Bad News on Newsprint Makes Price Hike Less Likely

By: Debbie Garcia With the recent release of the latest North American newsprint data -- which was mostly negative -- producers appear to be losing ground in their attempt to raise newsprint prices in the United States by $35/ton effective March 1. However, industry analysts still hold out hope that the increase will stick if the industry can further control supply.

Consumption still falling

According to the Pulp & Paper Products Council's (PPPC) latest report, released Feb. 23, consumption by U.S. dailies fell 3.1% in January 2005 compared to January 2004, despite an extra Sunday this January.

While Canadian newsprint demand was up 2.2% year-over-year in January, total U.S. demand dropped 8.4%, resulting in North American newsprint demand contracting by 7.5%, the PPPC reported.

North American newsprint shipments increased by 0.7% in January from December 2004 but were down 5.4% from January 2004. North American shipments within North America, year-over-year in January, decreased by 7.6%; however, overseas shipments were up by 6.2%.

Mill operations anemic

Newsprint mill operating rates in both the United States and Canada reached 95% in January, up 1% compared to a year earlier. Despite higher operating rates, newsprint production fell by 4.7% overall in North America in January compared to a year ago, and North American newsprint mill inventories rose by 36,000 tons.

U.S. dailies increased their newsprint inventories by 46,000 tons in January, while all U.S. users' inventories were up 35,000 tons. In terms of days of supply, the 40 days of inventory for all U.S. users was unchanged from a year ago, while the 44 days on hand at U.S. dailies was up just 1 day from a year ago.

The PPPC reported that the most recent ad linage data showed a 2.2% decrease in December 2004, which brought the year-to-date figure to +1.1%.

Outlook less optimistic

Some newsprint industry analysts are becoming increasingly more bearish on newsprint consumption rebounding as the months of negative results pile up. Publishers continue to control costs, including ongoing efforts to lower newsprint consumption.

However, Canadian producers -- compelled by a strong Canadian currency and rising costs -- are increasingly more aggressive in curtailing production by not only taking temporary downtime but also permanently closing down machines or converting them to other grades.