Newsprint Market Is Stable

The newsprint market achieved another month of relative stability in April, according to trade data, as a March price increase appeared to stall as it phases through to newspaper publishers.

According to updated trade statistics released late last week, North American newsprint production, shipments, and demand were all slightly down from a year ago, but inventories remained under control.

A planned $50/tonne price increase effective in March is said to have been partially implemented, according to reports.

Analysts said statistics from the Pulp and Paper Products Council (PPPC) in Montreal indicated a relatively stable market scenario. But as with other paper and paperboard price initiatives, experts emphasized newsprint prices cannot defy overall weak economic conditions.

CitiGroup Smith Barney analyst Chip Dillon in a report said newsprint prices are up from recent lows due mainly to the benefit of the recent decline in the value of the U.S. dollar versus both the euro and the Canadian dollar "and not due to cyclical supply/demand forces."

Analysts said it appeared the newsprint price hike had been implemented mostly among mid-size and smaller publishers but not to the larger newspaper chains.

Pulp and paper futures service FOEX Indexes Ltd. last week reported a decline in newsprint prices in the prior week and noted continued resistance to higher prices especially among the large producers, and noted that the latest index does not confirm reports indicating that more of the announced price increases have gone through.

FOEX last week showed U.S. newsprint prices at about $479/tonne, down $2 from the prior week and higher by $22/tonne since the start of the year.

Deutsche Bank Securities analyst Mark Wilde noted that the declining U.S. dollar should help realign operating rates in Canada and the U.S. Canadian mills have been running much higher than American mills. The overall operating rate in April was 90%.

Wilde noted April U.S. daily newspaper newsprint consumption rose 0.7% from a year earlier, the fourth month of increases over the past five. "Although only a small improvement, it suggests that a gradual recovery is continuing," he said.

Inventory data from PPPC and the Newspaper Association of America showed April stockpiles by mills and consumers declined a total of 32,000 tonnes from the prior month, relatively close in comparison to a 10-year average decline of 37,000 tonnes.

"This brought total inventories to a level 192,000 tonnes below their historical average," PPPC said.

Inventories among all U.S. users of 1.113 million tonnes in April were down 30,000 tonnes from March and 8.4% above year-earlier levels. Newsprint inventories at mills were mostly unchanged from March to April, and at 395,000 tonnes were down about 17% from a year ago.

"Inventories remain in decent shape," Wilde commented.

PPPC noted that for the fourth time in the last five months, U.S. daily newspapers saw their newsprint consumption grow year-over-year, posting a 0.7% increase in April. Total U.S. consumption was up 0.6% in April, a fourth consecutive month of growth, resulting in a year-to-date figure of +1.1%. PPPC said the most recent ad linage data showed a small drop in March (down 0.5%) after registering nine consecutive months of growth.

"It is worth noting, as well, the strong rebound of U.S. consumer confidence in April, which climbed a full 20 points from its low point in March," PPPC commented. "Moreover, U.S. retail sales continued to expand significantly, recording a 4% increase in April, while housing starts showed no signs of slowing down. U.S. vehicle sales, however, continued to fall (down 4.8%)."

North American total newsprint production of 1.151 million tonnes was off 0.8% in April and shipments of 1.152 million tonnes were down 1.4%, PPPC reported. Year-to-date output of 4.579 million tonnes was up 2.3% from the first four months of 2002, and shipments of 4.498 million tonnes were up 3.0%.

Canada production in April was up 1.6% as the sector operated at 94% of capacity, and Canadian shipments to the U.S. were up 3.1%. U.S. output was down 4.6% at an operating rate of 84%, and U.S. domestic shipments were lower by 5.3%, PPPC reported.

North American offshore exports were down in April by 4.7% and were higher 1.6% year-to-date.

The decline in overseas demand on North American capacity was explained by lower deliveries to Western Europe (down 15%) and Latin America (down 18%), PPPC noted. North American shipments to "Other Asia," however, showed substantial growth for a second consecutive month in April, increasing 40% year-over-year, while deliveries to Japan progressed 4.5%.

Bowater Inc. said in a financial filing its first quarter inventories increased approximately 23,400 tonnes compared to Dec. 31 in order to service customers in Europe and due to a shortage of containers for export shipments due to the war in Iraq.

Bowater said its average transaction price for newsprint was 0.4% higher in Q1 2003 compared to Q1 2002 and 0.8% lower compared to Q4 2002. Prices were lower than Q4 primarily due to export markets, the company said.

It said it took approximately 49,000 tonnes of market and maintenance downtime in Q1 compared to approximately 70,000 tonnes a year earlier. "We plan to take 45,000 metric tons of market and maintenance downtime in the second quarter of this year and we will continue to match our production to our orders," Bowater said.

Abitibi-Consolidated Inc. said it took 200,000 tonnes of market-related downtime in order to adjust production according to its order books in Q1. This includes 140,000 tonnes of downtime from indefinitely idled paper machines at Sheldon, Texas, and Port-Alfred, Quebec.

Abitibi said on a per tonne basis, its cost of goods sold in Q1 2003 was higher than for the same quarter of 2002 mainly due to cost increases of recycled paper and energy at its PanAsia operations. The company's North American cost increases in energy and fiber were offset by the benefits of its focused downtime strategy and a stronger Canadian dollar, it commented.

NorskeCanada Ltd. said its Q1 newsprint sales volumes were marginally lower than those for the previous quarter, and average sales revenue for the quarter was C$586 per tonne. The decrease of $20 per tonne, or 3.3%, from the preceding quarter was primarily a result of a stronger Canadian dollar relative to the U.S. dollar. Average transaction prices were largely unchanged from previous quarters.

NORTH AMERICAN NEWSPRINT STATISTICS April 2003 (000 tonnes)
	April	% change	Year-to-	% change
	2003	2003/2002	date	2003/2002
Production	1,151	-0.8	4,579	2.3
Shipments	1,152	-1.4	4,498	3.0
Demand	941	-1.4	3,745	2.7
U.S. consumption	875	0.6	3,356	1.1
Mill inventories	395	-16.8	--	--
U.S. user inventories	1,113	8.4	--	--
Source: Pulp and Paper Products Council, Montreal. From Forestweb.