ---------                ---------
Total(2)                                 E  54,754                E  47,929
                                         =========                =========
SALES BY GEOGRAPHIC AREA
Germany                                  E  23,253                E  21,205
European Union(3)                           16,797                   15,875
Eastern Europe and other                    14,704                   10,849
                                         ---------                ---------
Total(2)                                 E  54,754                E  47,929
                                         =========                =========
SALES BY VOLUME                                       (tonnes)
Specialty papers(1)                         15,265                    9,411
Printing papers                              5,715                    6,818
Pulp                                        67,757                   73,937
                                         ---------                ---------
Total(2)                                    88,737                   90,166
                                         =========                =========
</TABLE>

-----------------
(1)  The  Company  acquired its  specialty  paper  mill in Landqart, Switzerland
     in  December 2001. These amounts include the results from the Landqart mill
     for the  third  quarter  of  2002.
(2)  Excluding  intercompany  sales.
(3)  Not  including  Germany.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  15


<PAGE>

In  the  three  months  ended  September  30,  2002,  revenues  increased  by
approximately  7.8%  to  E  57.2 million from E 53.1 million in the three months
ended  September 30, 2001, primarily as a result of increased sales of specialty
papers resulting from the acquisition of the paper mill in Landqart, Switzerland
in  December  2001.  In the current period, pulp and paper revenues increased by
approximately  14.2%  from the comparable period of 2001, on an 8.3% decrease in
pulp  sales  and  a  67.6%  increase  in  paper  sales.

Pulp  sales  in  the  three  months ended September 30, 2002 decreased to E 30.9
million from E 33.7 million in the comparable period of 2001, as global economic
weakness  and  high producer inventory levels continued to lead to lower prices.
List  prices  for  kraft  pulp  in  Europe  decreased  from  approximately E 528
(U.S.$470) per  tonne  at  the end of 2001 to approximately E 486 (U.S.$480) per
tonne  at  the  end  of  the  third  quarter  of  2002.

Paper  sales  in  the  three months ended September 30, 2002 increased to E 23.9
million from E 14.2 million in the comparable period of 2001. Sales of specialty
papers  in the three months ended September 30, 2002 increased to E 19.8 million
from  E  8.4 million in the three months ended September 30, 2001 as a result of
the  acquisition  of  the Landqart mill. On average, prices for specialty papers
realized  by  the Company in the three months ended September 30, 2002 increased
by approximately 45.3% and for printing papers increased by approximately 17.3%,
compared  to  the  same  period  in  2001.

Expenses  increased  to  E  59.8 million in the three months ended September 30,
2002 from E 54.9 million in the comparable period of 2001. Operating expenses in
the  current period increased from the comparable period of 2001, primarily as a
result  of  the  inclusion of the results of the Landqart mill. Flooding damaged
inventory  and  equipment  at  the  Heidenau  and  Fahrbrucke paper mills in the
current  period and resulted in their taking approximately 20 days and 3 days of
downtime, respectively. Operating expenses in the current period included a loss
of E 2.1 million for inventory losses and clean-up and repair expenses resulting
from flooding damage at the Fahrbrucke and Heidenau paper mills. On average, the
Company's  unit  fibre  costs  for  pulp  production  in  the three months ended
September  30, 2002 decreased by approximately 4.4%, compared to the same period
in  2001.  As  a  result of the acquisition of the Landqart mill, waste paper no
longer represents a significant portion of the fibre used at the Company's paper
mills.

General  and  administrative  expenses  increased  to E 6.0 million in the three
months  ended  September  30,  2002 from E 5.3 million in the three months ended
September  30,  2001,  primarily  due  to increased administrative expenses as a
result  of  the acquisition of the Landqart mill and an increase in professional
fees,  costs  and expenses. Interest expense in the three months ended September
30,  2002 decreased to E 2.7 million from E 3.8 million in the comparable period
of  2001,  primarily  as  a  result of payments made on outstanding indebtedness
during  the  current  period.

For  the  third  quarter  of  2002,  the  Company  reported a net loss of E 20.6
million,  or E 1.23 per basic and diluted share, compared to net income of E 0.2
million,  or  E  0.01 per basic and diluted share, for the comparable quarter of
2001.  During  the current quarter, costs associated with flooding damage at the
Company's  Heidenau  and Fahrbrucke paper mills resulted in the Company taking a
charge  of  approximately  E  2.1  million.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  16


