Newsprint Prices Continue Up

Philip M. Stone April 16, 2010 Follow on Twitter

So far this year it is the newsprint producers who are having the upper hand by getting 30-lb newsprint pricing up by $43 a tonne, but publishers can still smirk for that increase is well below what the producers had been seeking.

Producers had started the year saying they wanted $25 a month increases in Q1 and when they saw that wasn’t going to work they said they wanted $50 over the course of Q1. They still fell short but they haven’t given up – AbitibiBowater, for instance, the world’s largest newsprint producer, says it is going for a $25 a tonne increase on May 1 and the same again June 1. Will its 42% of North American capacity be enough to ram the increases through? Based on previous experience this year, doubtful.

FOEX indexes says that the 30-lb paper price stands this week at $554.01, a tiny $2.59 cents above the week before, but with the exception of one week prices have been higher every week so far this year. In fact in the six months since the September, 2009 low of $445.89 prices have risen $108.12 per tonne (24%). No doubt publishers will take some solace that in January 2009 the price was around $750 a tonne.

Newsprint is an important high cost for print newspapers – but not when those newspapers are circulated on such media consumption devices as iPad and Kindle which is why those types of digital platforms are seen as salvation for newspaper bottom lines. The New York Times Company, for instance, says that newsprint accounted for 7% of its 2009 operating costs, some $161.5 million. Consider that the newspaper made a net profit of less than $20 million last year and you can see why publishers’ eyes glaze over as they think of the savings and added profits if they could just make newsprint go away. They seriously believe that the likes of the iPad, Kindle, and other such hardware will be as important for their survival as Gutenberg was in getting them started in the first place.

In 2009 U.S. newspapers cut their newsprint consumption by 1 million tonnes, a near 50% decline since the 2001 peak.  The Montreal Gazette boasts, for instance, that it reduced newsprint consumption by over 14% between 2007 and 2009. US dailies are said to have consumed some 16% less newsprint in the first two months of this year than they did during the same period last year. The suppliers can at least lean a bit on the continuing thirst in the developing world and in Asia for print newspaper consumption and a 20% export surge has been very welcome.  

But in North America it is still a case of desperately withdrawing capacity and most analysts believe that will have to continue into next year, too. Canadian producers have the capacity for 10 million tonnes annually but right now they are producing only around 7 million and the expectation is that this year it will fall lower in spite of the slow pricing stability. Producers are also working hard on shifting their product mix away from newsprint to higher-value grades.

Suppliers will be watching Q1 results for major newspaper chains to see if there is any glimmer of hope that advertising is rebounding, but the likelihood is slim. JP Morgan, for instance, is forecasting that Gannett’s newspaper ad revenue this year will be down 5.6% which is a whole lot better than the 28.4% drop last year, but it is still down all the same. For Q1 the largest US newspaper group is forecast to have ad revenues 7.2% less than last year, so the obvious message is that things are expected to improve later in the year.

The same analysts expect The New York Times Company to have a 5.5% ad revenue drop this year but Q1 is projected being down 8%. The unknown for The Times is what effect, if any, will the Wall Street Journal’s New York daily section have on advertising – The Journal is said to be offering discounts up to 70% of rate card to get New York department store ad spend.

But even with the projections that total ad revenue will be down this year over last year the forecasts are that the bottom lines at most newspaper groups will show improvements because of continuing cost cutting, which of course, includes being as miserly with newsprint as possible. Those policies aren’t going to change for this year at least.

See also in ftm Knowledge

The Paper Its Printed On – new

Newsprint, printing presses and page design are the basic components of the print media. The ftm Knowledge file tells the story. Includes 30 articles. 65 pages PDF (March 2010)

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