<PAGE>  1

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





                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

                   Quarterly Report under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


                        For Quarter ended March 31, 1997

                           Commission File No.: 0-9409

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

<TABLE>
<CAPTION>
                  WASHINGTON                           91-6087550  
          State or other jurisdiction                 IRS Employer 
       of incorporation or organization             Identification No.
   <S>                                                    <C>   
   Brandschenke Str. 64, Zurich, Switzerland              CH 8002   
    Address of principal executive office                Zip Code
</TABLE>

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


Indicate by check mark whether the registrant [1] has filed all documents 
and 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 14,917,369 shares of beneficial interest outstanding as 
at March 31, 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 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 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 THREE MONTHS ENDED MARCH 31, 1997

                                 (Unaudited)





















FORM 10-Q
QUARTERLY REPORT - PAGE 2
<PAGE>  3

                          MERCER INTERNATIONAL INC.

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

<TABLE>
<CAPTION>
                                                   March 31,    December 31,
                                                     1997           1996     
                                                   ---------    -----------
                                      ASSETS
<S>                                              <C>           <C>
Current Assets
   Cash and cash equivalents                      $    4,048    $    9,967
   Investments                                        75,276        83,359
   Receivables                                        16,362        18,366
   Inventories                                        17,143        20,668
   Other                                                 124           291
                                                  ----------    ----------
                                                     112,953       132,651
Long-Term Assets
   Investments                                         4,010         3,759
   Properties                                        120,321       125,116
   Deferred income tax assets                         16,962        18,313
                                                     141,293       147,188
                                                  ----------    ----------
                                                  $  254,246    $  279,839
                                                  ==========    ==========
</TABLE>






















 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
                  As at March 31, 1997 and December 31, 1996
                                  (Unaudited)
                               (dollars in thousands)

<TABLE>
<CAPTION>
                                                   March 31,    December 31,
                                                     1997           1996    
                                                   ---------    ------------
                              LIABILITIES
<S>                                                 <C>         <C>
Current Liabilities
   Accounts payable and accrued expenses           $  36,547     $  45,324
   Notes payable                                       3,572         6,017
   Current portion of long-term debt                  14,815         2,647
                                                   ---------     ---------
                                                      54,934        53,988

Long-Term Liabilities
   Debt                                               12,682        28,610
   Due to spun-off operations                            364           368
   Other                                               2,156         2,334
                                                   ---------     ---------
                                                      15,202        31,312
                                                   ---------     ---------

Total Liabilities                                     70,136        85,300
</TABLE>

                             SHAREHOLDERS' EQUITY
<TABLE>
<S>                                               <C>           <C>
Shares of beneficial interest                         87,606        85,965
Cumulative translation adjustment                    (27,680)      (12,014)
Net unrealized loss on investments valuation          (1,838)       (2,250)
Retained Earnings                                    126,022       122,838 
                                                   ---------     ---------
                                                     184,110       194,539
                                                   ---------     ---------
                                                   $ 254,246     $ 279,839
                                                   =========     =========
</TABLE>







 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 Three Months Ended March 31, 1997 and 1996
                                   (Unaudited)
            (dollars in thousands, except for earnings per share)

<TABLE>
<CAPTION>

                                                     1997          1996   
                                                  ----------    ---------- 
<S>                                               <C>           <C>
Revenues
   Sales                                          $   42,132    $   48,085
   Investments                                         2,222         1,788
                                                  ----------    ----------
                                                      44,354        49,873
Expenses
   Cost of sales                                      34,468        36,615
   General and administrative                          5,804         6,269
   Interest expenses                                     884         1,059
                                                  ----------    ----------
                                                      41,156        43,943
                                                  ----------    ----------

Income from continuing operations before
   income taxes                                        3,198         5,930
Income taxes                                              14            70
                                                  ----------    ----------

Income from continuing operations                      3,184         5,860
Income (loss) from spun-off operations                   --             30
                                                  ----------    ----------

Net income                                             3,184         5,890

Retained earnings, beginning of period               122,838       160,956
                                                  ----------    ----------

Retained earnings, end of period                  $  126,022    $  166,846
                                                  ==========    ==========

