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Navigating Troubled Waters: The Future Is Foggy for Newsprint Pricing

Magazine article Editor & Publisher

Navigating Troubled Waters: The Future Is Foggy for Newsprint Pricing

Article excerpt

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"SHARED SACRIFICE" IS THE LATEST POLITICAL BUZZ phrase making the media rounds. Economic strife abounds in the U.S. and elsewhere, leading politicians and citizens alike to ponder, "If we all do a little; if we all do our part, maybe--just maybe--we can bring our economy back around."

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It's a theme--this so-called "shared sacrifice"--that's particularly apropos to the paper, printing, and publishing verticals, as each segment faces great challenges, including the rising cost of raw materials and energy, the influence of digital media, and the decreasing demand for paper, quality print, and even, sadly, the written word. The codependent nature of these allied industries is forcing each to take a hard-line look at how to be more lean and stealthy, while at the same time working hand-in-hand to control one of the greatest costs of publication--paper.

"When the market is soft--meaning, there's not a big demand for product--publishers and printers have the upper hand. And the natural inclination is to take the upper hand to the extreme," said Tony Nanna, president/West, McGrann Paper Corporation in Charlotte, N.C. "What we sometimes forget is that the paper producers have to survive, too. We've all seen the decrease in the number of producers. There's a lot of consolidation that continues to happen in our industry, and we've got to find a way to work together to sustain our health."

In other parts of the world--namely, Asia and Europe--newsprint prices have been consistently creeping up. Fortunately, for North American newspaper publishers, the cost-per-ton has remained flat for approximately the past eight months.

"Prices were very high in 2008, and very, very low in 2009. They recovered toward the end of 2009 and through the first half of 2010. And they haven't moved [considerably] since," said John Lefave, senior vice president, pulp and paper sales and marketing, AbitibiBowater, Inc., Montreal. "Our last price-increase announcements were in June of 2010."

"Right now in our marketplace--and throughout the paper industry --everything but newsprint has been subjected to an announcement of increases," Nanna said. "Coated? There was an announcement of a $2 per cwt (centum weight) increase, effective in April. Uncoated freesheet--meaning offset and copy paper--as well as supercalender papers? Those commodities went, effective April 1. But our newsprint numbers in the states for the past six months have been at par. Nothing has changed.

"But we're all trying to figure out when it's going to happen, because it will happen," Nanna said. "Will it decrease? No."

Some of the market stressors are obvious--rising energy costs, for example.

"Paper is shipped by truck, by rail, and by intermodal," Nanna said. "Those costs are going up right now. I was in Los Angeles not long ago, and diesel was at $5 per gallon and climbing. Currently, the suppliers are eating these costs, but sooner or later, they're going to have to pass it along to publishers in, at least, the form of a surcharge. A lot of publishers and printers are going to revolt against it, but someone has to pay it. The suppliers have to pass it along to their customers, and in turn, the publishers will have to pass it along to their customers. Things just aren't normal right now, and no one has the fiscal health to absorb all of these costs and not pass them on. It has to be done."

Another contributing factor to the precarious position paper manufacturers find themselves in is scarcity of ONP--old newspapers that have already been printed, read, and discarded/recycled by the consumer--essential to newsprint production.

Lefave described the "shrinking basket" of North American consumption: "North America consumed 13 million tons (of newspaper) in 2000, but only 5.4 million tons in 2010. And when that basket shrinks--and there is far less ONP--the price of recovered fiber goes up dramatically. …

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