<PAGE>

For  the  third quarter of 2002, excluding items related to the Stendal Project,
the  Company  reported  a  net  loss of E 6.6 million. Total investment costs in
respect  of  the  project  are  estimated to be approximately E 1.0 billion, the
majority  of  which  is  being financed under the Facility. See "- Liquidity and
Capital  Resources  -  Financing  Activities."  Pursuant  to  the  Facility, the
Company's  approximately 63.6% owned project subsidiary entered into the Stendal
Interest  Rate  Swap  Agreements for the full term of the Facility to manage its
risk  exposure  with  respect  to an aggregate maximum amount of approximately E
612.6 million of the principal amount of the Facility. The Stendal Interest Rate
Swap Agreements are marked to market at the end of each reporting period and all
unrealized gains and losses are recognized in earnings for a reporting period. A
holding  loss  of  E 22.0 million  before  minority  interests was recognized in
respect of such interest rate swaps  in the Company's loss for the quarter ended
September 30, 2002. See "Item 3.  Quantitative and Qualitative Disclosures about
Market  Risk."

LIQUIDITY  AND  CAPITAL  RESOURCES
----------------------------------

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

<TABLE>
<CAPTION>

                                            As at                As at
                                      September 30, 2002   December 31, 2001
                                     --------------------  -----------------
                                                    (unaudited)
                                               (Euros in thousands)

<S>                                  <C>                   <C>
Financial Position
Working capital                           E    5,994          E   15,544
Property, plant and equipment (net)          413,156             278,617
Total assets                                 591,209             429,593
Long-term debt                               303,022             216,871
Shareholders' equity                         125,131             131,613

</TABLE>

At  September  30, 2002, the Company's cash and cash equivalents totalled E 22.9
million, compared to E 11.7 million at December 31, 2001. At September 30, 2002,
the  Company  had  short-term  trading  securities totalling approximately E 1.6
million,  compared  to  E  4.5  million  at  December  31,  2001.

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

Operating  activities  provided  cash of E 24.0 million in the nine months ended
September  30,  2002,  compared  to E 29.8 million in the same period in 2001. A
decrease  in  receivables  provided cash of E 5.6 million in the current period,
compared  to  E  7.0  million  in  the comparative period of 2001. A decrease in
accounts  payable  and accrued expenses  used cash of E 12.4 million in the nine
months  ended  September  30, 2002, compared to E 4.5 million in the nine months
ended  September 30, 2001. A net decrease in investment securities provided cash
of  E 4.0 million in the nine months ended September 30, 2002, compared to a net
increase in investment securities using cash of E 0.9 million in the comparative
period  of  2001.

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

Investing  activities  in  the nine months ended September 30, 2002 used cash of
E 155.0 million, primarily  as  a  result of construction in connection with the
Stendal  Project,  compared  to  using  cash of E 1.4 million in the nine months
ended  September 30, 2001.  Construction  in connection with the


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  17


<PAGE>

Stendal  Project  used  cash  of  E 145.9 million  in  the  current  period. Net
purchases of  properties  in  the  nine months  ended  September  30,  2002, not
including  in  respect  of  the  Stendal  Project,  used cash of  E 7.1 million,
compared  to  E 5.7 million in the comparative  period  of  2001.  Purchases  of
long-term investments in the nine months  ended  September 30, 2002 used cash of
E 3.0 million, compared to E 0.6 million  in  the  comparative  period of  2001.
Sales  of  available-for-sale investments in the nine months ended September 30,
2002 provided cash  of  E 1.0 million.

The  Company's  paper  mills  in  Germany  have  or will have to replace certain
equipment  that  was damaged as a result of the flooding in parts of Germany and
certain  other  Eastern European countries during the third quarter of 2002. The
aggregate  equipment  costs  are estimated to be approximately E 3.3 million, of
which  approximately  E  0.3  million  is  expected  to be incurred in 2002. The
Company  has  applied  for  German  governmental grants and for assistance under
special credit programs instituted by the German government for flooding victims
in  connection  with  such  costs.  However,  there can be no assurance that the
Company  will  receive such grants and assistance in the amounts applied for, or
at  all.

In August 2002 (the "Closing Date"), Mercer completed financing arrangements for
the  Stendal  Project. Total investment costs in connection with the project are
approximately E 1.0  billion,  the majority of which is to be provided under the
Facility  arranged  by  Bayerische Hypo-und Vereinsbank AG ("BHV") pursuant to a
project  finance  loan  agreement (the "Project Finance Loan Agreement") entered
into between Zellstoff Stendal GmbH ("ZSG"), a 63.6% owned project subsidiary of
Mercer  founded  to  develop, own and operate the Stendal mill, and BHV.  Mercer
also  contributed  financing to ZSG of approximately E 63.5 million from cash on
hand and  through  bridge  loans  (the  "Bridge  Loans")  from a U.S. investment
partnership ("Bridge Loan A") and a Swiss bank ("Bridge Loan B").

