By: James McLaren, special from Forestweb
(Forestweb) The problems of 2001 spilled into the newsprint market of early 2002, as January statistics showed weak demand, lower production, and inventories backing up at mills — all of which led to lower prices going into February.
Canada and U.S. newsprint production was down 14.4% in the first month of 2002 to 1.157 million tonnes as U.S. consumption was lower by 6%, the Pulp and Paper Products Council (PPPC) in Montreal reported. Total North American inventories held by producers and users rose in January by 82,000 tonnes from the preceding month, lower than a historical average increase of 102,000 tonnes. Most of the increase was at the mills.
Total North American inventories stood at 1.616 million tonnes at the end of January, which is 9.5% below the 10-year average, PPPC reported.
Dailies again decreased inventories and lowered consumption, driving prices down further. Average U.S. newsprint prices fell $20/tonne from December to January and another $10/tonne into February, according to The Reel Time Report newsletter. Current average prices of about $465/tonne are 22% lower than a year ago.
Analysts see prices going down further as the first half of the year is expected to remain characterized by weak advertising and demand, and the ever-present state of overcapacity among producers.
The declining conditions follow a troublesome fourth quarter for producers, who reported prices falling from third quarter averages by 10% or more. North American producer Bowater Inc., Greenville, S.C., said in its financial report that its average newsprint price slipped 10% from the third quarter to the fourth. Norway’s Norske Skog — the parent company of North American West Coast newsprint giant NorskeCanada Ltd., Vancouver, British Columbia — noted its quarterly average prices dropped 15% from $590/tonne at the beginning of the year to $500-$510/tonne in the fourth quarter.
Tiny newsprint producer Bear Island Paper Co. of Ashland, Va., partly owned by the Washington Post Co., said its $7 million loss in the quarter resulted from a 15% decrease in average per ton prices.
The hit on producers was an aid to newspaper publishers, many of whom recorded big drops in paper expenses in the quarter and full-year.
Nevertheless, profits on both sides of the newsprint sector were lackluster, with producers such as top supplier Abitibi-Consolidated Inc. of Montreal barely staying in black ink and Bowater recording a 68% drop in earnings. McLean, Va.-based Gannett Co. Inc. saw profits in the quarter drop 16% as newspaper revenues declined 19% from a year earlier.
St. Louis-based Pulitzer Inc. reported its newsprint costs were down 29% in the fourth quarter, reflecting a decrease in newsprint prices of roughly 20%, the company said. Trenton, N.J.-based Journal-Register Co. said its unit cost of newsprint decreased 8% and newsprint consumption was down 4% from a year earlier.
Toronto’s Torstar Corp. reported an 11% decline in average newsprint prices in the fourth quarter compared with a year earlier, when they were up 12%. The company reported lower newsprint usage as well.
Downtime is widely expected, and not just by leading suppliers Abitibi and Bowater. Abitibi reported it will keep three idled machines in Texas and Quebec down through the first quarter. It said it removed 331,000 tonnes of production in the fourth quarter alone, and 796,000 tonnes for the full year, or 15% of capacity. Machines are down in Lufkin and Sheldon, Texas, and at its Port Alfred mill in northern Quebec.
Bowater said it took out 110,000 tonnes in the quarter and expected to match that in the first quarter.
Last week, NorskeCanada said it planned 112,000 tonnes of downtime at its mills in British Columbia in the quarter. This follows 66,000 tonnes taken out in the fourth quarter, the company said.
Total North American newsprint shipments fell off 17% year-over-year in January; two thirds of this decline was due to a 14% contraction in North American demand, PPPC noted. The other third of the decline in total shipments was attributed to a 30% drop in overseas sales. Canadian shipments to offshore markets were down 36.8% in January at 122,000 tonnes. U.S. exports were down 6%.
North American shipments fell in most of the major offshore markets. Deliveries to Asian and Latin American countries were down 59% and 49% respectively. And though shipments to Western Europe were flat, it should be noted that January was not a particularly strong month in 2001, PPPC said.
Total newsprint consumption in the U.S. dropped 6% year-over-year, whereas U.S. daily newspaper consumption was down 7.3%.
Though newspaper ad linage remained weak in December, other economic indicators such as housing starts and retail sales showed healthy growth in January, PPPC reported.
Overall inventories appeared in relative control, with newsprint inventories held by all users in January rising by 25,000 tonnes from the previous month to 1.190 million tonnes. That was still down 10.3% from levels in January 2001.
Stocks held by U.S. daily newspapers rose 20,000 tonnes to 936,000 tonnes by the end of January. North American producer stocks bumped up by 57,000 tonnes month-over-month to 426,000 tonnes, PPPC noted, which are still 8.3% below a 10-year average. U.S. daily newspaper stocks represented 41 days of supply at the end of January, unchanged from the preceding month.
Newsprint demand and consumption was being driven down by the fall in advertising, and the news in January was still bad as major newspaper chains reported dismal statistics for advertising and revenues.
Gannett reported that total pro forma operating revenues declined 6% for the first period ended Feb. 3, compared with the same period in 2001. Newspaper advertising revenues fell 8% in the period and classified revenues declined 12% in the January period on a 1% increase in ad volume.
Gannett’s pro forma national advertising revenues declined 11% on a 2% decline in ad volume. At USA Today, advertising revenues declined 22% while paid pages declined 19% to 394 from 487.
Knight Ridder of San Jose, Calif., said the first period of the year doesn?t yet look much different from what has gone before — although retail was down less than in recent months. Total operating revenue was down 11.1% for January. Advertising revenue was down 13% for the month. All the large markets were soft.
Chicago’s Tribune Co. reported its consolidated revenues for the period were $446 million, down 7% from last year?s $480 million. Publishing revenues decreased 8% in January to $342 million. Total advertising revenue decreased 12% to $256 million, down from last year’s $290 million.
NORTH AMERICAN NEWSPRINT STATISTICS
JANUARY 2002/FULL YEAR 2001
|Jan.||% change||Full-year||% change|
|Source: Pulp and Paper Products Council, Montreal. From Forestweb.|