By: Debra Garcia
Newsprint statistics released today by the Pulp and Paper Products Council (PPPC) showed a continuing decline in U.S. consumption and rising consumer inventories. At the same time, reports indicate that U.S. newsprint prices were down sharply this month.
U.S. daily newsprint consumption reached 626,000 tonnes in December, up 2.0% compared to a year earlier. However, because December 2005 had four Sundays vs five Sundays for December 2006, the adjusted percentage change is somewhat lower.
For the year’s total, U.S. daily newspapers consumed just over 7.0 million tonnes of newsprint, a drop of 7.1% from 2005. There were 53 Sundays in 2006 vs 52 Sundays in 2005.
Total U.S. newsprint consumption was flat (down 0.1%) year-over-year in December and down 6.3% for the year’s total of nearly 8.8 million tonnes, according to the PPPC.
Meanwhile, newsprint inventories remain high for consumers. All U.S. users had 825,000 tonnes in stock at the end of December, a drop of 47,000 tonnes from a month earlier and down 102,000 tonnes from a year ago. U.S. daily newspapers had 749,000 tonnes of inventory at the end of December, 10,000 tonnes below a month earlier and 58,000 tonnes less than a year ago.
Mill inventories drop
North American mill inventories, however, dropped by 21,000 tonnes in December, to 306,000 tonnes by month’s end. This was 3,000 below the inventory level a year ago.
Mill stocks destined for the North American market were higher, rising by 13,000 tonnes in December, to 213,000 tonnes, which was 18,000 tonnes higher than last December 31. However, mill stocks destined for overseas dropped 34,000 tonnes in December, to 93,000 tonnes, which was 20,000 tonnes less than a year ago.
North American newsprint producers lowered their output by 2.2% in December compared to a year ago, bringing the year’s total production to nearly 12.0 million tonnes, which was 6.3% less than in 2005.
Operating rates were lower, as well. For both December and the year’s total, North American mills ran at a rate of 94% vs 96% in 2005, the PPPC reported.
U.S. operating rates were somewhat better in the U.S. than in Canada, with U.S. mills running at 95% for both December and the year’s total, down 1% from the same periods in 2005. Canadian mills, though, operated at 93% for both December 2006 and the total year, compared to 96% last December and 95% for all of 2005.
Good news for exports
North American newsprint shipments to overseas were up a sharp 24.2% in December vs a year earlier, but remain 9.8% lower for all of 2006 compared to 2005. A total of just over 2.2 million tonnes was shipped overseas in 2006.
Shipments to all markets were up year-over-year in December, including Western Europe (up 96.8%), Latin America (up 10.8%), Japan (up 47.2%), and non-Japan Asia (up 7.0%).
However, for the year’s total, only Latin America showed an increase over 2005, increasing by 13.0%. All other countries dropped, including Western Europe (down 35.0%), Japan (down 29.6%), and non-Japan Asia (down 9.2%).
Imports from overseas, though, remain down, despite reports that Chinese newsprint might be making inroads into the U.S. market. PPPC reported that December’s imports were down 63.2% vs the previous December and total 2006 imports were off 25.2% year-over-year.
However, according to Mark Wilde, paper and forest products analyst at Deutsche Bank, “the threat alone” of Chinese newsprint imports is enough to pressure prices. “The market appears headed for another shakeout,” he said.
Newsprint pricing bleak
Newsprint prices have been dropping for months, falling by $15/tonne through December, and down another $20/tonne in January, Wilde reported. He lists the Jan. 1 price for 30-lb newsprint at $640/tonne.
FOEX Indexes Ltd. reported that the U.S. benchmark price for 30-lb newsprint fell by $4.40, to $617.32/tonne for the week ending January 16 and fell another $2.58, to $614.74/tonne for the week ending January 23.
Forecasts call for further reductions in newsprint prices this year. Paul Quinn, paper and forest products analyst at Salman Partners, projects 2007 annual prices to drop $33/tonne from 2006’s list price average of $668/tonne.
Newsprint consumption is down 24.2% since it peaked in 1999, noted Quinn. “Newsprint publishers have increased their campaign to reduce consumption by format (broadsheet to tabloid and web-width reductions) and page count (elimination of daily stock tables),” he said.
In The Reel Time Report?s Quarterly dated Nov. 8, 2006, it forecast that U.S. newsprint prices would decline to $540/tonne by fourth-quarter 2007, but quotes could be as low as $491/tonne depending on what the cash-cost level is for mills. However, that prediction was based on the value of the Canadian dollar at the time; any variation in the exchange rate would alter the forecast.
“Once the pricing direction is established, it tends to maintain momentum until it reaches a level at which high-cost producers fare better financially by shutting down equipment,” noted Verle Sutton, editor.