Newsprint Consumption Down Sharply, But One Good Sign (Dinosaur Media Extinction Alert)

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 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.

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.

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.

I can't fint it tonite but the OGW owns a large interest in a Maine company producing paper.

This boils down to citizens of Maine producing news print are Antiwar antiAmerica warriors killing America.

I can't fint it tonite but the OGW owns a large interest in a Maine company producing paper.

http://biz.yahoo.com/e/060505/nyt10-q.html

Joint Ventures Our long-term strategy is also pursued through our equity investments, which are:

• a 49% interest in Metro Boston LLC,

• a 49% interest in a Canadian newsprint company, Donohue Malbaie Inc., and a 40% interest in a partnership, Madison Paper Industries, operating a supercalendered paper mill in Maine, and

• a 16.7% interest in New England Sports Ventures, which owns the Boston Red Sox, Fenway Park and approximately 80% of the New England Sports Network, a regional cable sports network.

We also have a 50% interest in the Discovery Times Channel ("DTC"), a digital cable television channel (see below).

"Every day the headlines of our local rag screams some negative about the President. We are all fed up with it, and this is wonderful news!"

Is your local rag one of the terrible Bees?

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