Newsprint Edges Up To Near $600

Philip M. Stone July 8, 2010 Follow on Twitter

Slowly but surely the price of 30-lb newsprint in the US is approaching $600 per metric tonne. FOEX indexes showed this week at $592.57 and that marks a 16% ($81) increase for the year but since most Canadian mills need around $700 for a decent profit there is still a long way to go.

Producers had said they were looking for $25 a tonne increase in each of June and July but they fell well short in June – the monthly increase was just $9 – but at least the curve continues up. And there is the good news that while newsprint usage by US dailies continues in decline, the percentage rate of monthly decline has dropped in each of the past four months. So while US decline may not yet have hit rock bottom, improving exports, especially to Asia, combined with a decline in the decline are painting a better picture for producers.

Producers know they are dealing with a North American newsprint market in which demand fell by about 23% last year, but what’s the outlook? David Paterson, AbitibiBowater CEO, expects demand this year to decline a further 8% and in each of the next four years the decline will the in the region of 5%-7%. Indeed figures from the Pulp and Paper Products Council would support that, saying that consumption by US daily newspapers dropped 8.1% in May compared to the same month in 2009. Exports rose in the same period rose 12.5%.

But even the increased exports elsewhere don’t make up for the North American usage decline which is why producers like AbitibiBowater have been busy the past three years closing mills to cut supply beyond user cutbacks and thus still force up prices. At AbitibiBowater, for instance, newsprint capacity production has been cut by 36% with newsprint now accounting for just 38% of the company’s sales compared to 45% three years ago.

Newsprint pricing historically has been a story of deep valleys and high mountains. In the most recent cycle, September, 2009 saw rock-bottom at 445.89, a dramatic fall from January of the same year when the price was around $750 – about a 12-year high.  The price crashed as newspapers implemented every way they could think to reduce newsprint usage.

But there are signs of a change.  In Edmond, Oklahoma the Edmond Life and Leisure weekly giveaway is actually increasing its page size. Yes, that is not a misprint, they are growing the length of the page by four inches!

Publisher Ray Hibbard told his readers in a column, “Over the last five years, the cost of newsprint has caused most broadsheet newspapers to shrink their web. That means they have gotten narrower. In fact, we noticed that most of them are as narrow as our original format. When we were thinking about how to give our readers and advertiser more in the future, it seemed logical to do it by just adding four inches to the bottom of the page. As they say, no rocket science needed folks.

“You may be asking yourself how we can afford to grow when most newspapers across the country are shrinking in size, distribution and staffing. It is a good question and one our partner, Chris Hoke, was anxious to learn about as well. The loss of advertising revenue for most newspapers around the country has come from a loss of national advertisers. National chains have gone to pre-prints, broadcast and web based sales leaving giant holes in daily newspapers all over the country. I guess you could say we have a good news, bad news situation. We never had much of the national advertising so we did not have the short fall many other papers suffered. It is great business to get and our national advertising has increased this year but it is still the support of our local merchants that keeps us going and we appreciate it.”

So maybe at least at the local community newspaper level things are looking up and as national advertising does make somewhat of a comeback to the larger newspapers their newsprint usage may well increase, too.

Even at the New York Times where first half newsprint costs were “favorable” to the same period last year, according to a company statement, the forecast for the last half of the year is “unfavorable”, probably a combination of higher prices and also more usage as national advertisers slowly come back – the newspaper says Q2 ad revenue grew over the same period a year earlier.

It’s very doubtful that newspapers will return to the good old days of distributing copies outside their core advertising area; it’s doubtful they’ll be printing many bulk copies; it’s doubtful that editorial will get back to staffing levels of three years ago; and it’s doubtful that advertising will return to its former glory, but for all that, newspapers may start to get a little thicker as the economy recovers, and that can only be good news for both users and producers.

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)

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