Newsprint Prices Inch Down Again As US Newspapers Brag About Their Savings

Philip M. Stone March 10, 2010 Follow on Twitter

Newsprint prices edged down last week showing how tough it is for producers to hit their Q1 $50 a tonne increase, even though they are withholding more and more capacity, and with such price softness it is perhaps no wonder that White Birch, the second largest North American newsprint company, has sought bankruptcy court protection while US newspapers brag how newsprint savings are playing a major role in their improved bottom lines.

FOEX indexes reported 30-lb paper prices had dropped $3.99 this week, down to $536.99. That’s just $17.90 above the January low and well off the original producers’ target of $25 increases for each of the Q1 months that has now been modified to $50 for all of Q1. At this week’s price it’s just a 3.5% increase so far for the year. Publishers comparing current pricing with how they started 2009 when the price was $749 are real happy with the 28% price decrease and the only real joy the producers have is that at least the price has risen 20% from the 2009 September low of $445.89.

US newspapers are vociferous about their 2009 Q4 and full year newsprint savings. Some examples:

• New York Times: “Newsprint expense decreased 48% in the fourth quarter of which 34% was attributable to lower pricing and 14% to lower consumption. Newsprint prices peaked in the fourth quarter of 2008 decreasing significantly during 2009 until reaching the bottom of the cycle in the third quarter of 2009. Newsprint prices have been rising since September; however current prices are significantly below the prior year. Suppliers have announced additional price increases for the first quarter of 2010. Market conditions are currently fragmented with inconsistency among suppliers in implementing announced increases. We believe additional price increases will be difficult for suppliers to achieve unless there is a significant permanent reduction in capacity to bring newsprint supply in balance with demand.”

• A.H Belo: “In 2009, newsprint consumption decreased 36.6% versus the prior year to 71,010 metric tons, and the average purchase price per metric ton of newsprint declined 18%versus the prior year to $575 per metric ton.  Newsprint expense decreased $27.7 million or 37.3%.

• E.W. Scripps: Newsprint and ink costs fell 49% in Q4 on declines in volume and price. Newsprint prices were 35% lower than a year ago.

• Torstar: “Newsprint consumption was down in the fourth quarter from a combination of reduced copies and paging. Newsprint prices were 19% lower compared with the fourth quarter of 2008.”

• Journal Communications – “For the fourth quarter, total newsprint expense in publishing was $3.8 million compared to $6.5 million, a 41.5% decrease due to a reduction in the price per ton of newsprint and reduced consumption. For the full year, total newsprint expense in publishing was $16.0 million compared to $24.8 million, a 35.4% decrease due to reduced consumption and a reduction in the price per ton of newsprint.”

With such high percentage savings it is no wonder producers remain troubled, even with all of their capacity cutbacks, culminating with White Birch going the way of AbitibiBowater, filing for  bankruptcy court protection in the US and Canada. White Birch cited a three-year drop in newsprint pricing, a high Canadian dollar reducing margins at the Canadian mills, but it also got nailed for guessing wrong about interest rates. It had guaranteed three interest rate swap agreements from 2005 and 2007 at fixed rates hoping floating rates would go higher and thus it would make money but neither their bean counters, nor their financial advisors saw far enough into the future to the global economic recession and near 0% rates. Those swap agreements have now ended but the company still owes some $50 million on them. There’s a lesson there.

So, how much are US newspapers cutting back on newsprint? According to the Pulp and Paper Products Council (PPPC) US daily newspaper 2009 consumption declined 23.8% from the year before, to 3.996 million tonnes from 5.535 million tonnes. Total US newsprint usage was 5.174 million tonnes which was 23.3% off 2008’s 6.746 million tonnes.

Producers are countering by shutting down more and more capacity. The 2009 mill operating rate was just 75% compared to 93% in 2008, but it is edging higher – December’s operating rate was 81% although still down from the 88% for the same month a year earlier. But besides using less product, publishers are also being frugal with their inventories. Total US newsprint inventory last year was down about one-third with US daily newspaper inventories down about 28%.

US newspapers are reporting improved bottom lines but all of that is coming from reduced costs – revenues still continue to decline albeit not at such high percentages as they did early last year. Thus if advertisers don’t require more newsprint for their messages then certainly editorial isn’t about to get any more, either. And with Outsell, a web research firm, predicting this year in the US more sales and advertising money will be spent online and on digital platforms than on print it points to newsprint producers having a dismal 2010 ahead.

See also in ftm Knowledge

The Paper Its Printed On – new

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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