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

Financing  activities  provided cash of E 142.7 million in the nine months ended
September  30, 2002,  primarily  as a result of increased indebtedness of E 91.0
million  relating  to  the  Stendal  Project.  An  increase  in restricted cash,
including in connection with the Stendal Project, used cash of E 29.3 million in
the current period. An  increase  in Stendal Project costs payable provided cash
of  E 51.8 million in the nine months ended  September 30, 2002. Equity invested
and  loans  received  from minority  shareholders in connection with the Stendal
Project provided cash of E 30.6  million  in  the current period. A net decrease
in  other  indebtedness  used  cash  of  E 1.5  million  in  the current period,
including the repayment of E 12.5 million of indebtedness incurred in connection
with  the project to convert the Company's  pulp  mill  from  the  production of
sulphite  pulp  to kraft pulp (the "Conversion  Project").  Financing activities
used  cash  of E 27.9  million  in  the nine  months  ended  September 30, 2001,
primarily as a result of the reduction of indebtedness  during  the  period.

Mercer  completed  financing arrangements in connection with the Stendal Project
in  the  third  quarter  of  2002.  The  following  description of the financing
arrangements  for  the  Stendal  Project  is a brief summary of certain material
attributes and characteristics thereof, which  does  not  purport to be complete
and is qualified in its  entirety  by  reference  to  the  Project  Finance Loan
Agreement,  the  Bridge  Loan agreements and other agreements relating  to  such
financing  arrangements,  copies  of  which  are attached to Mercer's  Form  8-K
filed  September  10,  2002  with  the  SEC.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  18


<PAGE>

The Facility is in the aggregate amount of E 828.0 million and is to be used for
the  following  purposes:  (i) Tranche A in the principal sum of E 464.6 million
for project construction and development costs; (ii) Tranche B, which is divided
into  four  Sub-Tranches, in the aggregate principal sum of E 122.0 million for:
(a)  financing  costs up until the date upon which ZSG issues a final acceptance
certificate  in connection with the Stendal Project (the "Acceptance Date"); (b)
start-up  costs   until  the  Acceptance  Date;  (c)  project  construction  and
development  costs  not financed under Tranche A; and (d) working capital costs;
(iii)  Tranche  C  in  the  principal  sum  of E 42.0 million to provide partial
funding  of a debt service reserve account (the "Debt Service Reserve Account");
(iv)  Tranche  D1 in the principal sum of E 9.4 million for project construction
costs; (v) Tranche D2 in the principal sum of E 30.0 million to finance approved
cost  overruns  until the Acceptance Date and thereafter to repay Tranche A; and
(vi)  Tranche  E,  a  revolving loan facility in the aggregate amount of  up  to
E 160.0 million, to  provide short term bridge financing for expected government
grants  and recoverable payments on construction costs. The Project Finance Loan
Agreement  also  provides  for  hedging facilities to allow ZSG to hedge against
interest  rate  risk,  currency risk and pulp price risk by way of interest rate
swaps,  Euro  and  U.S.  dollar  swaps and pulp hedging transactions. During the
third  quarter  of  2002,  ZSG  entered  into  the  Stendal  Interest  Rate Swap
Agreements.

Interest  on  the credit facilities accrues at the rate of Euribor plus .75% per
annum  in  respect  of  Tranche A, Euribor plus .60% per annum in respect of the
guaranteed  portion of Tranche B, Euribor plus 1.50% per annum in respect of the
unguaranteed  portion  of  Tranche B, Euribor plus 1.55% per annum in respect of
Tranches  C, D1 and D2 and Euribor plus 1.25% per annum in respect of Tranche E.

The  Facility  is  available  for  disbursement  from the Closing Date until the
earlier  of the Acceptance Date and forty months following the Closing Date (the
"Availability  Period"),  provided  that  Tranche D2 will be available up to one
month  prior  to  the  First Repayment Date (as defined below).  The Facility is
secured  by  the  assets  of  ZSG  in  respect  of  the  Stendal  Project.

The Tranches and Sub-Tranches are repayable and mature on different dates. Under
the  terms of the Project Finance Loan Agreement: (i) the "First Repayment Date"
is  the  date upon which the First Repayment (as defined below) is made in full;
and  (ii) "Repayment Date" is the First Repayment Date and each subsequent March
31  and  September  30  on  which  a  repayment  of  any  part of any Tranche or
Sub-Tranche  is  scheduled  to  take  place.