Earnings per share
   Income from continuing operations              $     0.21    $     0.43
   Income (loss) from spun-off operations                 --            --    
                                                  ----------    ----------
                                                  $     0.21    $     0.43
                                                  ==========    ==========
</TABLE>



 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 CASH FLOWS
               For Three Months Ended March 31, 1997 and 1996
                                  (Unaudited)
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                        1997         1996 
                                                  -----------   ----------
<S>                                               <C>            <C>

Cash Flows from Continuing Operating Activities:
  Net income from continuing operations           $     3,184   $    5,860
  Adjustments to reconcile net income from
     continuing operations to cash
     from continuing operating activities
     Depreciation and amortization                     (2,070)      (1,835)
     Loss (gain) on investments                        (1,663)           1
                                                  -----------   ----------
                                                         (549)       4,026
  Changes in current assets and liabilities
     Inventories                                        1,939          (36)
     Receivables                                          796          (59)
     Accounts payable and accrued expenses             (7,422)      (6,530)
     Other                                                144          (96)
                                                  -----------   ----------
                                                       (5,092)      (2,695)

  Proceeds from the sales of trading securities         7,801       11,875
  Purchase of trading securities                       (4,369)     (21,153)
                                                  -----------   ----------
     Net cash used in continuing 
       operating activities                            (1,660)     (11,973)
 
Cash Flows from Investing Activities of
 Continuing Operations:
  Purchase of fixed assets                             (1,864)      (5,366)
  Other                                                     8           17
                                                  -----------   ----------
  Net cash used in investing
    activities of continuing operations           $    (1,856)  $   (5,349)
</TABLE>








 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
                                     (Continued)
                    For Three Months Ended March 31, 1997 and 1996
                                     (Unaudited)
                               (dollars in thousands)
<TABLE>
<CAPTION>
                                                       1997        1996       
                                                   ----------   ----------
<S>                                                <C>          <C> 
Cash Flows from Financing Activities of Continuing
 Operations:
  Increase in bank indebtedness                    $      --    $    3,300
  Decrease in bank indebtedness                        (2,684)        (149)
  Net proceeds on issuance (cost to repurchase) 
      of shares of beneficial interest                    570       (1,391)
                                                   ----------   ----------
  Net cash provided by financing
      activities of continuing operations              (2,114)       1,760

Effect of exchange rate changes on cash and
  cash equivalents                                       (289)        (586)
                                                   ----------   ----------

Net cash used in continuing operations                 (5,919)     (16,148)
Net cash provided by (used in) spun-off operations        --          (376)
                                                   ----------   ---------- 

Net decrease in cash and cash equivalents              (5,919)     (16,524)

Cash and Cash Equivalents, beginning of period          9,967       29,230
                                                   ----------   ----------
Cash and Cash Equivalents, end of period           $    4,048   $   12,706
                                                   ==========   ==========
</TABLE>
















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

FORM 10-Q
QUARTERLY REPORT - PAGE 7
<PAGE>  8

                              MERCER INTERNATIONAL INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THREE MONTHS ENDED MARCH 31, 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 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"), formerly Arbatax 
International Inc., 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 in a one for two stock dividend (the "Distribution") of 
approximately 6,697,716 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 8
<PAGE>  9

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 14,930,868 
and 13,505,291 for the three months ended March 31, 1997 and 1996, 
respectively.












































FORM 10-Q
QUARTERLY REPORT - PAGE 9
<PAGE>  10


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 and its operations 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.  
See Notes 1 and 2 to the financial statements included herein.

The following discussion and analysis of the results of operation and the 
financial condition of the Company for the three months ended March 31, 1997 
should be read in conjunction with the consolidated financial statements and 
related notes included elsewhere herein.

RESULTS OF OPERATIONS - Three Months Ended March 31, 1997
---------------------------------------------------------

In the first quarter of 1997, revenues decreased to $44.4 million from $49.9 
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 in 
the first quarter of 1997 also contributed to lower revenues.  See "Foreign 
Currency".

