Decline in North American Newsprint Production Slows in June, as Exports Continue to Gain

By: Debbie Garcia North American newsprint production totaled 934,000 tonnes in June, off just 2.1% from a year ago. This helped reduce from a month earlier, the year-over-year drop in first-half production (5.7 million tonnes) to 4.7%, according to the latest report from the Pulp and Paper Products Council (PPPC).

Exports played a major part in boosting North American newsprint output, with overseas shipments in June totaling 230,000 tonnes, up 23.0% from last June. This brought the year-to-date total to nearly 1.2 million tonnes, up 8.6% year-over-year.

Chip Dillon, industry analyst with Citigroup, said June's exports were the highest for any month in over two years.

All overseas destinations were ahead of a year ago in June, except for a slight 0.2% decline in deliveries to Latin America. The biggest jump was to Western Europe, which nearly doubled. Non-Japan Asia was up a healthy 16.1%.

Through the year's first six months, North American newsprint exports remain down from a year earlier to Latin America (down 5.8%), Japan (down 11.2%) and non-Japan Asia (down 2.6%), but are ahead for Western Europe (up 74.9%) and ?Other? (up 9.2%), the PPPC reported.

North American newsprint mills operated at 95% in June, up 1% from a year ago, but through first-half 2007 vs 2006, the operation rate lost 1%, to 94%. In June, U.S. mills ran at 98% vs 94% last June, but Canadian mills were down 1% to 93%.

North American newsprint mills were able to reduce inventories by 10,000 tonnes in June, ending the month with 459,000 tonnes on hand, which was still 141,000 tonnes higher than a year earlier. Canadian mills shed 12,000 tonnes of inventory in June, while U.S mills gained 2,000 tonnes.

For consumers, inventories are still low compared to a year earlier. All U.S. users reduced stocks by 3,000 tonnes in June, to end the month 96,000 tonnes lower than a year earlier. U.S. daily newspapers gained 27,000 tonnes in inventory in June, but this was still 63,000 tonnes below a year ago, according to the PPPC.

U.S. newsprint demand continued to decline in June, totaling 635,000 tonnes, a year-over-year drop of 11.3%. This brought the year-to-date total to just over 3.9 million tonnes, down 11.2% from first-half 2006.

Newsprint consumption by U.S. daily newspapers fell 10.7% in June vs mid-year 2006, and total year-to-date consumption of nearly 3.2 million tonnes was down 9.4% year-over-year. The number of Sundays in June were the same in 2007 and 2006; however, there was one less Sunday in first-half 2007 vs last year's first six months.

With total U.S. newsprint consumption down year-over-year by 10.1% in June and 11.1% through the first half, commercial printers do not appear to be helping, as their share is calculated as the difference between consumption for Total U.S. and U.S. Dailies.

While Kruger Inc. announced a $25/tonne price hike for newsprint sold in the U.S., effective Sept. 1, the chance of the increase sticking are seen as slim. U.S. newsprint prices have fallen steadily for several months, with current prices for 30-lb newsprint in the U.S. currently about US$570-$575/tonne, according to analysts.

In addition, newspaper publishers continue to cut consumption not only because fewer newspapers are being sold and advertising is shifting to other media, but also as the result of conservation measures still being implemented.

Verle Sutton, editor of The Reel Time Report, recently indicated that, while the Kruger-led hike appears ill-fated, prices are not expected to drift much lower.

Dillon projects newsprint prices in the U.S. will start to rebound late this year. U.S prices are a record US$145/tonne below European prices, he noted.


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