followthemedia.com - a knowledge base for media professionals
Fit To Print

Hear That Ticking? That’s The Newsprint Time Bomb For Newspapers – Prices Are On The Up And Producers Are Looking For Big Increases

Newspapers are doing better financially these days but it all is coming from the cost side, and high among those cost savings is the reduced spend on newsprint. But that particular euphoria may be ending for newsprint prices in North America are on the up -- 7.4% since September 1 according to FOEX Indexes, and the producers are looking for major increases before the year is out.

newsprint rollThe major US newspaper companies boasted in their Q3 figures just how much in percentage terms they have saved on newsprint this year -– The New York Times said its Q3 newsprint expense was down a whopping 45% from a year ago, 28% from lower pricing and 17% from less consumption.  Over at the Washington Post, newsprint expenses were down 37% for Q3, with the year so far showing a 19% fall. And at Gannett, the nation’s largest newspaper group, the Q3 newsprint expense was 43% down.

But maintaining those savings going forward is going to be a lot tougher. The price for standard 30 pound newsprint in the US rose 3.5% in October – a 1.6% jump in the past week alone – and it’s up 7.4% since September 1. This week’s pricing at $478.79 is still very much on the low end, but the signs are that even with the extraordinary steps publishers are making to reduce their newsprint usage, the even more extraordinary  efforts by the producers to withhold supply is beginning to bite. And most producers are looking to shove through increases of $50-$60 a tonne by year-end. 

Previous such attempts in the past months have fallen by the wayside, but this time the giant AbitibiBowater is looking for a $50 increase by the end of the year so if the solidarity by producers remains then they might just reach their $500 a ton which many say is what they need to make it worthwhile to even produce newsprint at all.

The recent US audit circulation numbers for the six months to September could not have made for pleasurable reading by newsprint manufacturers.  Circulation at 379 U.S. daily newspapers fell by an average 10.6% in those six months with all of the top 25 dailies posting declines. Now, some of this was of their own doing – getting rid of bulk sales, stopping delivery to outlying regions and the like -- but also fewer people are subscribing, partly because of higher subscription costs.

Take The New York Times, for instance, where for the first time in memory its circulation fell below the 1 million mark, to 928,000. The Times has been boasting that even with such circulation falls its circulation revenue is up because of several newsstand and subscription increases over the past year or so, but it means it is now printing some 70,000 less newspapers than it did six months ago, and that accounts for most of their consumption decrease.

And since no one is really announcing increased advertising revenues it means there is little likelihood that newspapers will get much fatter in the immediate future – save for Thanksgiving Nov. 26 when people will actually stand in line to buy a newspaper so they can discover the big sales starting on the Friday.

On the manufacturing side, production at North American newsprint mills in September dropped some 34% from the same month a year ago with production for the year down some 31%, according to the Pulp and Paper Products Council (PPPC).

The problem for Canadian mills in particular, hard hit by not just  lower demand but a strong Canadian dollar, is that with current cost levels it’s tough to make a profit, if at all, with current prices. But at least now there is a general acceptance in many quarters, if not yet fully with the unions, that the cost basis within the industry has to come down.

That was made clear this week by Quebec Economic Development Minister Clement Gignac, former chief economist of the National Bank of Canada, who said the government could take a stake in AbitibiBowater, currently deep in bankruptcy proceedings in the U.S. and Canada, but before any such decision was made the company needs to produce an acceptable business plan with operations on a lower cost basis.

“The provincial government formed a group that includes union and paper industry representatives to find ways to reduce raw material and wage costs at mills in Quebec,” he said. “Before the government becomes a shareholder of Abitibi, all of the partners will have to make sacrifices that allow us to lower production at the Quebec plants. This means fiber costs and labor costs.”

