Posted on 06/05/2006 9:48:28 AM PDT by abb
Published: June 05, 2006 7:00 PM ET updated Monday
ETNA, Maine North American newsprint production dropped 5.1% year-over-year in April, not keeping pace with the 8.9% plunge in consumption by U.S. dailies for the same period. However, total mill and consumer inventories remained lower than historical averages, according to data released today by the Pulp and Paper Products Council of Canada (PPPC).
While inventories held by North American newsprint mills rose by 17,000 tonnes in April, they were still 29,000 tonnes lower than a year earlier. At the same time, U.S. consumer stocks dropped sharply in April, with all U.S. users down 45,000 tonnes and U.S. dailies down 19,000 tonnes.
While this net 28,000 tonnes in inventory decline in April vs a year ago is less than the 10-year average falloff of 45,000 tonnes for April, inventories remain substantially lower than normal, according to Chip Dillon, analyst with Citigroup Global Markets.
"Total inventories are at their lowest April level since April 1979," said Dillon. "Since the end of December, North American total inventories have risen by a mere 16,000 tonnes (up 1.3%), only one-eighth of the 126,000-tonne, 10-year average January-April increase."
In terms of days of supply, all U.S. users' inventories (38 days) were unchanged from a month earlier but two days lower than a year ago, while U.S. dailies (43 days) rose by two days from a month earlier and were one day below a year ago.
Some analysts were concerned that the decline in newsprint production was not keeping pace with the steep drop in consumption. The year-over-year decrease in newsprint output in April brought year-to-date total North American newsprint output to just over 4.0 million tonnes, 6.2% lower than a year ago.
However, the North American newsprint operating rate remained unchanged from a year earlier in April, at 96%, but dropped to 95% for the first four months' total, compared to 96% a year ago.
Canadian pressure mounting
Canadian production declined more sharply than U.S. output, with Canada down 7.8% year-over-year for both April and year-to-date. U.S. production, however, was off by just 0.8% in April and down 3.7% for January-April 2006 vs a year ago, the PPPC reported.
Canadian newsprint mills ran at 95% in April, while U.S. producers were at 97%. Through the first four months, the operating rate in Canada was 94% vs 97% a year earlier, while it was 96% in the U.S. in both years.
The North American newsprint industry--particularly the mills in Canada--have curtailed production in various ways but more permanent closures and/or conversions might be needed if demand continues to decline, industry analysts indicated.
While rising input costs for energy and freight are affecting operating profits at all North American mills, Canadian producers are also seeing earnings eroded by a strengthening currency. This continues to put Canadian newsprint mills more at risk of being shut down permanently.
"With the Canadian dollar still trending upward, one wonders where/when the next newsprint machine closure will occur," said Mark Wilde, research analyst with Deutsche Bank, in a May 22 report.
Claudia Shank, analyst at J. P. Morgan Securities Inc., recently reported that the Canadian dollar has "risen to around a 30-year high in relation to the U.S. dollar and has wiped out the bulk of U.S. dollar commodity pulp and paper price improvement achieved in the first quarter."
In April's The Reel Time Report, Verle Sutton commented on the newsprint industry that rising mill inventories would be a sign that more downtime would be necessary as an interim measure to firm up the market until additional closures or conversions were made.
Wilde indicated that Kruger Inc. might be looking to scale back production as it is reportedly reducing staff by 80 at one of its large Quebec mills.
Demand continues to decline.
The downward trend in newsprint consumption continued in April, with U.S. daily newspapers down 8.9% year-over-year in April, bringing the year-to-date total to just over 2.37 million tonnes, down 7.2% from January-April 2005, according to the PPPC.
Even consumption by U.S. commercial printers was off in April, after having helped buoy the market for several months. Printers used nearly 2.5% less newsprint in April than a year earlier. However, the year-to-date total consumption by printers was still up 5.2% from a year ago.
Consumption by commercial printers is calculated as the difference between total U.S. consumption and consumption by U.S. daily newspapers. Total U.S. consumption was down year-over-year by 7.6% in April and off 4.9% year-to-date.
Total U.S. demand for newsprint reached 733,00 tonnes in April, a decrease of 4.5% from last April, bringing the January-April total to just under 3.0 million tonnes, down 4.4% from the same period in 2005.
The erosion in North American newsprint data is even more revealing when considering that April 2006 had five Sundays vs four Sundays in April 2005, and January-April 2006 had one additional Sunday compared to the same period in 2005. The additional Sunday is typically worth an extra 1%-2% consumption, noted Wilde.
Export demand also fell, dropping year-over-year by 18.0% in April and 17.4% through the first four months. The only market still ahead was Latin America, up 9.5% for January-April vs a year earlier. Exports to Europe have fallen year-over-year by 45.2% year-to-date, according to PPPC statistics.
Dillon commented that the drop in North American newsprint exports was a "healthy sign" because it meant domestic mills "simply do not have the capacity to maintain export sales and yet maintain sales to their (more regular) North American newsprint customers."
Dillon expects 2006 global newsprint demand to rise by as much as 2%-3%, while world newsprint capacity will be flat to down due to closures in Europe and North America more than offsetting startups in Asia.
Outlook still bullish.
Global demand growth and continued restraint on capacity in markets where demand is declining appear to be some of the factors causing analysts to remain cautiously optimistic about the outlook for newsprint.
