FORESTWEB Report: U.S. Dailies' Newsprint Consumption Falls by 1 Million Tonnes in 2008

By: Debra Garcia Since the new year began, newsprint curtailment announcements have increased in an attempt to balance the market. Data released Jan. 22 by the Pulp and Paper Products Council (PPPC) in Montreal indicates that U.S. consumption continued to fall sharply through December, with U.S. dailies consumption dropping by 1.0 million tonnes in 2008.

Newsprint consumption by U.S. daily newspapers fell last year by 16.3%, to 5.245 million tonnes, down from 6.265 million tonnes in 2007. December's 386,000 tonnes of consumption was off 23.5% from Dec. 2007; however, Dec. 2008 had one fewer Sunday than the previous December.

Somewhat less depressed was total U.S. newsprint consumption, which includes commercial printers. It dropped last year by 13.8% year over year, to 6.758 million tonnes. Both years had 52 Sundays.

With demand continuing to decline at a hefty pace, newsprint manufacturers have lately decided to cut output even further than previously planned. On Jan. 20, Catalyst Paper Corp. became the latest to add to the industry's already significant curtailments, saying it would ?match production with orders? by removing 55,000 tonnes of newsprint from production in the first quarter.

When making the announcement, Catalyst CEO Richard Garneau referred to an ?unprecedented? slowdown in advertising and restructuring by newspapers.

Earlier this month, Kruger Inc. announced it would curtail 25,000 tonnes of newsprint production in the first half.

These announcements are in addition to AbitibiBowater Inc.'s plans for substantial downtime of 830,000 tonnes in the first half, with 590,000 tonnes of that in the first quarter.

Prices drop again
Prices, though, continued to drop this month. According to a Jan. 12 analysis from The Reel Time Report, 30-lb newsprint prices were down $10/tonne this month, to $725/tonne. After moving up through 2008, prices began to slip in December.

However, with a decline in key manufacturing costs -- including fiber, energy and transportation -- newsprint mills have some ?wiggle? room to drop prices, according to a Dec. 31 Deutsche Bank report. ?We expect some of the benefit from costs ... to be returned back to customers in the form of lower prices,? it was noted.

The only bright spot in the data released by the PPPC today was for export markets. In December, a 28.3% year over year surge in newsprint exported from North America brought the year-to-date total to 2.558 million tonnes, up 6.5% from 2007.

Many of North America's export markets for newsprint were up sharply in December, including Western Europe (up 54.9%), Latin America (up 21.3%) and Asia (up 32.1%). Japan, however, dropped 52.9%.

For all of 2008, however, shipments improved only to Latin America (up 18.5%) and Asia (up 23.2%), while deliveries to Western Europe (down 16.4%) and Japan (down 21.9%) declined.

Total North American newsprint shipments to all destinations were down 5.6% in December compared to a year ago and off 7.3% for the year, to 10.260 million tonnes, according to the PPPC.

Canadian newsprint shipments increased 2.4% year over year in December, but were still down 7.9% year-to-date, to 6.078 million tonnes. U.S. shipments fell 16.3% in December vs a year earlier and were down by 6.4% for the year, to 4.182 million tonnes.

Both countries saw an increase in exports last year, with Canada up 4.1%, to 1.953 million tonnes and the U.S. up 14.9%, to 606,000 tonnes. However, Canadian newsprint exports jumped in December by 49.3% while the U.S. saw a year-over-year drop of 30.2%.

North American mills produced 10.6% less newsprint in December than a year earlier, bringing the year-to-date total to10.218 million tonnes, an 8.0% drop from 2007. Newsprint output last year was off more sharply in Canada (down 9.6%) than in the U.S. (down 5.6%).

Canada ahead of U.S.
However, in December, Canadian mills ran at 89% of capacity while U.S. mills operated at 80%. This compares with rates of 91% in Canada and 95% in the U.S. last December. The operating rate for North America was 86% in Dec. 2008 vs 92% a year earlier, according to the PPPC.

For 2008, North American mills ran at 93%, the same as a year earlier. The operating rates for all of 2008 were 94% in Canada 93% in the U.S., with Canada gaining two points and the U.S. down two points compared to 2007.

Newsprint inventories increased at consumers' warehouses, but mills managed to trim stocks in December. At the end of the year, North American mills had 320,000 tonnes in inventory, down 42,000 tonnes from both the end of November and the end of 2007.

Stocks for all U.S. users, however, grew by 25,000 tonnes in December, to 761,000 tonnes, which was 53,000 tonnes higher than at the end of 2007. U.S. dailies had 651,000 tonnes in inventory at the end of December, up 19,000 tonnes from the end of November and 35,000 tonnes higher than a year ago, the PPPC reported.

RBC Capital Markets indicated in a Jan. 12 report that it expects downward pressure on newsprint prices in 2009 due to declining advertising effecting newsprint consumption. In late December, three of the five major newspaper-publishing groups reported dismal November advertising revenues.

?A steep reduction in advertising revenues from the classified ad category had the biggest impact, as the collapse of the housing market and now the job market takes its toll,? it was noted. RBC Capital Markets said it revised its 2009 forecast for newsprint prices down from $660/tonne to $630/tonne and projected $650/tonne in 2010.