U.S. Newsprint Demand Up In May

By: James McLaren, special from Forestweb (ForestWeb) May statistics from the Pulp and Paper Products Council in Montreal showed North American newsprint production down again, but U.S. demand higher by 1.9% over last year. Mill inventories declined, but consumption and consumer inventory data was not yet available.

Abitibi-Consolidated was expected to respond to rising demand with an Aug. 1 newsprint price hike of $50 per metric ton. The planned price hike -- with a rare 30-day notice rather than 60 or 90 days -- is seen as roughly an 11% increase from current levels. Newsprint prices in May and June scraped rock-bottom at $430/tonne, according to "The Reel-Time Report" on Forestweb.

No other producer was yet known to be also planning an increase, according to sources last week.

One analyst said current data on consumption, shipments, exports, imports, production, and inventories provide indicators for possible success of a hike. "The critical shipments/inventory ratio has finally nosed into positive territory and seems likely to remain there for the foreseeable future, suggesting an upturn in pricing within the next few months," he said.

"Many observers have been expecting the producers to move towards 30 days' notice, since 90 days often killed any upward momentum on pricing," he added. "This may be one of the battlegrounds that is fought over during the coming months."

Noting that demand in May rose for the first time in 19 months, another analyst said in a report earlier last week that a price increase was likely in the third quarter. "Demand is showing signs of improvement, inventories are low, excess capacity has been shut, and publishers are expecting a price increase before the end of the year," he commented.

"Prices are at cycle bottom and at cash break-even levels for the high-cost producers," he added. "Rising wastepaper costs, improving demand, low inventories, and rationalized capacity suggest that a price increase is likely and will succeed."

May statistics

Newsprint production was down 4.6% in Canada and down 10.4% in the U.S. in May from last year but U.S. demand was up 1.9%, according to PPPC. Canadian demand was down 9.2%.

North American mill stocks dropped 28,000 tonnes or 5.9% from April to May to 448,000 tonnes, PPPC reported.

North American total newsprint output was down 10.4% in May to 1.147 million tonnes, PPPC reported, as the industry operated at 91% in Canada and 84% in the U.S. -- 88% on average, the same as in April.

PPPC said U.S. consumer inventory and consumption data will be available around July 2 due to the annual trade show last week for the Newspaper Association of America, as well as a Canadian holiday July 1.

North American newsprint shipments were down 1.5% overall in May and stayed off last year?s pace by 10.0% through the first five months of the year. U.S. domestic shipments were off 7.5% in May and 14.0% year-to-date while Canada shipments to the U.S. were up 13.0% in May and down 1.4% year-to-date.

U.S. demand was up 1.9% in May to 858,000 tonnes and was lower by 7.7% year-to-date.

North American overseas exports in May were down 11.6% from last year to 234,000 tonnes, PPPC reported. Year-to-date offshore exports were down 17.6% to 1.013 million tons. Western Europe shipments were down 27.2% in May and Japan shipments were up 4.7%. (Scroll down for newsprint stats.)

NORTH AMERICAN NEWSPRINT STATISTICS May 2002 (000 tonnes)
	May	% change	Year-to-date	% change
	2002	2002/2001	2002	2002/2001
Production	1,147	-6.9	5,625	-10.4
Shipments	1,176	-1.5	5,543	-10
Demand	956	0.6	4,612	-7.9
U.S. demand	858	1.9	4,149	-7.7
Mill inventories	448	-1.9
Source: Pulp and Paper Products Council, Montreal. From Forestweb.