By: James McLaren, special from Forestweb
(Forestweb) Newsprint output crashed in December as consumption by newspapers fell, leaving producers facing even more mill downtime, according to industry sources last week. Prices in January were down again, and newspaper company financial reports showed quarterly levels sunk from year-ago highs.
Boise Cascade Corp., whose relatively small amount of newsprint is sold by market leader Abitibi-Consolidated Inc., revealed in its financial report that newsprint realizations were down $80/tonne or roughly 15% from third to fourth quarter. Abitibi last week outlined first-quarter newsprint downtime at a Texas mill in addition to ongoing curtailments at other mills in Texas, Quebec, and Ontario.
And amidst the negative newsprint vibe last week, the government of Saskatchewan announced it was working with Alberta Newsprint Co. to build a huge new newsprint mill by 2004.
“We’d call the last 30 hours ‘lunacy’ in the paper industry but that would be too gracious,” Deutsche Banc Alex. Brown industry analyst Mark Wilde said early last week.
He said Boise’s report confirms the widely reported newsprint market collapse; that Abitibi and Bowater Inc. are expected to announce further capacity changes in their financial revelations this week; and the Saskatchewan mill plan ignores market realities.
“Part of the problem with this industry is government subsidy,” Wilde said.
North American mills produced 25% less newsprint in December than they did a year earlier, resulting in a record low, non-strike operating rate of 78%, the Pulp and Paper Products Council in Montreal reported last week. North American newsprint demand dropped 17% in December compared to last year, U.S. consumption crumbled 15%, and shipments fell 19% to 1.101 million tonnes, PPPC reported.
“They aren’t pretty,” said Wilde of the latest statistics. “However, some of the December newsprint figures suggest that we’re nearing a price floor.”
U.S. newsprint prices dropped $15/tonne from December into January to $480/tonne, Reel Time newsletter reported earlier this month. Current levels are about 20% lower than last year.
At the end of December, total North American inventories (all mills and users) came down for a fourth consecutive month, registering a 148,000-tonne decrease from the preceding month (the historical average is minus 41,000 tonnes). In the last four months, total inventories have shrunk 18% or 326,000 tonnes, PPPC reported. As a result, total North American inventories closed the year at 1.528 million tonnes, their lowest level since February 1995 and 16% below the 10-year average. At the end of December, North American mill stocks decreased by 92,000 tonnes month-over-month to 368,000 tonnes, a full 25% below the 10-year average.
Full-year 2001 newsprint production of 14.145 million tonnes in Canada and the U.S. was down 10.4% from 2000, with shipments of 14.110 million tonnes off 11.1%, and full year demand of 11.633 million tonnes off 10.9%.
For 2001, the industry operating rate was 90%. PPPC said operating rates now reflect the removal of newsprint capacity at West Tacoma (Steilacoom), Wash., 130,000 tonnes (mill closed in December 2000); Kenora, Ont., 85,000 tonnes (PM#8 shut down permanently in June 2001); and Coosa Pines, Ala., 90,000 tonnes (PM#1 shut down permanently in October 2001).
The 16.8% year-over-year drop in North American demand accounted for almost 70% of the decrease in North American shipments in December. In 2001, North American newsprint demand contracted 10.9%, PPPC noted.
In December, total newsprint consumption in the U.S. registered a 14.8% year-over-year decline, whereas U.S. daily newspaper consumption was down 16.8%. It is important to note that the year-over-year comparison of U.S. dailies’ consumption is made difficult because several of the major publishing groups, who report data according to accounting periods as opposed to calendar months, had an unusually higher number of days in the 12th period of 2000.
Among the media giants last week reporting fourth quarter and full-year results, Knight Ridder Inc. in San Jose, Calif., reported newspaper revenues down 16.6% to $722.8 million in the fourth quarter from a year earlier, with full year 2001 revenues down 9.8% to $2.8 billion. Knight Ridder’s operating income fell 14.1% in the quarter to $184.8 million and for the full year dropped 29.9% to $520.1 million from a year earlier. Knight Ridder reduced its workforce 10% in 2001.
Tribune Co. in Chicago said its publishing operations saw revenue decline 13% in the quarter to $983 million. Publishing operating profit decreased 37% to $146 million. For the full year 2001, publishing revenues increased 12% to $3.8 billion, and profit declined 23% to $543 million from a year earlier.
Knight Ridder said decreased advertising meant diminished newsprint consumption, which translated to lower-than-anticipated newsprint costs. For the year (on a comparable basis), expenditures for newsprint were down 2.5% despite an 11% higher average price per ton, the company said.
Knight Ridder’s ownership stake in two newsprint mills reduced equity earnings by 19.3% in the quarter due to lower newsprint prices. Tribune said its newsprint prices were 7% below 2000 and consumption was 9% lower.
E.W. Scripps Co. of Cincinnati reported it cut newsprint consumption by 105,000 tons from partnering its Denver newspaper with another. Overall it said newsprint costs decreased 17% over the prior year on a 13% decrease in newsprint prices in the quarter.
The Washington Post Co. said newsprint expense decreased 6% for 2001 due to reduced consumption offset by overall higher prices during the year.
Newsprint producer Tembec Inc. in Quebec last week noted its average selling prices of newsprint and uncoated groundwood paper grades declined by C$88/tonne quarter to quarter.