Under  the  Facility,  ZSG  covenants  to  pay  an  amount which will reduce the
aggregate  advances  outstanding,  other  than  under Tranche E, to no more than
E 590.0 million plus 30% of the aggregate advances made under Tranche D2, but in
any event to no more than E 599.0 million (the "First Repayment") to the lenders
on  or before the date that is not later than the first March 31 or September 30
immediately  following the fourth anniversary of the first advance under Tranche
A  (the  "Scheduled  First  Repayment  Date").  Tranche  A  is  repayable  in 22
semi-annual  installments  on  the Repayment Dates following the Scheduled First
Repayment  Date  in  accordance with an amortization schedule and matures on the
first Repayment Date following  the  fifteenth  anniversary of the first advance
under Tranche A. Sub-Tranches B1,  B2  and  B3  are  repayable  in  eight  equal
semi-annual installments on  the  eight  Repayment  Dates  following  the  First
Repayment  and  each  mature  on  the  first Repayment Date following the eighth
anniversary  of the first advance under each such Sub-Tranche. Sub-Tranche B4 is
repayable  in  full  and  matures  on  the  first  Repayment  Date following the
fifteenth  anniversary of the first advance under Tranche A.  Tranches C, D1 and
D2  are


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  19


<PAGE>

repayable  in  three equal  semi-annual  installments  on  the  three Repayment
Dates after  the  Scheduled  First  Repayment Date and each mature on the third
Repayment  Date  following  the  Scheduled  First  Repayment  Date.

Tranche  E  is  repayable  in  an amount equal to the proceeds of all government
grants  and/or  value  added  tax  refunds  on  project  costs  received  from
time-to-time  and/or  out  of  one  or  more  drawings  made  pursuant  to  the
shareholders'  undertaking  agreement  dated  as of the Closing Date between the
shareholders of ZSG, Mercer and BHV and/or monies available for such purposes in
the  Proceeds  Account  (as  defined  below).  Tranche  E  matures  on the first
Repayment  Date  following  the  fifth  anniversary  of  the first advance under
Tranche  A.

Tranches  A  and  B  will be subject to German federal and state guarantees (the
"Guarantees")  in  respect of 80% of the principal amount thereof, provided that
the  amount  of each Sub-Tranche under Tranche B benefiting from such guarantees
will  be  reduced  semi-annually  by  12.5%  per  annum  beginning  on the first
Repayment  Date  following  the  fourth anniversary of the first advance of each
Sub-Tranche  under  Tranche  B.  Under  the  Guarantees,  the  guarantors  are
responsible  for  ZSG's performance of its payment obligations in respect of the
guaranteed  amounts.

Until  the Acceptance Date, all payments received by ZSG, including all drawings
under  the  Facility,  all  funding  received  from  ZSG's  shareholders and all
operating  cash  flows,  subject  to  certain exceptions, shall be credited to a
disbursement  account  and will be applied to project costs, operating costs and
working capital costs incurred during the Availability Period in relation to the
Stendal  Project.  Following  the  Acceptance Date, all revenue received by ZSG,
subject  to  certain  exceptions,  shall  be credited to a proceeds account (the
"Proceeds  Account")  and,  subject to certain exceptions, applied toward, in an
agreed  priority  of payments, operating, financing and other costs and expenses
and  to  make repayments and other distributions. Excess start-up cash flows may
be  deposited  into  an  equity  reserve account to be used to secure claims and
amounts  owing  to  the  lenders  in priority to the funding of the Debt Service
Reserve  Account.  The  Debt Service Reserve Account will be funded in an amount
sufficient  at  specified times to service the amounts due and payable under the
Facility during the following twelve months.  The Facility also requires that an
Annual  Debt  Service  Cover  Ratio  (as  defined  in  the  Project Finance Loan
Agreement)  of  not  less  than  1.15:1 be maintained, failing which monies that
would  otherwise  be  payable into the shareholders' account will be retained in
the  Proceeds  Account.

The  shareholders  paid into the Proceeds Account E 15.0 million in subscription
for  share  capital  of ZSG  and E 55.0 million in respect of fully-subordinated
loans  to  ZSG,  and  agreed  to  make subordinated loans to ZSG of up to E 30.0
million  as a standby equity amount to cover cost overruns and to partially fund
the  Debt  Service  Reserve  Account.

In  connection  with  its  obligation  to  provide  funding  in  respect  of the
Stendal  Project, on the Closing Date, Mercer entered into and completed funding
under  two  bridge  financing loan agreements.  Mercer utilized the net proceeds
from  the  Bridge  Loans  to  fund,  in  part,  its approximately E 63.5 million
contribution  to  the  Stendal  Project.

The  loan  agreement in respect of Bridge Loan A (the "Bridge Loan A Agreement")
is in the principal amount of E 15.0 million, which was disbursed on the Closing
Date,  after  deduction of fees and expenses, as a non-revolving single advance.
The  loan  matures  eight  months (the "Initial


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  20


<PAGE>

Period")  after  the Closing Date, with  Mercer  having an option to extend the
maturity  date  for  an additional six months (the "Extended Period") and for a
further four months if agreed to by the lender (the "Second Extended Period").

