Worst Month for Newsprint in Three Years

By: Debbie Garcia (Forestweb) The downturn in U.S. newsprint demand continued in March, with consumption declines by dailies (-6.5%) greater than in three years, according to the Flash Report released today by the Pulp and Paper Products Council (PPPC).

Newsprint consumption by U.S. dailies totaled 631,000 tons in March, bringing the total for first-quarter 2005 to 1.875 million tons, a drop of 5.0% from first-quarter 2004. March's total U.S. newsprint consumption reached 779,000 tons, down 5.3% year-over-year, while year-to-date showed a year-over-year decline of 4.6% to 2.302 million tons.

The PPPC indicated that "other users consumption" was down by 3.2% in first-quarter 2005. The number of Sundays for both years was identical for March and first-quarter; however, February 2004 had one additional day.

The PPPC noted that newsprint grammage for North American domestic shipments continues to decline. For all of 2003, the average grammage remained at 48.3 g/m2. In 2004, it slipped to 48.2 g/m2 overall (with the exception of 48.1 g/m2 in second-quarter). However, through this year's first quarter, it has edged downward. Since falling in January to 47.9 g/m2, it has slid by .1 g/m2 each month, ending up at 47.7 g/m2 in March.

Inventories decline

At the end of March, inventories held by U.S. dailies dropped 12,000 tons to 924,000 tons, the equivalent of 43 days of supply. This was 60,000 tons below a year ago. Inventories held by all U.S. users fell by 48,000 tons to 1.082 million tons at the end of March, the equivalent of 40 days of supply. This was 37,000 tons higher than inventories held by all U.S. users a year earlier.

Mill inventories also fell in March, with total North American mill stocks down 38,000 tons to 334,000 tons at month's end. This was 35,000 tons higher than a year earlier. The PPPC said this level was 11% below the five-year average. Most of the reduction in mill inventories was in stocks designated for overseas, which fell 30,000 tons in March, but were still 30,000 tons higher than a year ago.

The biggest decline in mill inventories was at Canadian mills, which reduced their stocks by 28,000 tons, to 285,000 tons, but were still 28,000 tons higher than a year earlier. U.S. mill inventories dropped by just 9,000 tons in March, to 49,000 tons, but were 7,000 tons higher than a year ago.

The PPPC indicated that North American newsprint demand declined 5.4% in March, a slower pace than that recorded so far this year. The association attributed this to reductions in both U.S. and Canadian demand (-5.7% and -2.3%, respectively).

For the first quarter, total North American newsprint demand fell 6.8% to 2.627 million tons, with U.S. demand down 7.3% to 2.374 million tons and Canadian demand dipping by 2.0% to 253,000 tons.

Export demand good

Overseas demand, however, held up, with first-quarter shipments of 636,000 tons, 1.6% higher than a year ago. Demand from Asia (excluding Japan) was especially strong, with shipments of 73,000 tons in March up 38.9% from a year earlier, while first quarter orders of 216,000 tons were 35.4% ahead of a year ago. The PPPC said this was largely due to demand from India, Israel, and Turkey.

Demand from Western Europe, mostly due to double-digit growth in orders from Germany, help boost shipments of North American newsprint to that region by 9.2% in March (67,000 tons) and by 3.2% through the first quarter (152,000 tons).

Other overseas markets were down. In March, shipments declined to Latin America (-5.4%), Japan (-23.4%), and other countries (-61.2%). Through the first quarter, these regions also showed drops of 7.4% for Latin America, 14.4% for Japan, and 60.8% for other countries.

Within North America, deliveries fell 6.5% in March, to 889,000 tons, and were down 7.4% for the first-quarter, to 2.568 million tons. U.S. mill shipments in March were down 4.8% overall, and declined 4.9% to local markets. Canadian mill shipments fell 5.4% overall in March but were down a steeper 7.7% to domestic markets.

Through the first quarter, total U.S. and Canadian mill shipments were down 5.9% and 5.4%, respectively, but shipments within the North American market showed a steeper decline for Canadian mills (-8.9%) than for U.S. mills (-5.3%).

Operating rates high

North American newsprint production dropped by 3.7% in March, to just under 1.1 million tons, and was down 5.5% through the first quarter, to 3.2 million tons. U.S. production was off 4.4% in March and down 4.0% in first quarter, while Canadian production fell 3.3% in March and declined 6.3% in first quarter.

Operating rates stayed relatively high, though. The North American rate was 97% for March and 96% through first quarter. Both rates were the same as a year earlier. The PPPC noted that the first-quarter operating rate would have been 97% if adjusted for indefinetely idled capacity.

Despite the high North American rate, Canadian mills ran at 96% this March compared to 98% last March, and the rate dropped during the first quarter to 96% from 97% a year ago. In the U.S., mills operated at 98% in March, up 2% from a year earlier, while the first-quarter operating rate of 96% was up from 95% a year ago.