FORESTWEB Report: U.S. Newsprint Consumption Continues Sharp Downward Trend

By: Debra Garcia Newsprint consumption in the United States remained on a downward slope in July, falling by 21.4% year-over-year, according to data released by the Pulp and Paper Products Council (PPPC).

Through the first seven months of this year, 3.03 million tonnes of newsprint was consumed in the U.S., and this was down 25.4% from a year earlier.

Consumption by U.S. dailies showed an almost identical trend, dropping by 21.8% in July and 25.1% year-to-date, to 2.38 million tonnes. Total U.S. newsprint demand fell 24.0% in July and was off 31.1% year-to-date, to 2.86 million tonnes.

TD Newcrest, a division of TD Securities Inc., reported in an Aug. 25 research note that newsprint market conditions improved marginally as the PPPC figures show a decelerated rate of consumption decline in July compared to previous months.

As the number of Sundays for July and through the first seven months was the same in 2008 and 2009, the year-over-year comparisons are straightforward.

Another relative improvement in July was in newsprint mill operating rates. Up from June's 64%, the North American rate was 75% in July and 74% year-to-date. This compares with 95% last July and 94% last January-July, the PPPC reported.

Output still depressed
North American newsprint production in July was down 31.5%, bringing the total through the first seven months to 4.3 million tonnes, a drop of 29.1% from a year earlier. Shipments fell 27.8% in July and were off 31.3% year-to-date, to 4.17 million tonnes.

Overseas deliveries of newsprint from North America continued to drop in July, falling 41.3% year-over-year, bringing the total through the first seven months to 900,000 tonnes, which was off 35.8% from a year ago. All markets were down year-over-year in July and year-to-date, with most of them showing dramatic drops.

At the same time, imports are up 34.5% year-to-date compared to last January-July, although there was a 7.0% decline year-over-year in July. All of the North American imports of newsprint were to the U.S.

North American mill inventories of newsprint were trimmed by 18,000 tonnes in July, ending the month at a level of 446,000 tonnes, but this was still 96,000 tonnes higher than a year earlier, according to the PPPC. While Canadian mills reduced stocks by 27,000 tonnes during July, U.S. producer inventories grew by 9,000 tonnes.

Newsprint consumer inventories, however, increased in July. All U.S. users' stocks were up 7,000 tonnes, to 608,000 tonnes, but this was still 197,000 tonnes below a year ago. U.S. daily newspapers built up inventories by 19,000 tonnes in July, to 561,000 tonnes, which was 152,000 tonnes lower than a year earlier.

Despite the tonnage increase in consumer inventories, U.S. daily newspapers are holding 53 days of supply compared to the long-term average of 42 days, stated TD Newcrest in its Aug. 25 report.

Operating rates better
Mill operating rates improved both in the U.S. and in Canada, although much more in the U.S. Last month, U.S. newsprint mills had run at just 56%. That jumped to 78% in July, bringing the year-to-date rate to 73%. This compares with 95% for both periods in 2009.

In Canada, mills ran at 72% in July and 74% through the first seven months, both of which were down from the rates of 95% last July and 94% last January-July, the PPPC reported.

U.S. newsprint production was off 30.2% year-over-year in July, bringing the total year-to-date to 1.7 million tonnes, which was nearly one-third (32.3%) below a year ago. U.S. newsprint shipments fell in July by 31.2%, and were off 33.4% year-to-date, to 1.66 million tonnes, with overseas deliveries down 55.4% in July and off 49.5% year-to-date, both compared to year-earlier periods.

Canadian newsprint output dropped year-over-year by 32.5% in July and was off 26.8% through the first seven months, to 2.6 million tonnes.

Canadian shipments of newsprint in July were off by one-quarter (down 25.5%) versus a year ago, and the cumulative 2009 total through July was 2.5 million tonnes, which was down nearly 30% from a year ago, reported PPPC.

Exports of newsprint from Canada fell 36.4% in July, bringing the total through the first seven months to 739,000 tonnes, which was down 31.8% year-over-year.

Price erosion eases
With newsprint markets continuing to decline, though more slowly, prices have remained on a downward trend, but that is also moderating. August newsprint prices were down a relatively moderate US$20/tonne, according to Deutsche Bank's Aug. 24 research note.

In its Aug. 25 report, TD Newcrest stated that current price of $435 per tonne for 30-lb newsprint selling in the U.S. is below cash costs for most producers.

Market analysts have said that more newsprint capacity will have to be closed permanently for the market to firm. It is suspected that producers are waiting for AbitibiBowater Inc.'s reorganization plan, which could include up to 1 million tonnes of newsprint closures in Canada, stated TD Newcrest.

In the meantime, a substantial amount of downtime is being taken. AbitibiBowater plans to take 250,000-300,000 tonnes out of production per quarter in second-half 2009. This includes the indefinite shutdown of two newsprint machines at its Thunder Bay, Ontario, mill.

In the third quarter, an estimated 750,000 tonnes of newsprint downtime is planned by North American producers, including Catalyst Paper Corp., Tembec Inc., Kruger Inc., as well as AbitibiBowater, reported TD Newcrest.


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