The  loan accrues interest at a rate equal to Euribor plus 6.5% per annum during
the  Initial  Period, Euribor plus 9.0% per annum during the Extended Period and
Euribor  plus  11.5%  per  annum during the Second Extended Period, in each case
calculated  semi-annually, not in advance, and payable upon maturity or default.
In  addition,  in  the event that the loan is not repaid upon maturity, the loan
shall  accrue  interest  at  the  rate of Euribor plus 15% per annum thereafter.

The  Bridge  Loan  A  Agreement  is  secured  by: (i) assignment agreements (the
"Assignment  Agreements")  under  which  Mercer  and certain of its subsidiaries
assign  their  respective  interests  in intercompany loans; and (ii) securities
pledge  agreements  (the  "Securities  Pledge  Agreements")  under  which Mercer
pledges  its interest in all of the share capital of certain of its wholly-owned
subsidiaries.  The  security  granted  under  the  Assignment Agreements and the
Securities  Pledge  Agreements  is held by the lender under Bridge Loan B in its
capacity  as  security  agent  (the  "Security  Agent")  under  a security trust
agreement,  pari  passu  for  the benefit of the lenders under the Bridge Loans.

The Bridge Loan A Agreement contains customary covenants in favour of the lender
thereunder.  The  Bridge Loan A Agreement is also subject to customary events of
default.  Under  the  Bridge Loans, the lenders acknowledge that their rights to
realize  upon  any  interest  in Mercer's subsidiary that operates its pulp mill
("ZPR") pursuant to the security granted thereunder shall be limited to the sale
of 49% of the shares thereof unless additional sales are consented to in writing
by  ZPR's senior lenders and that any right that they may otherwise have to sell
any  interests  in  ZSG  shall  be  limited  to such percentage thereof which is
consented  to by the European Commission and to no more than 12.5% of the shares
thereof  unless  additional  sales  are  consented to in writing by ZSG's senior
lenders.

The  loan  agreement in respect of Bridge Loan B (the "Bridge Loan B Agreement")
is in the principal amount of E 30.0 million, which was disbursed on the Closing
Date,  after  deduction of fees and expenses, as a non-revolving single advance.
The  Bridge  Loan B Agreement was negotiated at the same time and in conjunction
with  the  Bridge  Loan  A Agreement and was entered into upon substantially the
same  terms  as  those  set  out  in  the  Bridge  Loan  A Agreement, as to loan
structure,  maturity, interest, security, the appointment of the Security Agent,
Mercer's  obligations  in  respect  of  asset  sales  and/or an issue or sale of
equity,  conditions to advance, covenants, negative covenants, events of default
and  ancillary  matters  subject  to  such changes as were required to reference
Bridge  Loan  B  rather  than  Bridge  Loan  A.

Other  than  the  Stendal  Project,  the  Company had no material commitments to
acquire  assets or operating businesses as at September 30, 2002, although it is
considering a number of initiatives relating to potential acquisitions and joint
ventures both in Europe and North America.  The Company  anticipates  that there
will  be  acquisitions  of businesses, the Redeployment of assets or commitments
to projects  in the future. To  achieve  its  long-term  goals 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,  issuances  of  securities and/or
borrowing against and/or  the  sale  of  assets.


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  21


<PAGE>

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

Effective  January  1, 2002, the Company changed its reporting currency from the
U.S.  dollar  to  the  Euro  as a significant majority of the Company's business
transactions  are  originally  denominated in Euros.  By adopting the Euro, most
cumulative  foreign  currency translation losses of the Company were eliminated.
However, the Company holds certain assets and liabilities in U.S. dollars, Swiss
francs and, to a lesser extent, in Canadian dollars.  Accordingly, the Company's
consolidated  financial  results  are  subject to foreign currency exchange rate
fluctuations.

The  Company translates U.S. dollar, Swiss franc and Canadian dollar 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 Company's balance sheet and do not affect the net
earnings  of  the  Company.

The  Company's cumulative foreign exchange translation gain increased from E 1.3
million  at  December  31,  2001  to E 5.2  million  at  September  30,  2002.

The  average  and  period end exchange rates for the U.S. dollar to the Euro for
the  periods  indicated  are  as  follows:

<TABLE>
<CAPTION>

                              Quarter Ended               Quarter Ended
                            September 30, 2002          September 30, 2001
                        --------------------------   --------------------------
                        Period End  Period Average   Period End  Period Average
                        ----------  --------------   ----------  --------------
<S>                     <C>         <C>              <C>         <C>
RATE OF EXCHANGE
Euro                      1.0123       1.0164           1.0990      1.1218

</TABLE>

Based  upon  the period average exchange rate in the nine months ended September
30,  2002,  the U.S. dollar decreased by approximately 3.7% in value against the
Euro  since  December  31,  2001.

