North American Newsprint Mill Operating Rates Up; Price Hikes Imminent

By: Debra Garcia As newsprint mills in North America continue to take extensive downtime to try to tighten markets for a price increase this fall, production in September fell 33.8% year-over-year, bringing total output through 2009's first three quarters to 5.381 million tonnes -- which was down 30.6% from a year earlier, according to data released by the Pulp and Paper Products Council (PPPC).

The North American newsprint mill operating rate, adjusted for idled capacity, was up month-over-month in September to 71%, which was one percentage point below the year-to-date rate. Last year, the operating rate was 93% in September and 94% through the first three quarters.

September operating rates were higher in the U.S. (74%) than in Canada (69%), but were an improvement over a month earlier when both were at 65%. Last September, U.S. mills ran at 90% and Canadian mills, at 95%. Through the first nine months of 2009, the operating rates were close, with the U.S. at 72% and Canada at 73%; this compares to a rate of 94% for both countries a year earlier.

Newsprint production in the U.S. was off 25.6% in September, bringing the total year-to-date to 2.165 million tonnes, which was down 32.6% from a year earlier. Canadian newsprint output was off 39.3% in September and fell 29.2% through the first three quarters to 3.216 million tonnes, the PPPC reported.

The number of Sundays in September and through the first nine months for both years was the same, making the statistical comparisons accurate.

Shipments exceed output
North American newsprint shipments in September exceeded production but were still trailing the level of the previous September by 29.6%, bringing the total year-to-date to 5.358 million tonnes shipped, which was down 30.9% from a year earlier.

Canadian newsprint shipments were off 31.7% year-over-year in September, bringing the total through the first three quarters to 3.188 million tonnes, which was down 30.3% from a year ago. Newsprint shipments in the U.S. fell 26.5% in September and were off 31.7% year-to-date to 2.17 million tonnes, according to PPPC data.

Overseas shipments of North American newsprint remained depressed. In September, exports fell 45.6% year-over-year, bringing the total through the first nine months to 1.157 million tonnes, which was down 38.0% from a year earlier.

All markets for North American newsprint exports declined substantially in September versus a year earlier, including Western Europe (down 31.3%), Latin America (down 30.1%), Japan (down 58.5%), non-Japan Asia (down 66.8%), and other markets (down 61.0%).

Through the first three quarters, overseas shipments of newsprint from North America dropped 38.0% year-over-year and all markets were down, including Western Europe (off 14.2%), Latin America (off 33.3%), Japan (off 68.4%), non-Japan Asia (off 57.0%), and other markets (off 30.2%).

However, with overall shipments greater than output in September, North American mill newsprint inventories were trimmed by 62,000 tonnes to a level of 343,000 tonnes at month's end, and this was 25,000 tonnes lower than a year earlier. Most of this decline came from Canada, with a loss of 55,000 tonnes in inventory.

Consumer stocks also fell in September, with all U.S. users' inventories down 6,000 tonnes to 608,000 tonnes, which was 201,000 tonnes lower than last September; U.S. dailies trimmed stocks by 28,000 tonnes to 536,000 tonnes, which was 166,000 tonnes less than a year earlier.

U.S. newsprint demand in September fell year-over-year by 24.1%, the same as the drop in the previous month. Total U.S. demand through the first three quarters was 3.67 million tonnes, which was off 29.7% from a year earlier.

Consumption not as bad
The year-over-year declines in total U.S. newsprint consumption and consumption by U.S. dailies improved in September from a month earlier and slightly boosted the year-over-year drops in consumption numbers year-to-date.

In September, total U.S. consumption fell 22.8%, bringing the total through the first nine months to 3.834 million tonnes, which was down 25.2% from a year earlier. U.S. dailies consumption in September was off 22.4% year-over-year, bringing the year-to-date total to 3.005 million tonnes, which was one-quarter less than a year earlier.

North American newsprint imports have crept up this year, with a gain of 4,000 tonnes year-over-year in September, which brought total imports for January-September to 62,000 tonnes, a 28.2% increase from a year earlier, reported the PPPC.

Although newsprint consumption remains weak and newsprint mills must shut down production to tighten markets, newsprint price increases slated this fall are expected to have some success as prices have dropped below where many newsprint mills -- especially in Canada -- can recoup their costs.

To provide a sustainable level of return, a price of about U.S. $480-$500 per tonne is at least required for Canadian producers to be ?willing to sell paper rather than shut down,? according to the October issue of The Reel Time Report.

Prices moving up
North American newsprint producers have separately announced two $35/tonne price hikes in the U.S. that are to take effect either Sept. 1 and Oct. 1, or Oct. 1 and Nov. 1.

On Oct. 19, AbitibiBowater Inc. -- which was one of the producers to announce $35/tonne hikes on Sept. 1 and Oct. 1 -- said it would raise the U.S. price of its 30-pound newsprint by $50/tonne in increments of $25/tonne each in November and December. Its other basis weights will be increased accordingly.

The Reel Time Report projected that newsprint prices will increase by about $35/tonne this month, then move up again next month, but probably not by the full $35/tonne increase.

The publication expects prices to then stabilize at $480-$500/tonne until the industry permanently closes more than two million tonnes of newsprint capacity. The Reel Time's posted price for 30-lb. newsprint in September was $450/tonne, which was up $10 from the previous month.

Last week, Kruger Inc. said it would take 10,000 tonnes of downtime at its Sherbrooke newsprint mill in Brompton, Quebec, from Oct. 30 to Nov. 11 due to poor market conditions.

However, AbitibiBowater delayed an indefinite idling of one of its two newsprint machines at its Clermont, Quebec, mill from this month until Jan. 15 due to an influx in orders.