1Q Newsprint Profits Fall, Data Shows Continued Market Decline

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By: Debra Garcia

While North American newsprint producers were releasing dismal returns for first-quarter 2007, the latest available market data reflect a continuation of the steady drop in U.S. newsprint consumption.

Statistics released today by the Pulp and Paper Products Council (PPPC) show U.S. daily newspapers consumed 8.7% less newsprint year-over-year in both March and throughout first-quarter 2007.

Total U.S. consumption was even worse, dropping 12.4% in March and 12.2% year-to-date. March had the same number of Sundays in both 2006 and 2007, but there was one additional Sunday during this year’s first quarter vs last year, the PPPC reported.

In recent days, first-quarter results posted by newsprint producers Catalyst Paper Corp. and Bowater Inc. reflect the grim condition of the market. Through the first three months, profits fell year-over-year by C$25.6 million (US$22.9 million) for Catalyst and by US$35.4 million for Bowater.

“The continued decline in newsprint consumption?led to price declines during the quarter,” noted David J. Paterson, Bowater chairman, president and CEO. Increased recycled fiber costs and production curtailments also adversely effected profits.


Exports improve again.

The weakening of the loonie vs the U.S. dollar, however, provided some relief for Canadian producers, noted Catalyst. At the same time, a drop in value for the U.S. dollar boosted exports. Overseas buyers were also attracted by lower North American newsprint prices.

Overseas shipments of North American newsprint increased 7.0% in March vs a year earlier, the PPPC reported. Together with the 10.1% year-over-year hike in February, the two months’ total just offset January’s 17.2% loss and brings year-to-date even with a year ago, at 525,000 tonnes (down 0.1%).

The biggest year-over-year jump in March’s overseas shipments was to Western Europe (up 82.6%), while Latin America grew by 6.2%. Japan and non-Japan Asia, however, fell by 34.7% and 16.3%, respectively. Through first-quarter, only Western Europe was ahead of a year ago, by 52.8%.

FOEX Indexes Ltd.’s latest report indicates that 30-lb newsprint in reels dropped just 26 cents, to US$595.87/tonne, for the week ending Apr. 17, indicating a slowing down in the rate of price erosion. However, this latest index is down US$31.88/tonnes, or 5.1%, since the beginning of 2007.

The Reel Time Report lists a price of $605/tonne for 30-lb newsprint in March, down $50/tonne since it hit its latest peak in September 2006. Bowater’s average newsprint transaction price decreased $22/tonne in first-quarter 2007 vs the previous quarter, according to the company.


More downtime taken.

Bowater indicated in releasing its first-quarter results that it curtailed significant newsprint and specialty paper production during the first three months of 2007, resulting in the loss of approximately 68,000 tonnes of newsprint output and costing about $15 million.

North American newsprint production dropped 4.9% in March, to 947,000 tonnes and brought the year-to-date total to just under 2.9 million tonnes, 4.5% below a year earlier, the PPPC reported.

At the same time, the industry’s operating rate declined year-over-year by 1% to 93% in March and 94% through the first three months of 2007. However, U.S. mills ran at just 91% in March compared to 95% in Canada. The rate was 94% for both countries through the first quarter.

North American mill inventories were whittled down by 14,000 tonnes in March, but were still 162,000 tonnes higher than a year earlier, according to the PPPC. The bulk of the drop in stocks occurred in Canada, which was down 13,000 tonnes in March, yet still 136,000 tonnes higher than a year ago.

Inventories held by North American newsprint consumers remained low and continued to decline. All U.S. users had 874,000 tonnes on hand at the end of March. This was 3,000 tonnes lower than a month earlier and 108,000 tonnes below a year ago. U.S. dailies stocks fell 13,000 tonnes in March and were down 52,000 tonnes from last March.

Newspapers continued to reduce the basis weight of newsprint used, with the PPPC reporting that the average g/m2 fell 0.8% year-over-year for both March and year-to-date, to 46.69 and 46.66, respectively.

Second-quarter could see some improvement in overall newsprint earnings due to lower fiber costs, Bowater indicated. In addition, the company expects its proposed merger with Abitibi-Consolidated Inc. would “improve efficiencies by reducing costs and increasing productivity.”

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