Cyclical  Nature  Of  Business;  Competitive  Position
------------------------------------------------------

The  pulp and paper business is cyclical in nature and markets for the Company's
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
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,  transportation,  labour  costs  and  productivity.

Stendal  Pulp  Mill  Project  Uncertainties
-------------------------------------------

The  Stendal  Project is subject to various risks and uncertainties customary to
large  "greenfield"  projects  of  this  nature  which may result in the Stendal
Project  not  proceeding  or being completed as currently planned, including the
availability  and  cost  of  materials  and  labour,  construction  delays, cost
overruns, weather conditions, governmental regulations, availability of adequate
financing,  increases  in  long-term  interest  rates and increases in taxes and
other  governmental  fees.  The Stendal


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  22


<PAGE>

Project is also subject to extensive and  complex  regulations and environmental
compliance  which may result  in delays,  in  the  project  company  and/or  its
shareholders,  including the Company, incurring  substantial  costs  in relation
thereto or in the Stendal Project being amended or not being completed at all.

The  implementation  of  the  Stendal  Project  commenced  in August 2002 and is
expected  to  be completed in 2004.  However, there can be no assurance that the
Stendal  Project  will  proceed  or  be  completed  as  currently  planned.

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, the 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 interest
rates,  commodity prices, 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  misjudgements  in  the  course  of  preparing  forward-looking  statements.

ITEM 3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT
         MARKET  RISK

The  Company  is exposed to market risks from changes in interest rates, foreign
currency  exchange  rates  and  equity  prices  which  may affect its results of
operations  and  financial  condition.  The  Company manages these risks through
internal  risk  management policies.  As a result of the change in the Company's
reporting  currency  from  the U.S. dollar to the Euro, the Company is no longer
sensitive to foreign currency exchange rate fluctuations in connection with cash
restricted.  The  Company  also  uses  derivative  instruments  in regard to its
exposure  to  interest  rate,  currency  and  pulp  price risks.  The derivative
instruments  are  not designated as hedging instruments for accounting purposes.
The  purpose  of the derivative activity is speculative in nature, as management
uses such tools either to augment the Company's potential gains or to reduce the
Company's  potential  losses,  depending  on  management's  perception of future
economic  events  and  developments.  If  any  of the variety of instruments and
strategies the Company utilizes are not effective, the Company may incur losses.
Many  of  the  Company's strategies are based on historical trading patterns and
correlations. However, these strategies may not be fully effective in all market
environments  or  against all types  of  risks.  Unexpected  market developments
may  affect  the  Company's  risk  management strategies during this  time,  and
unanticipated developments could impact the Company's risk management strategies
in  the  future.

The  Company  has  entered  into currency and interest rate swaps ("Currency and
Interest Swaps") in connection  with  its long-term indebtedness relating to the
Conversion Project. The Company has also entered into the  Stendal Interest Rate
Swap Agreements in connection with its long-term indebtedness  relating  to  the
Stendal  Project.  In  addition,  the  Company has entered into currency


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  23


<PAGE>

forward  contracts  ("Currency Forwards"). The  Company's  Currency and Interest
Swaps, Currency Forwards and  the Stendal  Interest  Rate  Swap  Agreements  are
marked to market at the end of each reporting  period,  and all unrealized gains
and  losses  are  recognized in earnings for a  reporting  period.

In  December  2000,  the  Company  entered  into  U.S.  dollar/Euro Currency and
Interest  Swaps  to  manage  its  risk  exposure  with  respect  to in aggregate
approximately  E  223.3  million  of  the  principal  amount  of  its  long-term
indebtedness  relating  to  the Conversion Project.  These Currency and Interest
Swaps  were subsequently settled and realized in  July  2002 at a gain of E 13.9
million, which was accrued for in the current period.  A currency  gain of E 0.2
million was recognized when loan repayments were  made under the  currency  swap
contracts  during  the  current  period.

As  a  consequence  of  the  settlement  of  these  Currency and Interest Swaps,
interest on these swaps was paid from April 1, 2002 to September 29, 2002 at the
six-month  Euribor  plus  bank  margin  rate  and 4.5% fixed rate including bank
margin,  as  applicable, in accordance with the terms of the original underlying
loans.

