FORESTWEB Report: Newsprint Output Down, But Mills Are Up

By: Debra Garcia Despite the newsprint industry's attempts to curtail production, mill inventories were up dramatically in January, the Pulp and Paper Products Council (PPPC) has reported.

North American newsprint output in January fell 20.5% from a year earlier, to 724,000 tonnes; yet mill stocks increased by 99,000 tonnes, to 419,000 tonnes -- which was 66,000 tonnes higher than a year ago.

Canadian mill inventories grew the most in January, increasing by 57,000 tonnes, while U.S. newsprint stocks were up 42,000 tonnes; however, compared to a year earlier, Canadian inventories at the end of January were 9,000 tonnes lower while U.S. stocks were 75,000 tonnes higher.

U.S. newsprint production fell 20.0% year-over-year in January, to 308,000 tonnes and Canadian output dropped 20.9%, to 416,000 tonnes.

The newsprint sector's curtailments were reflected in low operating rates. For total North America, newsprint mills operated at 77%, with rates of 76% in Canada and 78% in the U.S. This compares to operating rates in January 2008 of 92% for total North America, 91% in Canada, and 93% in the U.S., according to the PPPC.

Further closures needed
In an attempt to firm up markets, AbitibiBowater Inc. has announced permanent newsprint closures of 590,000 tonnes per year in addition to at least 20,000 tonnes/month of temporary down time; and, while other producers have indicated additional though lesser outages, it is not enough to stop newsprint prices from eroding, noted The Reel Time Report in its February issue.

?It is possible for the newsprint producers to stop the price erosion,the publication stated. ?However, this would require White Birch and Kruger to take substantial down time (much more than announced), and that is not something these companies do easily.?

The Reel Time Report's January price for 30-lb. newsprint was $730/tonne, down $10/tonne from December and off $20/tonne from November, when prices peaked at $750/tonne.

RBC Capital Markets projects a full-year 2009 newsprint price of $630/tonne, down 10% from the $700/tonne 2008 average. ?Structural adjustments by publishers, including the elimination of whole sections or even a full day's edition, will have a large impact,? according to a Feb. 24 report.

On Feb. 24, MarketWatch.com reported that the San Francisco Chronicle might be the latest in a line of newspaper casualties from the economic recession, as The Hearst Corp. said it would close or sell the publication if costs are not slashed within weeks. Last month, Hearst said it would shut down its Seattle Post-Intelligencer if a buyer is not found.

Demand drops dramatically
U.S. dailies' consumption fell 22.6% year-over-year in January, to 374,000 tonnes. At the same time, newsprint held in inventory by U.S. dailies increased in January by 26,000 tonnes, to 674,000 tonnes, which was the equivalent of 54 days of supply -- 10 days more than a year earlier.

Total U.S. consumption of newsprint in January was down 21.6%, to 481,000 tonnes, while inventories dropped during January by 24,000 tonnes, to 750,000 tonnes. At the end of January, all U.S. users had 750,000 tonnes of newsprint in stock, which was the equivalent of a 46 days of supply, eight days more than a year ago, PPPC reported.

Total U.S. demand for newsprint fell 31.3% in January, to 457,000 tonnes. Domestic North American shipments of newsprint were off 30.1% year-over-year in January (514,000 tonnes), while overseas shipments were down 40.2%, to 111,000 tonnes.

All North American export markets were down in January compared to a year earlier, including Western Europe (off 28.8%), Latin America (off 40.2%), Japan (off 30.8%), non-Japan Asia (off 43.2%), and other markets (off 74.6%).

Canadian newsprint shipments dropped 32.7% year-over-year in January, with domestic deliveries down 29.6% and exports off 41.3%. U.S. newsprint shipments fell 31.3%, with domestic shipments off 30.7% and exports down 36.3%, PPPC reported.

January's North American newsprint exports represented just 18% of total shipments, lower than any month last year, according to RBC Capital Markets, which projects weak export markets will continued this year due to the global economic slowdown.