FORESTWEB Report: Exports of North American Newsprint, Domestic Consumption Both Down

By: Debra Garcia There's not a bright spot in the markets for North American newsprint, as reflected in data released June 23 by the Pulp and Paper Products Council (PPPC). In May, total U.S. consumption fell 26.6%, while exports declined 36.2%, both compared to a year earlier.

Exports had previously help bolster the market, but not this year. Newsprint exports from North America totaled 133,000 tonnes in May, with all markets reporting year-over-year declines, including Western Europe (off 23.1%); Latin America (down 15.6%); Japan (off 1.0%); non-Japan Asia (down 61.8%); and others (off 92.4%).

Through the first five months, 633,000 tonnes of newsprint were exported from North America -- down 33.0% from January-May 2008. Year-to-date, exports fell compared to a year earlier for all markets, including Western Europe (down 7.9%); Latin America (off 30.5%); Japan (down 56.9%); non-Japan Asia (off 53.4%) and Other (down 30.5%).

Exports are off both in the U.S. and Canada. In May, newsprint exports from the U.S. were off 33%, bringing the total though the first five months to 117,000 tonnes, which was 43.7% below a year earlier. Canadian newsprint exports in May were off 36.9% year-over-year, and year-to-date was down 30%, to 516,000 tonnes.

U.S. demand also remained depressed in May, falling 30.4% year-over-year for the month and down 33.4% through the first five months, to 2.022 million tonnes. With printers also suffering from reduced orders, total U.S. consumption fell 26.6% year-over-year in May, continuing the steep declines seen this year and following years of steady drops. Total U.S. newsprint consumption for January-May 2009 is 2.192 million tonnes, down 26.1% compared to a year ago, PPPC reported.

Newsprint consumption by U.S. daily newspapers was down by a similar amount in May, falling 26% from a year ago, to bring the total through the first five months to 1.722 million tonnes, which was down 25.8% year-over-year.

These drops are especially sharp considering that there was one addition Sunday in May of this year compared to last May, and one additional Sunday in January-May of this year versus the same period last year.

Downtime continues
With orders significantly down, North American newsprint producers continued to take substantial downtime. The Reel Time Report estimated in its June newsletter that the current newsprint market is oversupplied by 1.5 million to 2.0 million tonnes.

PPPC reported that North American newsprint production was off 30.1% year-over-year in May, bringing the total output for January-May 2009 to 3.146 million tonnes, which was down 27.4% year-over-year.

Production was down sharply both in the U.S. (down 32.3%) and Canada (down 28.5%) year-over-year in May, bringing the total through the first five months to 1.251 million tonnes (off 30.6%) in the U.S. and to 1.896 million tonnes (off 25.2%) in Canada.

The North American newsprint operating rate slipped to 67% in May and 71% for January-May 2009, compared to a rate of 94% for both periods in 2008. The U.S. rate was just 64% in May and 68% year-to-date, significantly lower than the 94% rate for both periods a year earlier. Canadian mills ran at 69% in May and 73% year-to-date versus 94% last May and 93% year-to-date in 2008.

Despite low operating rates and reduce output newsprint prices continued to decline going into June. This month, the steady decrease in prices accelerated when Boise Inc. dropped its price to $430/tonne for newsprint from its DeRidder, La., mill, according to a June 15 report by RBC Capital Markets.

Newsprint prices in freefall
Today, FOEX Indexes Ltd. reported that its U.S. price index for 30 lb. newsprint has come down $135-$145/tonne in the second quarter and last week dropped again by $9.91/tonne, to $540.28/tonne. FOEX newsprint benchmarks have come down by $135-$145/tonne just in the second quarter.

The Reel Time Report expects that Boise's pricing will accelerate the closing of more newsprint mills as more producers are compelled to match the price and those that cannot because of operating costs, will be forced out of the market.

The publication expects that newsprint prices will bottom out at $480/tonne; its May price for 30-lb. newsprint was $560/tonne. However, FOEX reported this week that there are rumors of a price increase planned for August.

Total shipments from North American newsprint mills sunk 30.6% year-over-year in May, bringing the total through the first five months to 2.945 million tonnes, down 32.3% from January-May 2009, PPPC reported.

Newsprint shipments were off about the same in May in the U.S. (down 30.2%) as in Canada (off 30.8%). Through the first five months, newsprint shipments totaled 1.180 million tonnes in the U.S. (down 33.9%) and 1.765 million tonnes in Canada (off 31.2%).

Despite the decline in shipments, North American newsprint inventories were up slightly, rising by 7,000 tonnes during May, to end at 521,000 tonnes, which was 171,000 tonnes higher than a year earlier. Stocks grew in May both in the U.S. (up 3,000 tonnes) and in Canada (up 4,000 tonnes), and these were, respectively, 85,000 tonnes and 86,000 tonnes higher than a year ago, PPPC reported.

Consumer inventories, however, continued to decline, with U.S. daily newspapers stocks falling by 25,000 tonnes during May, to end the month at 539,000 tonnes, which was 140,000 tonnes lower than a year earlier. Inventories held by all U.S. users were down 22,000 tonnes in May, ending the month at 602,000 tonnes, which was 177,000 tonnes below a year ago.