Yet, the downward trend in consumption does not show any signs of abating. Newspaper publishers continue to seek ways to cut newsprint usage in reaction to shrinking advertising linage and readership. Not only has grammage been lowered, resulting in newspapers being printed on lower basis weight newsprint, but conservation measures are being adopted to reduce the number of pages in more newspapers.
The rate of circulation decline accelerated in April, according to data from the two largest U.S. publishers, Gannett Co. Inc. and The McClatchy Co. On a year-to-year comparison, the two showed a weighted average drop of 2.8% in the number of total newspapers sold in April and a decrease of 2.3% year-to-date, according to figures compiled by Salman Partners.
While not down in April, ad lineage remained relatively flat year-over-year for the top five U.S. publishers for both the month and year-to-date comparisons. "With both newsprint circulation and advertising lineage declining, we continue to expect a rough road ahead for newsprint producers," noted Paul Quinn, paper and forest products analyst with Salman Partners.
The Chicago Tribune eliminated its stock price tables in its Monday-through-Saturday editions earlier this year, replacing them with a shorter list of widely held companies and new investment information. This strategy, which was subsequently adopted by other smaller publishers and eventually by The New York Times, is expected to result in a paper and ink savings of roughly 1%, noted Sutton.
With less newsprint being consumed and newsprint output still perhaps too high to keep the market tight, the industry appears to be having more difficulty implementing its February price hike than its immediately preceding increases, market observers said.
North American newsprint producers have been able to push through only $20-$25/tonne of that $40/tonne increase, some industry analysts reported; although Quinn noted that list prices were up $30/tonne and Foex Indexes Ltd. reports a $27.82/tonne improvement in newsprint prices since the beginning of 2006.
Wilde indicated that the February 1 hike was implemented in steps that were getting progressively less effective, with $15/tonne going into effect in March, another $5/tonne in April, and another $5/tonne in May.
Shank noted that the current U.S. price for 30-lb newsprint is $675/tonne, "a level not seen since the second quarter of 1996." She credited producers with reducing supply to match demand. Dillon indicated that, while $675/tonne is 9% less than the record price of $743/tonne seen during September 1995 to March 1996, it is up 11.6% from April 2005 and up 4.7% from last December.
Concerned that the April statistics indicate that "producers appear to have let out the reins on production," which declined less than both the drop in consumption and the year-to-date trend in production loss of 6%, Shank does not expect newsprint prices to gain in June.
Quinn forecast that North American newsprint companies would only attempt two price increases this year instead of the three seen in 2005, due to the slowdown in implementating the February 1 hike. He expects a second price increase this year will be posted for August 1.
Debra Garcia (letters@editorandpublisher.com)
Pinging with good news...
Gee, what do you think Putz at the NYT thinks of this statistic?
ping
bump
Our two 'rags' (Ft Worth[less] Startlegram & Dallas Snoring News) here in the DFW metroplex just reek of 'biased crap' 7 days a week!! I'm even now thinking about giving up my WSJ subscription because the Journal is now too often pandering to the other print media rags.
The only subscription I have is to the WSJ Online Edition...
""Total inventories are at their lowest April level since April 1979," said Dillon. "Since the end of December, North American total inventories have risen by a mere 16,000 tonnes (up 1.3%), only one-eighth of the 126,000-tonne, 10-year average January-April increase."
As subscriptions drop and ad revenues drop, the fishwraps across America are making their newspapers smaller in width and length. This is starting to have a negative impact on their main readers, the seniors. Often they can't read the articles even with reading glasses. So they stop their subscriptions.
Yep...that's where I think I'm heading also!
" I'm even now thinking about giving up my WSJ subscription because the Journal is now too often pandering to the other print media rags."
Miss Marple and I dropped our WSJ subscriptions years ago due to Al Hunt, his rigged polls and hiring of lefties to pretend to be reporters for the WSJ.
Last year a study from UCLA noted that the so called news side of the WSJ was more liberal than the NY Slimes.
The Editorial section of the WSJ is conservative most of the time.
Thanks for the ping.
The manufactures of newsprint paper and the suppliers have to be living a very scared life these days.
Hopefully, they can find a new use for their products.
I would much rather read a newspaper, than listen to the radio, watch tv or stare at my monitor.
It's much better to get all your news from FR, that way, it won't be biased.
"It's much better to get all your news from FR, that way, it won't be biased."
Even if it is biased, that bias is skinned and filleted by Freepers in minutes.
For years I have suggested that we all cancel our subscriptions to any Dinosaur Fishwrap or liberal pseudo news mags and send the monthly savings to Free Republic.
LOL! Save the trees, man!
Count me as a proud member of the FReeper fishwrap parasitic information gatherers brigade. ;) BWAHAHAHAHAHA
. . .
The meteoric rise of a million bloggers in their pajamas is maddening. These parasitic information gatherers leech onto the news content that your edit staffs produce, pay nothing to print newspapers or to staff overseas bureaus, yet steal huge chunks of your readership daily.
"Down, down to hell; and say I sent thee thither." - Shakespeare
I love this:
"The meteoric rise of a million bloggers in their pajamas is maddening. These parasitic information gatherers leech onto the news content that your edit staffs produce, pay nothing to print newspapers or to staff overseas bureaus, yet steal huge chunks of your readership daily."
Motivation for my posting the article was not because of any new important details....but because of the lousy reporting by the NY Times,....and Captain ED at CQ has some pithy comments on their effort!
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