Pulp and paper costs decreased to $34.5 million in the first quarter of 1997, 
compared to $36.6 million in the same period in 1996, primarily as a result 
of  reduced revenues and decreased fibre costs (raw materials).  General and 
administrative expenses decreased marginally to $5.8 million for the three 
months ended March 31, 1997 from $6.3 million in the same period in 1996.

For the three months ended March 31, 1997, net earnings from continuing 
operations were $3.2 million or $0.21 per share, compared to $5.9 million or 
$0.43 per share for the three months ended March 31, 1996. 















FORM 10-Q
QUARTERLY REPORT - PAGE 10
<PAGE>  11

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:

<TABLE>
<CAPTION>
                                           Quarter Ended       Quarter Ended
                                           March 31, 1997      March 31, 1996
                                           --------------      --------------  
                                                     (in thousands)
<S>                                          <C>                 <C>
Sales by Product Class
----------------------
Packaging papers                             $   7,011           $   9,715
Specialty papers                                 6,916               8,014
Printing papers                                  8,901              10,311
Pulp                                            18,401              18,424
Other                                              903               1,621
                                             ---------           ---------
Total(1)                                     $  42,132           $  48,085
                                             =========           =========
Sales by Geographic Area
------------------------
Germany                                      $  25,265           $  29,164
European Union(2)                               12,780              11,244
Other                                            4,087               7,677
                                             ---------           ---------
Total                                        $  42,132           $  48,085
                                             =========           =========

Sales by Volume                                         (tonnes)
---------------
Packaging papers                                26,589              28,682
Specialty papers                                 8,459               7,044
Printing papers                                 12,851              11,190
Pulp                                            41,445              26,134
                                             ---------           ---------
Total                                           89,344              73,050
                                             =========           =========
</TABLE>

------------------
(1) Excluding intercompany sales.
(2) Not including Germany.

Pulp and paper markets were generally weak in the first quarter of 1997 and 
product prices were lower than in the same period in 1996, as a result of 
relatively slow paper demand and high pulp inventories.  Increased sales 
volumes in the first quarter of 1997 only partially compensated for the price 
weakness, which is expected to continue until the excess inventory situation 
corrects itself. See "Cyclical Nature of Business; Competitive Position".  

While demand for market pulp improved during the quarter, high operating 
rates and inventories resulted in generally weak prices.  In the first 
quarter of 1997, list prices for pulp were, on average, down approximately 
37.0% from the same period in 1996 and approximately 7.7% from December 31, 
1996.  Pulp sales by volume in the first quarter of 1997 increased by 58.5% 
compared to the same period in 1996.  Improvements in overall demand during 
the current quarter resulted in some 

FORM 10-Q
QUARTERLY REPORT - PAGE 11

<PAGE>  12

pulp producers announcing a price increase in the second quarter.  However, 
there can be no assurance that such an increase can be successfully 
implemented.

The average net selling price for the Company's paper products decreased, on 
average, by approximately 20.2% in the first quarter of 1997 from the 
comparative period in 1996.  Prices for all classes of paper also declined in 
the first quarter of 1997 compared to the fourth quarter of 1996. In 
contrast, paper sales by volume in the first quarter of 1997 increased by 
2.1% compared to the same period in 1996, and increased by 6.4% from the 
fourth quarter of 1996.  Sales of specialty and printing papers, by volume, 
increased marginally in the first quarter of 1997, compared to the same 
quarter in 1996, whereas sales volume for packaging papers declined.  
Although sales prices for paper products are stabilizing and expected to be 
firm in the second quarter, there can be no assurance that such prices can be 
maintained.

On average, the Company's fibre (wood chips and pulpwood) costs for pulp 
operations decreased by approximately 8.9% in the first quarter of 1997, 
compared to December 31, 1996 and were down approximately 21.9% in the 
current quarter, compared to the same period in 1996.  Recycled fibre 
(wastepaper) costs for paper operations decreased by approximately 44.6% in 
the first quarter of 1997 from the same period in 1996 and were down 
approximately 24.4% in the current quarter of 1997, compared to December 31, 
1996.  While fibre costs remained relatively low in the first quarter of 
1996, there can be no assurance that they will not escalate in the future.

