Another Down Month for North American Newsprint Statistics

By: Debra Garcia With newsprint demand continuing to trend downward, orders appear to have reached a level at which they exceed North American newsprint capacity and prices have begun to erode, according to various sources.

"The newsprint supply/demand balance has reached its tipping point," noted Verle Sutton, editor, The Reel Time Report, in that publication's November issue. Sutton dropped the price of 30-lb newsprint in the U.S. by $5/tonne in October, to $650/tonne.

Mark Wilde, industry analyst, Deutsche Bank, reported that 30-lb newsprint in the U.S. declined $5/ton to $670/tonne on Oct. 1.

Sutton estimates that North American producers will have to permanently eliminate another 675,000 tonnes of newsprint capacity just to shore up the market, as he projects shipments to decline by another 620,000 tonnes in 2007. "But that only gets us even for 2007; 2008 is another story," he noted.


Companies cutting, shifting capacity

Stora Port Hawkesbury Ltd. is expected to restart a 190,000 tonnes/year newsprint machine at the end of November, but it will be producing a higher grade groundwood with higher brightness and opacity than newsprint, under the name ExoPress, the Cape Breton Post reported on Nov. 6.

Meanwhile, Bowater Inc. is looking at restructuring its Thunder Bay, Ont., newsprint mill, and is slated to discuss the details with its employees in late November. Last month, the company announced the indefinite shutdown of the 146,000 tonnes/year No. 4 newsprint machine.

Statistics released today by the Pulp and Paper Products Council (PPPC) indicate that newsprint consumption by U.S. daily newspapers declined year-over-year by 9.0% in October, bringing the year-to-date total to just over 5.8 million tonnes, down 7.9% from January-October 2005.

Total U.S. consumption, which includes commercial printers, plummeted 9.1% year-over-year in October. Through the first 10 months of this year, the 7.3 million tonnes of total U.S. consumption, is off 6.6% from a year earlier.

The number of Sundays for October 2006 and the first 10 months of 2006 were both the same as for their year-earlier periods. Sunday newspapers tend to be thicker than daily newspapers, padding consumption totals during months with an additional Sunday.

The Newspaper Association of America's latest report indicates that U.S. daily newspaper circulation for the six-month period ending in September was down year-over-year by 2.8%, while Sunday circulation fell 3.4% over the same period.

Newsprint mills in North America produced 993,000 tonnes in October, 9.1% less than a year earlier. This brought the year-to-date total to 9.9 million tonnes, off 7.0% from the first 10 months of 2005, the PPPC reported.


Operating rates sharply lower

The North American newsprint mill operating rate plummeted in October compared to a year ago, from 96% to 91%, although year-to-date the operating rate declined just 1%, to 94%. Both the U.S. and Canada felt the drop in demand in October, with the U.S. operating rate falling year-over-year to 94% from 97%, while Canada dropped to 90% from 95%. On a year-to-date basis, the two countries are closer, with mills in the U.S. running at 96% vs 94% in Canada.

North American mill inventories continued to build in October, ending the month 12,000 tonnes higher than at the end of September and 10,000 tonnes higher than last October 31. The fault was with Canadian mills, which raised stocks in October by 21,000 tonnes, while U.S. mill inventories fell by 9,000 tonnes.

Consumer inventories, however, dropped in October by 41,000 tonnes for all U.S. users and fell by 38,000 tonnes for U.S. daily newspapers. This brought U.S. users stocks to a level 56,000 tonnes below a year earlier, and U.S. dailies' inventories were 49,000 tonnes lower than year ago.

While total North American demand for newsprint fell year-over-year in October by 6.3%, with U.S. demand down by 6.5%, North American shipments to overseas customers during this period plummeted 9.8%.


Exports down, imports up

For January-October 2006, total North American offshore newsprint shipments plunged 13.7% year-over-year, to 1.8 million tonnes, according to the PPPC. The only market still posting positive results on a year-to-date basis was Latin America, which was up 12.7% from January-October 2005, but dropped 20.7% year-over-year in October.

North American newsprint shipments to non-Japan Asia, however, increased 9.8% year-over-year in October, but remain 12.0% lower through the first 10 months of 2006 vs a year earlier. All other regions are down year-over-year both for October and year-to-date.

For October, North American newsprint shipments to Western Europe were off 27.6% and Japan was down 30.2%. For January-October 2006, these regions fell 42.2% and 33.5%, respectively, vs. a year ago.

Newsprint imports into North America jumped 20.4% in October compared to last October, but remain down 18.9% on a year-to-date basis. There is some concern that U.S. newspapers will be increasing imports of newsprint, especially from China, in the coming months and into the future.

The Tribune Co., Gannett Co. Inc., and The New York Times Co. are all looking at Chinese newsprint, the National Post reported on Nov. 1.

Sutton expects 75,000 tonnes of Chinese newsprint will be imported into the U.S. next year. At the same time, he projects a decline in North American newsprint exports by the same amount.

Chip Dillon, industry analyst, Citigroup Global Markets, however, is optimistic about the outlook for global newsprint, which is good for North American producers as they export about 20% of their output.

In a recent report, Citigroup indicates that total world demand for newsprint will continue to grow and U.S. demand declines will moderate. In addition, relatively abundant fiber resources in North America still put domestic newsprint producers at an advantage to certain other regions of the world.