FORESTWEB: North American Newsprint Inventories Increase, U.S. Consumption Declines

By: Debbie Garcia Despite one extra Sunday last month compared to August 2007, total U.S. newsprint consumption fell 13.9% year over year for the month, according to newsprint data released today by the Pulp and Paper Products Council (PPPC) in Montreal.

An additional Sunday through the first eight months also did not avert an 11.5% year-over-year drop in the total 4.59 million tonnes of newsprint consumed in the U.S. year-to-date.

Newsprint consumption by U.S. daily newspapers dipped even lower in August than total U.S. consumption, showing a decline of 14.7% year over year. For January-August 2008, 3.59 million tonnes of newsprint was consumed by U.S. dailies, a drop of 14.0% compared to the first eight months of 2007.

Industry analysts are forecasting that without further capacity closures, newsprint price hikes of $20/tonne per month posted through the fourth quarter will continue to lose momentum as consumption maintains its steady drop.

In early September, AbitibiBowater Inc. announced it would curtail an additional 100,000 tonnes of newsprint output by the end of this year. Catalyst Paper Corp. indicated late last month that it would take approximately 11,000 tonnes of newsprint and directory paper downtime at its Crofton, B.C., mill.

With North American producers solidly behind raising newsprint prices this year, domestic price levels have steadily gone up monthly by $20/tonne from January through July, but only $15/tonne was realized in August.

AbitibiBowater announced a further round of $20/tonne monthly increases in the fourth quarter. However, without further capacity cuts, only about half of that hike is expected to be implemented, it was noted in The Reel Time Report's September issue. The publication raised its newsprint price by just $15/tonne in August, to $705/tonne for 30-lb newsprint, but expected its September price to go up $20/tonne.

In a Sept. 8 report, Deutsche Bank indicated that August prices for 30-lb. newsprint in the U.S. increased by $15/tonne, to $735/tonne, the highest level in 12 years.

If the fourth quarter hikes are fully implemented, it would bring U.S. newsprint prices to $800/tonne, an all-time record high and 37% more than at the start of 2008, noted a Sept. 12 report from CIBC World Markets.

Publishers are resisting further hikes, however. Gannett Inc. allegedly was able to negotiate the price it pays in the third quarter from $60/tonne to $36/tonne on about half of the newsprint it buys, according to The Reel Time Report.

Consumers have been able to keep lean inventories overall. Although stocks held by U.S. users at the end of August were up 10,000 for the month, to 841,000 tonnes, this was actually a decline of three in days supply because of the downward trend in usage, as newspapers put into effect various conservation measures.

Daily newspaper inventories were also up in August, increasing by 5,000 tonnes, but down by three days supply, to 719,000 tonnes.

North American newsprint mill inventories, meanwhile, grew by 58,000 tonnes in August, to 407,000 tonnes at month's end, with Canadian mills gaining 26,000 tonnes and U.S. mills up 31,000 tonnes.

Overall, total North American mill stocks were still 126,000 tonnes lower than a year ago but Canadian mills bore all of the credit for the drop, slashing their inventories by 129,000 tonnes while U.S. mills added 3,000 tonnes, PPPC reported.

North American newsprint production dropped by 6.9% year over year in August, bringing the year-to-date total to 6.94 million tonnes, which was down 8.9% from last August. Once again, Canadian newsprint output has declined more than that of its neighbor to the south. Newsprint production in Canada fell 10.6% in August, and was off 12.0% through the first eight months (4.06 million tonnes), but U.S. output was down just 1.3% year over year in August and off 4.3% year-to-date (2.88 million tonnes).

Canadian newsprint mills operated at 89% of capacity in August and through the first eight months, down from 94% for both periods in 2007. U.S. mills, however, ran at 97% in August and 95% year-to-date, with both periods showing no change from a year earlier. The North American operating rate was 92% in August and 91% in January-August vs 95% and 94% for each period, respectively, in 2007.

Shipments of newsprint from North America dropped 11.2% year over year in August, with the total through the first eight months of 6.89 million tonnes down 7.0% from a year earlier.

Year-to-date, U.S. newsprint shipments year over year dropped 4.6% (2.83 million tonnes) and Canadian newsprint shipments fell 8.6% (4.06 million tonnes). In August, newsprint shipments year over year were off 7.8% in the U.S. and down 13.4% in Canada, PPPC reported.

Newsprint exports from North America took a turn downward in August, falling by 3.2%. This brought the total for January-August to 1.62 million tonnes, up just 1.6% from a year earlier. All of the downturn occurred in Canada, where newsprint exports were off 7.9% year over year in August, bringing the total through the first eight months to 1.24 million tonnes, a decline of 1.2% from a year ago. U.S. newsprint exports, though, increased 11.3% year over year in August, bringing the year-to-date total to 379,000 tonnes, up 12.3% from a year ago.

All offshore markets for North American newsprint exports were down in August except for non-Japan Asia, which shot up 61.5% from a year earlier, and was 7.7% ahead on a year-to-date basis. Latin America, which dropped 8.8% in August, was the only other market still ahead (up 19.5%) year over year through the first eight months.

The Reel Time Report expects North American offshore newsprint exports to be up about 8%, or 110,000 tonnes, in 2008 vs 2007.