The Company is currently negotiating new labour agreements with its pulp and 
paper workers.  The Company has agreed to a three percent wage increase with 
its paper workers effective March 1, 1997 with ongoing negotiations to 
finalize a new labour agreement.  The Company's labour agreement with its 
pulp workers expires at the end of June 1997.  Although the Company cannot 
predict with any certainty the results of such labour negotiations or provide 
any assurances, it expects that new labour agreements will eventually be 
successfully concluded without material work stoppages.

The date by which the Pulp mill must reduce its levels of AOX (adsorbable 
organic halogen) discharge from 0.6 kilograms per tonne to 0.4 kilograms per 
tonne has been deferred from January 1, 1998 to January 1, 1999.  In 
addition, the Company's requirement to reduce its levels of COD (chemical 
oxygen demand) discharge at the Pulp mill to 50 kilograms per tonne has also 
been postponed from July 1, 1997 to January 1, 1999.  The Company has and 
will continue to modify its wastewater and bleaching facilities at its Pulp 
mill to meet or exceed these prescribed regulations. Such  modifications are 
also expected to improve the operational efficiency of the Pulp mill and are 
part of the Company's overall capital investment program for the mill.

Since acquisition, the Company has been implementing operational changes to 
its operations to improve efficiency, increase export sales to markets 
outside of Germany and upgrade its product mix.  These changes continued in 
the first quarter of 1997 and resulted in the further elimination of employee 
positions and downtime at some of the Company's mills.  These changes and 
upgrades to the mills will continue during the balance of 1997.


FORM 10-Q
QUARTERLY REPORT - PAGE 12

<PAGE>  13

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
                                     March 31, 1997   December 31, 1996
                                     --------------   -----------------
                                             (in thousands)
<S>                                     <C>                <C>
Financial Position
------------------
Working capital                        $   58,019         $  78,663
Total assets                              254,246           279,839
Long-term government debt                   8,476             9,184
Long-term debt - other                      4,206            19,426
Due to spun-off operations                    364               368
Shareholders' equity                      184,110           194,539
</TABLE>

<TABLE>
                                       Quarter Ended      Quarter Ended
                                      March 31, 1997     March 31, 1996
                                      --------------     --------------
                                 (in thousands, other than per share amounts) 
<S>                                      <C>                    <C>
Cash Flow From Continuing Operations(1)
------------------------------------
Cash flow                              $     (549)        $   4,026   
Cash flow per share                    $    (0.04)        $    0.30
</TABLE>                                

---------------------------------
(1) Cash flow from operations before changes in working capital and
    net purchases of trading securities.

At March 31, 1997, the Company's cash and cash equivalents decreased to $4.0 
million, from $12.7 million at March 31, 1996 or from $10.0 million at 
December 31, 1996.  At March 31, 1997, the Company had short-term trading 
securities, totalling $75.3 million, compared to $83.4 million as at December 
31, 1996.

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

Cash used in operating activities before net purchases of trading securities 
was $5.1 million in the three months ended March 31, 1997, as compared to 
$2.7 million in the same period in 1996.  Cash flow from operations used cash 
of $1.7 million in the first quarter of 1997, as compared to $12.0 million 
for the same period in 1996.  During the current period, the reduction of 
accounts payable and accrued expenses used $7.4 million, and net sales of 
trading securities provided $3.4 million. Purchases of trading securities 
consisted primarily of interest bearing investment grade deutschmark and 
Swiss franc bonds. The Company expects to generate sufficient cash flow from 
operations to meet its working capital requirements.

FORM 10-Q
QUARTERLY REPORT - PAGE 13

<PAGE>  14


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

Investing activities in the first quarter of 1997 used cash of approximately 
$1.9 million, consisting primarily of capital expenditures for upgrades to 
the manufacturing plants, compared to $5.3 million in the same period in 
1996.

The Company expects capital investments in 1997 to total approximately $10.7 
million. Approximately $1.9 million was expended in the first quarter of 
1997, compared to $5.4 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 plans to convert the Pulp mill from the production of 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 $325 million, 
which will be financed through a combination of non-refundable governmental 
grants of approximately $97.5 million, governmental assistance and guarantees 
for long-term project financing and cash flow from operations.  The Company 
is finalizing its detailed reviews and anticipates making its formal 
application for approval of the project in mid 1997.  A final decision to 
proceed with the conversion would be made upon receipt of all necessary 
environmental and operating permits and approvals which are currently 
expected to be received at the end of 1997.  The Company estimates that its 
costs in respect of the project in 1997 will be approximately $3.3 million. 

