FORESTWEB Report: North American Newsprint Decline Accelerates

By: Debra Garcia Newsprint consumption by U.S. dailies fell 26.2% year-over-year in February, bringing the year-to-date total to 703,000 tonnes, a drop of 24.4% from a year ago, the Pulp and Paper Products Council (PPPC) reported.

Total U.S. consumption, however, was even more depressed, falling by 29.9% year-over-year in February and 26.7% through the first two months of 2009, to 869,000 tonnes. Total consumption includes commercial printers, as well as newspapers.

However, an even steeper decline was reported for total U.S. demand, which dropped 35% last month versus February 2008 and was off 32.8% for January-February 2009, to 842,000 tonnes.

In North America, about 270,000 tonnes of newsprint downtime was announced for the first quarter in order to offset this steep decline in demand, according to a Feb. 13 report by RBC Capital Markets.

?We do not expect, however, that producers can continue to answer chronic oversupply with temporary production curtailments,? the report stated. RBC Capital Markets expects that ?further permanent closure announcements will reflect the outcome of labor negotiations with the CEP union, set to begin in late March or early April.?

Newsprint production in North America declined 24.6% year-over-year in February and was off 22.5% year-to-date, to 1.348 million tones, the PPPC reported. Due to shifts in the Canadian and U.S. currencies in recent months, Canadian output fell less sharply than that of its southern neighbor.

Canadian newsprint production in February was down 20.2% versus a year earlier, while there was a 30.9% year-over-year drop in the U.S. Through the first two months, Canadian production of 802,000 tonnes was down 20.6% and U.S. output of 546,000 tonnes was off 25.1%, both compared to a year earlier.

The operating rate in Canada also remained higher than that in the U.S. In February, Canadian mills ran at 79% versus 95% a year earlier, while U.S. mills operated at 69% versus 96% last February. Through the first two months, the operating rate in Canada was 78% compared to 93% a year earlier, while mills in the U.S. ran at 74% compared to 95% last January-February.

For total North America, newsprint mills operated at 75% in February and 76% year-to-date compared to 96% last February and 94% in January-February 2008, according to the PPPC.

North American newsprint shipments plummeted by nearly a third (33.2%) in February versus a year earlier and the year-to-date total was down nearly as much (off 32.7%), to 1.189 million tonnes.

Shipments were down about the same amount in Canada as in the U.S. In February, U.S. newsprint shipments fell 32.8%, bringing the total for January-February to 493,000 tonnes, off 32.0% year-over-year, while Canadian shipments last month declined by 33.5% and were down 33.1% year-to-date, to 695,000 tonnes.

Overseas markets did not help offset the decline in domestic sales for North American newsprint manufacturers. Overseas newsprint shipments in February plunged 30.6% from February 2008 and the 239,000 tonnes of newsprint exported from North America through the first two months of 2009 was 35.4% less than a year earlier.

All export markets were down both in February and year-to-date versus a year earlier. Least affected was Western Europe (down 17.1% in February and down 22.9% year-to-date), while substantial declines were reported in the key markets of Latin America (down 21.9% in February and down 31.1% year-to-date) and non-Japan Asia (down 61.2% in February and down 53.3% year-to-date).

U.S. newsprint exports plummeted 47.9% year-over-year in February, bringing the total through the first two months to 48,000 tonnes, which is off 42.0% from January-February 2008. Overseas shipments from Canada fell 25.8% in February versus a year earlier, and were down year-over-year 33.5% year-to-date, to 192,000 tonnes.

Newsprint imports from overseas increased in February, by 93.9%, but the year-to-date total was still just 15,0000 tonnes, a year-over-year increase of 31.4%, PPPC reported. All of the imports of newsprint into North America landed in the U.S.

Despite the decline in shipments and producers' efforts to reduce output through down time, North American newsprint mill inventories in February grew by 60,000 tonnes, to 479,000 tonnes at month?s end. This was 143,000 tonnes higher than at the end of February 2008.

Both U.S. and Canadian mill stocks were up in February, with an 11,000 tonnes gain in the U.S. and a 49,000 tonnes gain in Canada. This brought Canadian inventories to a level 63,000 tonnes higher than a year earlier, while U.S. stocks were up 80,000 tonnes for the same period.

Inventories at U.S. daily newspapers also grew in February, increasing by 43,000 tonnes, to 712,000 tonnes at month?s end. This was 16,000 tonnes more than the dailies held in stock at the end of February 2008.

All U.S. users? stocks, however, shrank by 25,000 tonnes in February to 744,000 tonnes, which was down 29,000 tonnes from the level of inventories at the end of February 2008.

Industry analysts generally expect that newsprint prices in the U.S. will remain under pressure in 2009 as consumers continue to reduce consumption due to the economic recession exacerbating the trend in declining readership and advertising.

FOEX Indexes Ltd. reported last week that its 30-lb. newsprint index had dropped $2.66/tonne from the previous week, to $704.48/tonne. Since the start of 2009, that index has fallen by $45/tonne.