FORESTWEB: Continued Decline in North American Newsprint Consumption, and a Dip in Exports

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By: Debbie Garcia

The Pulp and Paper Products Council (PPPC) reported June 23 that U.S. daily newspapers consumed 15.7% less newsprint in May than a year earlier, bringing the year-to-date total to 2.32 million tonnes — down 13.5% from a year ago.

The 442,000 tonnes of newsprint consumed by U.S. daily newspapers in May was the lowest monthly total in at least two and-a-half years, and continues a gradual, steady decline that appears unabated due to the downward trend in newspaper readership and advertising.

Total U.S. consumption, which includes commercial printers, was down year-over-year by 13.4% in May and reached 2.963 million tonnes through the first five months, down 10.1% from a year earlier.

Total U.S. demand for newsprint in May dropped 14.2% versus a year ago, and totaled 3.034 million tonnes from January through May — a year-over-year drop of 7.8%, according to the PPPC.

The number of Sundays in both years were the same both for the month of May and for the first five months.

Days of supply a factor

With consumption declining, consumer inventories levels are actually not as lean as they might otherwise appear looking at the data. While U.S. users stocks of newsprint fell by 6,000 tonnes in May to 678,000 tonnes and days of supply dropped by one, on a year-to-date basis there is still a gain of four in days of supply even through inventories were 39,000 tonnes lower than January-May 2007.

According to The Reel Time Report’s June issue, this increase in days of supply while inventories drop is ?due to the fact that so much less paper is being consumed in 2008.? The publication expects this trend to continue, with dailies’ demand falling even more in the months ahead.

All U.S. users’ stocks were unchanged in May at 778,000 tonnes, 51,000 tonnes lower than a year earlier. However, in days of supply, stocks for all U.S. users was the same in May as in April but three days higher than last May, PPPC reported.

North American newsprint mill inventories gained by 4,000 tonnes in May, to 350,000 tonnes. During the month, U.S. mills increased stocks by 15,000 tonnes while Canadian inventories fell by 11,000 tonnes.
However, North American newsprint mill stocks at the end of May were still 118,000 tonnes lower than a year earlier, with Canadian inventories dropping by 119,000 tonnes while U.S. stocks grew by 1,000 tonnes.

Despite lean inventories, The Reel Time Report anticipates that a new round of mill closures will be needed before year-end due to consumption declining so rapidly.

The total for North American mill and consumer inventories at the end of May, 1.128 million tonnes, was the lowest for any May in at least 30 years, according to Chip Dillon, industry analyst with Citigroup Global Markets Inc.

Exports turn down again

Export demand did not help offset the decline in U.S. domestic newsprint consumption in May. With overseas shipments of North American newsprint falling year over year by 8.5% in May, the year-to-date total of 946,000 tonnes is about flat compared to a year ago (up 0.4%), according to the PPPC.

The only overseas market improving in May from a year earlier was Latin America (up 7.9%), which was also the only market showing growth through the first five months (up 31.4%). All of the other markets are down year-over-year during January-May, including Western Europe (down 18.7%), Japan (down 24.6%), non-Japan Asia (down 12.9%), and ?other? markets (down 5.0%).

In May, exports account for 24% of the newsprint shipped from North American mills. The remainder went to U.S. daily newspapers (51%) and other North American users (Canada and non-daily newspapers) (24%), according to Dillon.

He noted that the global newsprint market remains ?quite tight, with prices for standard news surpassing $800/tonne in Asia. Lightweight grades are fetching $900/tonne in Asian spot markets.?

North American newsprint production fell year over year by 8.7% in May, bringing the year-to-date total to 4.336 million tonnes, a 9.0% drop from a year ago. Mills operated at 90% in May and 91% though the first five months compared to 94% in both periods of 2007.

Output in the U.S. was off just 2.7% in May versus May 2007, bringing the year-to-date total to 1.801 million tonnes — a year-over-year drop of 3.7%. Canadian production, however, dropped 12.5% year over year in May, bringing the total through the first five months to 2.535 million tonnes, down 12.4% vs a year earlier.

In May, the operating rate was 94% in the U.S. and 88% in Canada vs 96% in the U.S. and 93% in Canada a year ago. Through the first five months, U.S. mills ran at 94% and Canadian mills, at 89% compared to 94% for both a year earlier.

North American shipments in May fell 11.7% year over year, reaching 4.349 million tonnes through the first five months, a drop of 5.9% vs a year ago.

U.S. newsprint shipments in May declined 8.6% year over year, bringing the total for January-May to 1.785 million tonnes, down 4.0% from a year ago. Canadian newsprint shipments, plummeted 13.7% year-over-year in May and fell 7.1% in January-May vs a year ago, to 2.563 million tonnes, PPPC reported.

Prices runup not as certain later in year

U.S. newsprint prices continue to advance. In June, U.S. prices for 30-lb. newsprint increased by $20/tonne, to a new high of $700/tonne, according to a June 23 Deutsche Bank report.

A third-quarter newsprint price hike of $60/tonne, to be implemented in $20/tonne monthly increments, has been announced by major North American producers and is expected to succeed. However, projections for another increase in the year’s final quarter are less certain.

?Additional hikes will likely be dependent on the willingness of industry leaders to take a hard line with customers in addition to removing capacity,? Deutsche Bank’s report notes.

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