Although the Company's plan to convert the Pulp mill to the production of 
kraft pulp has received favourable support from German governmental and 
regulatory bodies to date, the same is subject to receiving substantial 
governmental financial assistance under existing programs and receipt of 
complex environmental and operating permits.  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, if at all, or that all necessary environmental and 
operating permits will be received on satisfactory terms, if at all , or in 
time to permit the Company to proceed with and complete the project as 
currently planned.

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

Cash used by financing activities was $2.1 million in the first quarter of 
1997, as compared to $1.8 million provided in the same period in 1996.  The 
Company decreased its bank indebtedness by $2.7 million in the first quarter 
of 1997, as compared to a net increase of $3.2 million in the comparative 

FORM 10-Q
QUARTERLY REPORT - PAGE 14

<PAGE>  15


period in 1996.  During the first quarter of 1997, the Company received 
proceeds on the issuance of shares of $0.6 million on the exercise of stock 
options, compared to expending $1.4 million on repurchases of the Company's 
shares in the same period in 1996.

The depreciation of the deutschmark against the U.S. dollar in the first 
quarter of 1997 resulted in an unrealized foreign exchange translation loss 
of $0.3 million on cash and cash equivalents, which is included as 
shareholders' equity in the Company's balance sheet and does not affect the 
Company's net earnings.  See "Foreign Currency". 

The Company is continuing discussions with third parties to divest certain 
redundant assets, including a substantial amount of real property which is 
excess to its requirements.  The Company has entered into certain lease 
arrangements with respect to some of the redundant assets whereby the Company 
has the right to "put" the assets to the tenant at a prearranged price 
commencing 1997.

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. The Company's 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.

As at March 31, 1997, other than the Company's plan to convert the production 
of the Pulp mill from sulphite to kraft pulp, the Company had no material 
commitments to acquire assets or operating businesses.  The Company 
anticipates that there will be acquisitions of businesses or commitments to 
projects during 1997.  To achieve its long-term goals of expanding the asset 
and earnings base by 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 three months ended March 31, 1997, approximately 
99% of the Company's revenues were denominated 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 year.  
Unrealized gains or losses from these translations are recorded as 
shareholders' 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 three months ended 
March 31, 1997, the overall depreciation of the deutschmark against the U.S. 
dollar 

FORM 10-Q
QUARTERLY REPORT - PAGE 15

<PAGE>  16


resulted in a net $15.7 million foreign exchange translation loss and as a 
result the cumulative foreign exchange translation loss was increased from 
$12.0 million to $27.7 million at March 31, 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
                 March 31 to May 12, 1997        March 31, 1997           March 31, 1996
                 Period End Period Average Period End Period Average Period End Period Average
                 ---------- -------------- ---------- -------------- ---------- --------------
<S>              <C>          <C>            <C>        <C>            <C>        <C>
Rate of Exchange
Deutschmark       1.7031       1.7173        1.6672     1.6635         1.4760     1.4785
</TABLE>


Based upon the period average exchange rate in the first quarter of 1997, the 
U.S. dollar  increased by approximately 8.1% 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 
the 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 16

<PAGE>  17


                             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 2-5.  Not Applicable.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

      Exhibit
      Number    Description
      -------   ----------- 
         27     Article 5 - Financial Data Schedule for 1st Quarter 1997 -
                Form 10-Q.

(b)   Reports on Form 8-K

      None.


























FORM 10-Q
QUARTERLY REPORT - PAGE 17

<PAGE>  18

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


Date: May 14, 1997






































FORM 10-Q
QUARTERLY REPORT - PAGE 18
<PAGE>  19

                                   EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number   Description
-------- -----------
<S>      <C>
   27    Article 5 - Financial Data Schedule for 1st Quarter 1997 - Form 10-Q.
</TABLE>














































FORM 10-Q
QUARTERLY REPORT - PAGE 19