Subsequently in July 2002, the Company renewed these previously settled Currency
and Interest Swaps  in  terms  of  both  the  currency  and interest components.
The  interest  component  of  the  swaps  is  required  under  the  terms of the
facility agreement related  to the  Company's  long-term indebtedness in respect
of  the  Conversion  Project,  and  becomes  effective  for  the period starting
September  30, 2002.  For the  outstanding  principal  amounts of E 74.5 million
and E 130.4  million  under  the  facility agreement, all repayment installments
from  September  30,  2002  until  September  30,  2013  and September 30, 2008,
respectively, were swapped into U.S. dollar  amounts  at  a rate of Euro 1.0050.
The interest rates were swapped into the six-month U.S. dollar/Libor  plus  bank
margin rate and three-month U.S. dollar/Libor rate,  respectively, with a cap on
both of these floating interest  rates  of  6.8% until September 28, 2007. As at
September 30, 2002, a holding loss of  E  3.7  million  was  recognized  in  the
third  quarter.

During the second quarter of 2001, the Company entered into two U.S. dollar/Euro
Currency  Forwards  in  the  aggregate  amount  of approximately E 22.4 million,
which matured  in  the second quarter  of  2002  and a net gain of E 0.2 million
was recognized  in  the  current  period.

During  the  second  quarter of 2002, two U.S.$10 million Currency Forwards were
sold  and  bought,  effectively cancelling out each other, and a holding gain of
E 0.6  million  was  recognized.  One  of  these  contracts matured in the third
Quarter of 2002 and  the  other  is  to  mature  in the fourth quarter of  2002.

In July 2002, the Company sold a U.S. dollar/Euro Currency Forward in the amount
Of U.S.$20  million.  The contract is to mature in March 2003. A holding loss of
E 0.2 million as  at  September 30, 2002 was recorded in the third quarter.  The
Company also settled a  U.S.$1  million Currency Forward in the third quarter of
2002,  resulting  in  a  loss  of E 80,000.

As  at September 30, 2002, no derivative contract had been executed with respect
to  pulp  prices.

In  connection  with the Facility, in the third quarter of 2002 ZSG entered into
the  Stendal Interest Rate Swap Agreements, which are variable-to-fixed interest
rate  swaps,  for  the  term  of  the Facility, to manage its risk exposure with
respect  to  an aggregate maximum amount of approximately E 612.6


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  24


<PAGE>

million  of  the  principal  amount  of  its  long-term  indebtedness  under the
Facility.  The  swaps  took  effect  on October 1, 2002 and are split into three
periods,  with the first period  ending on May 3, 2004, the second period ending
on  April  1, 2005  and  the third  period ending upon maturity of the Facility.
Under the swaps, the Company pays a fixed rate and receives a floating rate with
the interest payments being calculated on  a notional amount. The interest rates
payable  under  the  Facility  were  swapped  into  fixed  rates  based  on  the
Eur-Euribor rate for the repayment periods  of the  Tranches under the Facility.
The swaps hedge the variable cash flow  risk from the variable interest payments
under the 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
a reporting period. The notional amount  under the swaps was E 612.6 million and
a holding loss of E 22.0 million as at  September 30, 2002 was recognized in the
statement of operations for the nine  months  ended  September  30,  2002.

The  Company  is  exposed  to  modest  credit-related  risks  in  the  event  of
non-performance by counterparties to derivative contracts.  However, the Company
does not expect that the counterparties, which are major financial institutions,
will fail to meet their obligations.

Reference is made to the Company's annual report on Form 10-K for the year ended
December  31,  2001  for  additional  information  concerning  market  risk.

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  25


<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 4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

The  Company  held  its annual meeting of shareholders on July 11, 2002.  At the
meeting,  Jimmy  S.H.  Lee  and  R. Ian Rigg  were elected Class II Trustees and
Andrew Milligan was elected a Class III Trustee of the Company  for  three  year
terms  as  follows:

<TABLE>
<CAPTION>

                                                     ABSTENTIONS AND
                    VOTES FOR     VOTES WITHHELD     BROKER NON-VOTES
                 ---------------  --------------     ----------------
<S>              <C>              <C>                <C>
Jimmy S. H. Lee        1,281,686       3,124,280                    -
R. Ian Rigg            1,281,686       3,124,280                    -
Andrew Milligan        4,412,186            2880                    -

</TABLE>

C.S.  Moon,  Maarten Reidel and Michel Arnulphy continued their respective terms
as  Trustees of the Company.  Jong L. Ryu replaced Andrew Milligan as a  Trustee
upon  the  retirement  of Mr.  Milligan  during  the  period.

ITEM 6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------

     99.1 - Certificate  of  Chief  Executive  Officer

     99.2 - Certificate  of  Chief  Financial  Officer

(b)  Reports  on  Form  8-K
     ----------------------

     Form  8-K  dated  September  10,  2002:
        Item  5.  Other  Events

     Form  8-K/A  dated  October  4,  2002:
        Item  7.  Exhibits


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  26


<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.


