China And India Are The World’s Two Fastest Growing Print Newspaper Nations So Is It Any Surprise Their Newsprint Per Tonne Cost Has Soared?

Philip M. Stone May 2, 2008

China and India usually come at the top of most print newspaper circulation growth surveys but profitability, that may now be a different matter. The culprit -- newsprint pricing that has soared through the roof in both countries, accounting for more than 50% of the cost of producing their newspapers. In India it has gotten so bad that the government has stepped in to help a little by reducing the already low tariff for imported newsprint down to 3% from 5%.

Newsprint prices in Asia are far higher than those found in North America and are on par with Europe. In March India newsprint prices rose 23% to $760 a tonne, more than $100 higher than in the US and just about $30 less than the $787.93 (€506.71) in Europe.  It’s thought Indian pricing will touch $850 per tonne by the end of the year, and sometime next year unless circumstances change dramatically pricing will hit $1,000 a tonne.  Those types of increases represent a 15-20% hit to a newspaper’s bottom line.

Part of the reason for India’s problem is that the Chinese who had been the major foreign supplier has cut off exports ahead of the Olympics. Even in China itself newsprint costs have risen dramatically, up 20% from a year ago – 12% in Q1 of this year alone -- to now reach some $783 per tonne.

Behind the Chinese increases, according to the state-run Xinhua news agency, is that besides a voracious appetite for newspapers the Chinese are also in a feeding frenzy for books. Add to that smaller polluting mills have been shut down and even in China the capitalist law of supply and demand has taken hold. And that is causing problems for Chinese newspapers where newsprint accounts for 60 – 70% of a newspaper’s total cost, according to the China Newspaper Association.

China increased its paper pulp imports last year  by 6.5% with the 8.47 million tons costing $5.55 billion, an increase of 26.3%. China now is second only to the US in paper consumption.

In India, publishers had lobbied the government  to waive the entire newsprint duty and came away with a 40% decrease. In announcing the move in Parliament the finance minister said, “ The newspaper industry has represented that international prices of newsprint have been rising alarmingly.”  He couldn’t resist a quip that he hoped newspapers would now be kinder to him. That could happen if publishers get something else they want -- a 50% increase in the rate for government advertising.

India produces about half the newsprint that it needs, but those domestic mill prices have gone up steeply, even if still behind imported prices. Part of the reason is that most  Indian domestic producers import their wood pulp and with Russia now putting a halt to wood pulp exports that cost  has increased. But it is still a seller’s market  -- Indian producers are not planning capacity increases -- and with the Chinese export halt and North American exports drying up somewhat because of mill closures and concentration on other markets the Indian producers are milking their domestic market for all they can.

National newspapers are probably able to stomach the increases better than regional newspapers, particularly those regionals printing in languages that have relatively restricted circulation possibilities. Many nationals have imposed advertising increases of at least 20% and there are cases where the increases are considerably more. Some newspapers are also looking at raising newsstand prices and cutting the number of pages per issue, the thinking being that if a newsstand price increase means a drop in circulation, that may be no bad thing.

Reducing paper weight is also an option. The norm in India is 45 grams per square meter  which is the norm, too, in Europe and in the US a few newspapers like the New York Times have dropped to 45 from 48, but Indian publishers are now looking at whether they can get away with 42 gram paper – but they will need to seriously study ink issues first. They will also want to look at the US pricing experience where the 48 gram (30 lb) paper is priced today at $634.18 per tonne but the 45 gram (27 pound) paper is actually more expensive now at $675.48.

North American newsprint producers are increasingly looking at overseas exports, but are concentrating more on Latin America, where  exports are up 28% over the past 12 months. North American exports to Europe and Asia are way off  (Europe, down 44%, Japan down 30%, non-Japan Asia down 40%). Meanwhile, in the US newsprint pricing continues up while usage is dramatically down – consumption by daily newspapers was 15.2% less in March than the year earlier according to the Pulp and Paper Products Council.

Although US prices are up 12% in the past 12 months they are “only” around $634 a ton for the 45 gram paper, a cost the Chinese and the Indians could only dream for. On the other hand, US publishers would kill for the hourly rates paid workers in India and China although in India in particular  wages for journalists have multiplied several times in the past year as new newspapers are announced and staff is poached. 

Bottom line is that in China and India newsprint costs represent more than half a newspaper’s costs whereas in the US it’s around 20%. The Hindu newspaper summed up the situation as well as any. “As of today, newsprint prices threaten to climb even further. If newspapers in the U.S. are in crisis because their circulations are dropping, Indian newspapers will be in crisis because their circulations are rising!”