North American Newsprint Inventories Trimmed in April, Further Cuts Needed as U.S. Consumption Plummets

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By: Debra Garcia

As U.S. consumption of newsprint fell 29.4% year-over-year in April — the fifth consecutive monthly drop of more than 20% — industry analysts projected newsprint prices would continue to erode in the coming months unless capacity is permanently closed, and soon.

With the number of Sundays for April and year-to-date the same in both 2008 and 2009, total U.S. newsprint consumption through the first four months of this year is down 26.1% year-over-year, to 1.767 million tonnes, the Pulp and Paper Products Council (PPPC) reported on May 22.

Newsprint consumption by U.S. daily newspapers fell 27.5% in April versus last April, bringing the total year-to-date to 1.393 million tonnes, which is off 25.8% from a year ago.

At this point, consumption by dailies is down less than total consumption because of ?the implosion of advertising printing and the ready availability of attractively priced mechanical printing papers? at commercial printers, the May 2009 issue of Allan Consulting’s Newsprint Tracker Monthly Briefing noted.

Total U.S. newsprint demand dropped year-over-year by 34.5% in April, bringing the total through the first four months to 1.627 million tonnes, which is down 34.0% from a year ago, the PPPC reported.

With newsprint consumption off, U.S. users were able to draw down inventories by 45,000 tonnes in April, ending the month with 631,000 tonnes in stock, which was 148,000 tonnes below a year ago.

U.S. daily newspapers’ inventories stood at 565,000 tonnes at the end of April, and this was down 59,000 tonnes from a month earlier and 118,000 tonnes less than a year ago.

Exports down sharply
North American newsprint exports have not helped offset the drop in domestic orders this year, as they have remained weak. While the rate of decline eased in March, exports again fell sharply in April, tumbling by 43.7% year-over-year and bringing the total year-to-date to 507,000 tonnes, which is off 31.3% from a year ago, according to the PPPC.

All overseas markets remain depressed in April, except for Western Europe, which was up 18.7% from April 2008, while all other markets fell dramatically, including Latin America (down 57.6%), Japan (down 90.9%) and non-Japan Asia (down 58.7%).

According to the May 2009 issue of The Reel Time Report, world newsprint demand appears to have peaked in 2000 and even developing economies will not compensate for the losses in the U.S. because Western Europe, and possibly Japan, appear to be in long-term declines.

Year-to-date compared to a year ago, North American newsprint exports to Western Europe remained fairly flat (up 0.3%), while drops were reported for Latin America (down 34.3%), Japan (down 60.4%) and non-Japan Asia (down 50.4%).

Overall, North American newsprint shipments in April slid 36.0% year-over-year, bringing the total through the first four months to 2.357 million tonnes, which was off 32.5% from Jan.-Apr. 2008, the PPPC reported.

Compared to a year ago, U.S. newsprint shipments in April were off 40.5% compared to a 32.9% drop in Canada even as the loonie has slid in the past year from being at par with the United States dollar, to a value of U.S. $0.89 currently.

Year-to-date Canadian mills shipped a total of 1.415 million tonnes of newsprint, which is off 30.9% from a year ago, while U.S. newsprint shipments of 941,000 tonnes are down 34.8% year-over-year.

Canadian mills faring better
In April, U.S. newsprint mills operated at 57% versus a rate of 64% in Canada. A year earlier, the operating rate in Canada was 94% and in the U.S., 95%. Year-to-date, Canadian mills ran at 74% and U.S. mills, at 68%, versus rates in January-April 2008 of 93% in Canada and 95% in the U.S.

Overall, North American newsprint mills operated at 61% in April and 71% through the first four months of 2009, compared to 94% for both periods a year ago, according to the PPPC.

Because of extensive downtime, total North American newsprint production in April fell 37.2% year-over-year, bringing the total through the first four months to 2.551 million tonnes, which is off 26.6% from a year ago.

Canadian output was down 34.2% year-over-year in April and off 24.1% year-to-date versus a year ago, to 1.543 million tonnes.

U.S. newsprint production in April fell 41.4%, bringing the total through the first four months to 1.008 million tonnes, which is down 30.1% year-over-year.

North American newsprint mill inventories were cut by 13,000 tonnes in April, to 515,000 tonnes at month’s end, but this was still 168,000 tonnes higher than a year ago. Canadian mills managed to reduce stocks by 10,000 tonnes, while U.S. inventories were trimmed by just 3,000 tonnes.

April’s mill inventory reductions could be an ?encouraging sign,? reported Allan Consulting, which expects producers to take additional downtime in the coming months to try to shore up prices.

Capacity overhangs market
However, it could take months to ?dry up the surpluses,? noted the company’s May 2009 Newsprint Tracker Monthly Briefing, as ?North American markets remain unequivocally oversupplied: they are beyond words like ?soft? or ?soggy?; more in the range of ?drowning.??

May’s published newsprint price of $585 per tonne reportedly fell last week to $430/tonne for June deliveries, reflecting an ?unprecedented rate of decline for this commodity? of 45% since last November, noted the May 25, 2009, Equity Research report from TD Newcrest.

TD Newcrest further stated that newsprint prices are dropping faster than previously, and expects that price movements going forward would be determined by capacity curtailments. ?At this stage, the industry likely has no option other than closing mills quickly,? according to the report.

The Reel Time Report’s May 2009 issue projects that newsprint prices will continue to decline to cash costs, falling at a rate of about $20-$25/tonne per month and bottoming-out in third-quarter 2009.

For April, the publication posted a price for 30-lb. newsprint in the U.S. of $600/tonne, which was down from $650/tonne in March. Two-tiered pricing in the U.S. in recent months caused prices in the East to be as much as $55/tonne higher than in the West, but that difference dropped to $10/tonne in April.

FOEX Indexes Ltd. reported on May 19 that its index for 30-lb. newsprint in the U.S. decreased by $4.25/tonne in the previous week, to $620.94/tonne.

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