                                    /s/  Maarten  Reidel
                                    ------------------------------------------
                                    Maarten  Reidel
                                    Vice President and Chief Financial Officer


Date:  November  14,  2002


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  27


<PAGE>

                        CERTIFICATION OF PERIODIC REPORT

I,  Jimmy  S.H.  Lee,  certify  that:

1.   I  have reviewed this quarterly report on Form 10-Q of Mercer International
     Inc.  (the  "Registrant");

2.   Based  on  my  knowledge, this quarterly report does not contain any untrue
     statement  of a material fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  quarterly  report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included  in  this  quarterly  report,  fairly  present in all
     material  respects  the financial condition, results of operations and cash
     flows  of  the  Registrant  as  of,  and for, the periods presented in this
     quarterly  report;

4.   The  Registrant's  other  certifying  officers  and  I  are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the Registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to  ensure that
          material  information   relating  to  the  Registrant,  including  its
          consolidated  subsidiaries,  is  made  known  to  us  by  others  with
          those   entities,   particularly  during  the  period  in  which  this
          quarterly report is being prepared;

     b)   evaluated the  effectiveness  of  the Registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly  report  (the  "Evaluation  Date");  and

     c)   presented  in  this  quarterly  report   our   conclusions  about  the
          effectiveness of the  disclosure  controls and procedures based on our
          evaluation as of the Evaluation  Date;

5.   The  Registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the Registrant's auditors and the audit
     committee  of  Registrant's  board  of directors (or persons performing the
     equivalent  functions):

     a)   all   significant   deficiencies  in  the  design  or   operation   of
          internal  controls  which  could  adversely  affect  the  Registrant's
          ability to record, process,  summarize  and  report financial data and
          have identified for the Registrant's auditors any material  weaknesses
          in internal controls; and

     b)   any  fraud,  whether  or  not  material,  that  involves management or
          other employees  who  have  a  significant  role in  the  Registrant's
          internal  controls;  and

6.   The  Registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:     November  14,  2002

                                               /s/  Jimmy  S.H.  Lee
                                               -------------------------
                                               Jimmy  S.H.  Lee
                                               Chief  Executive  Officer


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  28


<PAGE>


                        CERTIFICATION OF PERIODIC REPORT

I,  Maarten  Reidel,  certify  that:

1.   I  have reviewed this quarterly report on Form 10-Q of Mercer International
     Inc.  (the  "Registrant");

2.   Based  on  my  knowledge, this quarterly report does not contain any untrue
     statement  of a material fact or omit to state a material fact necessary to
     make  the  statements  made, in light of the circumstances under which such
     statements  were made, not misleading with respect to the period covered by
     this  quarterly  report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included  in  this  quarterly  report,  fairly  present in all
     material  respects  the financial condition, results of operations and cash
     flows  of  the  Registrant  as  of,  and for, the periods presented in this
     quarterly  report;

4.   The  Registrant's  other  certifying  officers  and  I  are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the Registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to  ensure that
          material  information  relating  to  the  Registrant,  including   its
          consolidated subsidiaries, is  made known to us by others  with  those
          entities, particularly during  the  period  in  which  this  quarterly
          report  is  being  prepared;

     b)   evaluated the  effectiveness  of  the Registrant's disclosure controls
          and procedures as  of  a  date within 90 days prior to the filing date
          of this quarterly  report  (the  "Evaluation  Date");  and

     c)   presented  in  this  quarterly  report  our  conclusions   about   the
          effectiveness of  the  disclosure controls and procedures based on our
          evaluation as of the  Evaluation  Date;

5.   The  Registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the Registrant's auditors and the audit
     committee  of  Registrant's  board  of directors (or persons performing the
     equivalent  functions):

     a)   all  significant  deficiencies   in   the   design   or  operation  of
          internal  controls   which   could  adversely  affect the Registrant's
          ability to record, process,  summarize  and  report financial data and
          have identified for the Registrant's auditors any material  weaknesses
          in internal controls; and

     b)   any  fraud,  whether  or  not  material,  that involves management or
          other employees who  have  a  significant  role  in  the  Registrant's
          internal  controls;  and

6.   The  Registrant's  other  certifying  officers and I have indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or  in  other  factors  that  could significantly affect internal
     controls  subsequent  to  the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:     November  14,  2002

                                             /s/  Maarten  Reidel
                                             ------------------------------
                                             Maarten  Reidel
                                             Chief  Financial  Officer


FORM  10-Q
QUARTERLY  REPORT  -  PAGE  29