However, the newsprint industry was buoyed in the closing months of 2007 by an upturn in prices, which continued to gain in early 2008, according to industry analysts.
By far the biggest year-over-year monthly decline in U.S. newsprint consumption occurred in December 2007, falling 19.3% from the previous December, according to PPPC.
Part of the drop was due to some publishers reporting five weeks of consumption in December 2006, a phenomenon that occurs every five years, according to Mark Wilde, research analyst with Deutsche Bank.
For all of 2007, 7.84 million tonnes of newsprint was consumed in the U.S., down 10.5% from 2006. U.S. daily
newspapers consumed 6.27 million tonnes, off 10.8% year-over-year.
North American newsprint production declined 12.6% year-over-year in December, bringing the year-to-date total to 11.1 million tonnes, down 6.4% from 2006, PPPC reported.
Impact of closures ahead. The North American newsprint industry ran at 90% of capacity in December compared to94% a year earlier, while the operating rate for all of 2007 was 93%, down 1% from the prior year.
If the 515,000 tonnes of newsprint closures announced by AbitibiBowater Inc. for first-quarter 2008 were taken into account, however, the North American operating rate for 2007 would have been 94%, noted Wilde.
The operating rate for Canada slipped more than that for the U.S. due to the strong Canadian dollar. In December, Canadian newsprint mills ran at 87% of capacity vs 93% a year earlier, while U.S. newsprint mills operated at 94% vs 96% a year ago. PPPC reported.
For all of 2007, the operating rate in Canada was 91%, down from 93% in 2006, but the U.S. newsprint industry ran at 95% in both years.
Total North American newsprint shipments fell 14.8% year-over-year in December, bringing the total for all of 2007 to 11.1 million tonnes, which was down 6.6% from the previous year, according to the PPPC.
Overseas shipments ease. Overseas shipments dropped a sharp 25.6% in December compared to a year earlier, but the 2.4 million tonnes shipped through the year was still 7.3% ahead of 2006.
December's drop in overseas shipments was surprising considering that the U.S. dollar is weak and domestic U.S. newsprint prices are low relative to those in places such as Europe. ?We view this as a conundrum,? noted Wilde.
Shipments to Western Europe were up just 1.0% year-over-year in December, after posting generous gains in the preceding months; however, through the year the region posted a 58.3% increase in deliveries.
All other major markets for U.S. newsprint posted a year-over-year drop in shipments in December, with Latin America off 7.3%, Japan down 40.7%, and non-Japan Asia falling 61.2%.
For all of 2007 vs 2006, Latin America was up 5.8%, but Japan dropped 19.0% and non-Japan Asia was down 15.3%.
The dip in overseas orders in December possibly contributed to a 6,000 tonne increase in North American newsprint mill inventories, which ended the month at a level of 367,000 tonnes.
Stocks held by all U.S. users, however dropped 16,000 tonnes in December while U.S. dailies whittled down their inventories by 14,000 tonnes.
This brought total U.S. consumer inventories at the end of December to a level of 705,000 tonnes, or 34 days of
supply, which was down 129,000 tonnes, or the equivalent of 5 days of supply, from year-end 2006.
This is the lowest level in over 30 years, according to Chip Dillon, with Citigroup Global Markets.
Newsprint prices rebounding. Despite seemingly weak newsprint markets, newsprint prices continued to strengthen in the U.S. in January and the AbitibiBowater hike of $60/tonne, to be phased in through first-quarter 2008, appeared to
be holding, noted Wilde.
With an estimated $25/tonne advance in price achieved in fourth-quarter 2007, and assuming the AbitibiBowater
increase is fully implemented, the U.S. newsprint price would be up $85/tonne from the October 2007 low, according to Wilde.
Capacity closures in North America and Western Europe, totaling roughly 4% of global newsprint production capability, have helped firm the price despite the continued slide in U.S. newsprint consumption, noted Don Roberts of CIBC World have helped firm the price despite the continued slide in U.S. newsprint consumption, noted Don Roberts of CIBC World
Markets.
According to the latest FOEX Indexes Ltd. report, 30 lb newsprint in the U.S. was listed at $580.57/tonne, up
$2.36/tonne, while 27.7 lb newsprint was up $2.55/tonne, to $618.99/tonne.
The Reel Time Report's December issue was bullish on newsprint pricing, forecasting another $60/tonne hike in
second-quarter 2008, and further increases in the second half.
"The 'aggressive' Reel Time newsprint forecast for 2008, with increases totaling $155/tonne, will ultimately prove to have been too cautious,? the publication stated.
Dillon projected that U.S. newsprint prices would rise over the next several months to narrow the gap of about $185/tonne (30%) with European newsprint prices.
At the end of 2007, many analysts estimated the U.S. price for 30 lb newsprint at $585/tonne.