FORESTWEB Report: For Newsprint, Good News and Bad News

By: Debra Garcia

North American newsprint mills operated in October at the best rate since March — and this has improved steadily since April, to 82% if adjusted for idled capacity, and 71% if unadjusted, according to statistics released by the Pulp and Paper Products Council (PPPC).

However, Canadian newsprint mills saw the greatest improvement, with the adjusted operating rate moving from 69% in September to 86% in October, bringing the year-to-date operating rate to 74%, which was 20 percentage points lower than a year ago.

The U.S. newsprint mill adjusted operating rate in October moved up just one percentage point from September, to 75%, bringing the rate year-to-date to 72%, which was down from 94% a year earlier.

Total North American newsprint production in October was down 25.1% year-over-year, bringing the total through the first 10 months to 6.012 million tonnes, which was off 30.1% from January-October 2008.

Canadian newsprint output was down 22.7% year-over-year in October and off 28.6% year-to-date to 3.601 million tonnes, while U.S. production was down 28.6% in October versus a year ago and off year-over-year 32.2% through the first 10 months, to 2.411 million tonnes, the PPPC reported.

Total North American newsprint shipments fell 24.4% year-over-year in October, bringing the total for January-October 2009 to 6.019 million tonnes, which was down 30.2% year-over-year.

Newsprint shipments in October were off about equally year-over-year in Canada (down 24.4%) and in the U.S. (down 24.5%). Through the first 10 months, newsprint shipments totaled 3.58 million tonnes for Canada and 2.439 million tonnes for the U.S., which were down 29.7% and 31.0%, respectively, year-over-year.

Exports a little less bleak
Total North American newsprint shipments to overseas remained depressed in October, falling 36.1% year-over-year, but not as depressed as last month’s 45.6% drop. This brought the total overseas shipments through October to 1.325 million tonnes, which was off 37.8% from the same period in 2008, reported PPPC.

All export markets continued to decline in October, with year-over-year decreases to Western Europe (down 2.5%), Latin America (down 32.0%), Japan (down 73.0%), non-Japan Asia (down 44.2%) and other markets (down 69.1%).

Overseas newsprint shipments have declined more sharply in the U.S. than in Canada. In October, Canadian export shipments fell 27.6% while the U.S. was down 53.9%. Through the first 10 months, shipments to overseas were off 33.0% in Canada, to 1.075 million tonnes and down 52.4% in the U.S., to 250,000 tonnes.

With shipments exceeding production, North American newsprint inventories were reduced by 30,000 tonnes in October, to 312,000 tonnes at month’s end. This level was 23,000 tonnes lower than a year earlier. Stocks were drawn down both in Canada (down 7,000 tonnes) and in the U.S. (down 24,000 tonnes), the PPPC reported.

All U.S. users inventories were reduced in October by 27,000 tonnes, to 575,000 tonnes, which was 179,000 tonnes lower than a year earlier. Stocks at U.S. daily newspapers fell by 35,000 tonnes, to 502,000 tonnes, which was 158,000 tonnes less than held in inventory a year ago.

Newspapers’ downturn continues
Newspapers continue to grapple with the long, drawn-out decline in readership and advertising. In the third quarter, newspaper advertising dipped 28% year-over-year to U.S. $6.4 billion, according to figures released Nov. 19 by the Newspaper Association of America.This trend continues to affect newsprint demand and resulted in a 23.6% year-over-year drop in consumption by U.S. daily newspapers in October, which was somewhat improved from the year-to-date decline of 24.8%.

This brought total U.S. dailies consumption through October to 3.346 million tonnes, which reflects a much deeper year-over-year, January-through-October tonnage decline (down 1.105 million tonnes) than seen at the same time last year (down 795,000 tonnes).

In October, total U.S. newsprint consumption was off 22.1% year-over-year, bringing the total through the first 10 months to 4.291 million tonnes, which was down 24.7% from a year earlier.

U.S. demand dropped 19.3% in October compared to a year earlier, and was down 28.8% year-over-year during January-October, to 4.095 million tonnes, according to the PPPC.

The number of Sundays for October and through the first 10 months was the same in both 2009 and 2008, making the year-over-year comparisons accurate.

Prices inching upward
Despite the continuing decline in consumption, North American newsprint producers have had some success increasing prices since September because transaction levels are at or below those at which many mills can profitably operate. Black liquor tax credits have bolstered some mills this year, but that subsidy is set to expire at year?s end.

According to the October issue of The Reel Time Report, the price of 30-pound newsprint in the U.S. began to increase in September, moving to $455 per tonne from $440/tonne in August. Since September, it has increased $30 each month, to $515/tonne in November.

Deutsche Bank lists a Nov. 1 price for 30-pound newsprint in the U.S. at $500/tonne. FOEX Indexes Ltd. reported Dec. 1 that its U.S. benchmark for 30-pound newsprint advanced from last week by $7.43 to $501.74/tonne.

Industry analysts have predicted that newsprint producers will have to permanently close more capacity to firm up markets. The Reel Time report expects more than 2.0 million tonnes will have to be removed from North American newsprint capacity. Reel Time estimated the current North American capacity to be about 10 million tonnes, and projects the 12-month moving total of North American shipments will end the year at about 7.3 million tonnes.

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