Well, that sounds pretty plain but Abitibi spokesman Pierre Choquette seemed to pour cold water on the Quebec government taking a stake, saying, "We didn't see anywhere where he said the government is willing to be a shareholder or buy into the company. I think his comment was a more general message that the government is willing to do something - not close the door - but that everyone has to do (his or her) part.". But the Canadian press seemed to have gotten the message at the news conference that if the producers reduce production costs by some US $50 to $75 U.S. a tonne then Quebec would consider a stake.

The producers are struggling with high labor costs (but again go tell that to the guy putting kids through college and still paying off the mortgage) and crippling power costs, especially electricity, are a major concern. Whatever the Quebec Minister said, or was trying to say, the end result will be watched throughout Canada.

In the past 18 months AbitibiBowater has shut down more than 1 million tonnes of capacity in North America and more closures are on the cards. The industry as a whole is actively working on permanently closing down some 2 million tonnes of newsprint capacity, but with newspapers disappearing, cutting their circulations, cutting their size, the big question is whether that 2 million tonnes will be enough?


See also in ftm Knowledge

The Paper Its Printed On

Newsprint, printing presses and page design are the basic components of the print media. The ftm Knowledge file tells the story. Includes 30 articles. 65 pages PDF (March 2010)

Order here

 


related ftm articles:

As AbitibiBowater, North America’s Largest Newsprint Producer, Fights To Avoid Becoming Another Bear Stearns, Norway’s Norske Skog Announces More Cutbacks, US Newspaper Groups Brag At Huge Newsprint Usage Declines, And China Ramps up Newsprint Production and Exports
The merger of Abitibi and Bowater last October was supposed to form North America’s largest newsprint producer that could, with the cost savings a merger between two such giants should produce, finally get the upper hand on production and pricing. Instead its shares are down nearly 70% so far this year, off 15% alone on Monday because the markets don’t think its recently announced $1.4 billion refinancing plan will fly.

Norske Plans A Big Newsprint Production Cut In Europe and AbitibiBowater Announces Huge Cuts in North America And There’s Consolidation Galore -- The Perfect Recipe For Higher Newsprint Prices
One saving grace for North American newspapers is that newsprint pricing actually dipped in 2007 but those days are now over. Price increases have already been announced and production is being cut on both sides of the Atlantic.

With China Expected To Deliver 75,000 Tons of Newsprint to the US in 2007, and With Economies Having Already Cut US Newsprint Usage By 6.6% This Year, The Laws Of Supply And Demand Are Finally Favoring Publishers
The relationship between newspapers and their newsprint suppliers has never been a love affair. No matter what publishers did in the past to cut back on their newsprint usage to save costs the producers would go and close down a newsprint paper mill or two to reduce supply and the laws of supply and demand put publishers right back where they were. But this year is different.


advertisement

ftm resources

no resources posted as of October 30, 2010->->


ftm Knowledge

Media in Spain - Diverse and Challenged – new

Media in Spain is steeped in tradition. yet challenged by diversity. Publishers hold great influence, broadcasters competing. New media has been slow to rise and business models for all are under stress. Rich in language and culture, Spain's media is reaching into the future and finding more than expected. 123 pages, PDF. January 2018

Order here

The Campaign Is On - Elections and Media

Elections campaigns are big media events. Candidates and issues are presented, analyzed and criticized in broadcast and print. Media is now more of a participant in elections than ever. This ftm Knowledge file reports on news coverage, advertising, endorsements and their effect on democracy at work. 84 pages. PDF (September 2017)

Order here

Fake News, Hate Speech and Propaganda

The institutional threat of fake news, hate speech and propaganda is testing the mettle of those who toil in news media. Those three related evils are not new, by any means, but taken together have put the truth and those reporting it on the back foot. Words matter. This ftm Knowledge file explores that light. 48 pages, PDF (March 2017)

Order here

More ftm Knowledge files here

Become an ftm Individual or Corporate Member to order Knowledge Files at no charge. JOIN HERE!


copyright ©2004-2010 ftm partners, unless otherwise noted Contact UsSponsor ftm