By: Debbie Garcia U.S. newsprint demand continued to decline at double-digit rates in July, but exports are helping give the market some support, according to data released last week by the Pulp and Paper Products Council (PPPC).
Newsprint consumption by U.S. daily newspapers dropped 15.7% in July vs a year ago, bringing the year-to-date total to 3.176 million tonnes, down 14.0% from the first seven months of 2008.
Some of the drop in July was due to last July having one additional Sunday. However, year-to-date last year and this year had the same number of Sundays. Sunday newspapers tend to be heavier than daily newspapers.
If adjusted to account for last July's fifth Sunday, the decline in North American demand for newsprint would have been in the single digits, Citi Investment Research indicated in an Aug. 26 report.
North American demand for newsprint fell by 11.8% year over year in July, to 645,000 tonnes, bringing the year-to-date total to 4.709 million tonnes, a year-over-year decline of 8.8%. Total U.S. demand for Jan.-July 2008 was 4.155 million tonnes, down 9.1% from a year ago.
Total U.S. consumption of newsprint dropped 15.3% in July vs last July and was down year over year by 11.2% through this year's first seven months, to 4.059 million tonnes, PPPC reported.
Price Hikes SlippingNewsprint producers in North America have had a successful seven-month run up in $20/tonne monthly price hikes but the continual decline in U.S. newsprint consumption is beginning to give buyers an edge.
?The pace of demand decline suggests that further capacity reductions and conversions may be needed to push newsprint past $800/tonne by the end of 2008,? noted Deutsche Bank in an Aug. 25 report.
In August, only $15/tonne of the $20/tonne price increase was pushed through, according to some sources. CIBC World Markets, however, reported Aug. 22 that AbitibiBowater Inc. said it was successful with the $20/tonne hikes ?for first eight months of this year and anticipates implementing the September $20/tonne price increase.?
U.S. prices for 30-lb newsprint currently are $720-$735/tonne, based on various sources. FOEX Indexed Ltd. today released its indexes for last week. With no changes reported from the previous week, the U.S. indexes remained at $706.89/tonne for 30-lb newsprint and $755.72/tonne for 27.7-lb newsprint.
AbitibiBowater announced this week another $60/tonne price hike for newsprint in the U.S., to take effect in monthly installments of $20/tonne through the fourth quarter, but the full implementation of those hikes now appears to hinge on further newsprint capacity cuts.
?We expect that, absent of further curtailment/conversion announcements, newsprint buyers will strongly resist the latest increase,? noted Salman Partners in an Aug. 22 report.
On Aug. 8, Salman Partners indicated that AbitibiBowater had decided to hold off on any further newsprint conversion or curtailment announcements until after it negotiates a new labor contract with the Communications, Energy and Paperworkers Union of Canada in April 2009.
Inventories gainingMeanwhile, newsprint buyers appear to be building inventories. Stocks at U.S. dailies at the end of July were up 44,000 tonnes from the previous month, to 712,000 tonnes, but still down 23,000 tonnes from a year ago. All U.S. users' inventories grew 27,000 tonnes in July, to 803,000 tonnes, which is 30,000 tonnes lower than a year ago.
During July, North American newsprint mill stocks also grew, but only by 21,000 tonnes, to 350,000 tonnes. This was still 164,000 tonnes lower than a year ago. During 2003-2007, the average North American mill inventories at month end was 360,000 tonnes, according to the PPPC.
Mill inventories were up despite a drop in production. In July, North American newsprint production was 898,000 tonnes, down 8.6% from last July. Through the first seven months, 6.060 million tonnes of newsprint was made in North America, a year-over-year decline of 9.2%.
Total newsprint shipments within North American dropped 11.7% year over year in July and were down 8.8% year-to-date, to 4.699 million tonnes. North American shipments to overseas customers, though, advanced by 20.1% in July, and were up 2.4% year-to-date, to 1.404 million tonnes.
In the overseas markets, North American newsprint shipments to all but Western Europe (down 4.2%) were up year-over-year in July, including Latin America (up 8.1%), Japan (up 73.6%) and non-Japan Asia (up 47.7%). Year-to-date, though, only Latin America (up 24.5%) remained ahead of a year ago, with decreases reported in Western Europe (down 19.8%) and Japan (down 13.9%).
CEPIPRINT, the Assn. of European Publication Paper Producers, reported this week that European newsprint demand increased by 2.3% year over year in July, to 870,000 tonnes.
Global outlook bullishCiti Investment Research indicated in an Aug. 25 report that global newsprint demand fell by 4% in this year's first half, but expects the improvement started in July -- possibly due to the Olympics -- to continue in August.
In an Aug. 26 report, Citi Investment Research stated that North American newsprint mills are able to sell any excess newsprint offshore, often at higher prices than domestically. It is bullish on the outlook for global newsprint markets.
FOEX reported today that European newsprint producers are planning to raise prices at the start of 2009. The strengthening of the Euro caused FOEX's price index for 45 g newsprint to drop by 39 cents last week, to E499.68/tonne.
U.S. newsprint mills continue to run better than their Canadian counterparts, PPPC statistics indicate. In July, U.S. newsprint production totaled 372,000 tonnes, a year-over year decline of 6.3%, compared to Canada's 526,000 tonnes, down 10.1% year over year.
During Jan.-July 2008, U.S. mills produced 2.514 million tonnes of newsprint, down 4.7% from a year earlier, while Canada's newsprint output of 3.546 million tonnes was down 12.2%.
In July, Canadian mills operated at 88% vs 93% last July, while U.S. mills ran at 95%, the same as a year ago. Through the first seven months, the operating rate in Canada was 88% and in the U.S., 95%; the operating rate for both was 94% a year ago.
The total North American newsprint operating rate was 91% in both July and year-to-date. This compares to 93% last July and 94% through the first seven months of 2007.
While total newsprint shipments are down for both the U.S. and Canada, both are benefiting from the increase in exports in July. U.S. overseas shipments totaled 60,000 tonnes in July and 318,000 tonnes year-to-date, up 28.7% and 12.5%, respectively vs a year ago.
A 17.4% improvement year-over-year in July's Canadian overseas newsprint shipments, to 176,000 tonnes, brought the year-to-date total to 1.086 million tonnes, about flat (down 0.2%) versus a year ago, PPPC reported.
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