US, European newsprint demand continues to decline, with prices down as some offsetting factors like exports, commercial printing look less promising; capacity reductions planned, plans to shift to other grades improve the outlook
March 29, 2013
(Industry Intelligence Inc.)
– Newsprint markets in the U.S. and Europe continue to deteriorate in a long-standing trend, but even the offsetting factors that were helping to bolster demand have started to erode, according to recent data and reports.
In February, European export demand fell 9.4% year-over-year and was off 14.8% for the cumulative two-month total compared to a year earlier, based on the most recent statistics from the European Association of Graphic Paper Producers.
At the same time, domestic demand in Europe fell 6.0% year-over-year in February and 3.3% year-to-date. Total European newsprint shipments for the month fell 6.7%, bringing the total for the first two months to a level 5% below a year earlier.
U.S. commercial printing demand lags. In the U.S., exports continue to prop up the market but demand from commercial printers is starting to recede, reported RBC Capital Markets in a March 24 research note, citing data from the Pulp and Paper Products Council (PPPC).
Through the first two months of this year, U.S. offshore shipments of newsprint rose by 21.2% year-over-year, bringing the total to a level that represents 32% of all newsprint shipped by North American producers, stated RBC Capital Markets.
However, total North American newsprint shipments in February were down by 5.1% year-over-year, and total demand for the month was off 14.1% year-over-year, with demand from newspapers down 17% and demand from commercial printers off 1.2%.
In 2012, commercial printing demand for newsprint grew by more than 20% compared with 2011; but that appears to being taking a downward trend, based on the data from the PPPC, reported RBC Capital Markets.
“The down-cycle has begun,” indicated The Reel Time Report in its March issue. The publication predicts that newsprint prices will fall by US$40 to US$60 per tonne before bottoming out by mid-year, once enough capacity is removed to shore up the market.
More capacity closures announced. In North America, Resolute Forest Products Inc. announced March 12 that it was indefinitely idling a 215,000 tonnes/year newsprint machine at its mill in Calhoun, Tennessee, a move that follows its purchase of the remaining 49% interest in the mill.
SP Fiber Technologies LLC plans to convert a 200,000 tonnes/year newsprint machine in Newburg, Oregon, to packaging. It already converted the smaller newsprint machine in Dublin, Georgia, and plans to switch the other newsprint machine to packaging by late first-quarter 2013.
In Europe, Holmen Paper AG announced March 19 that it would close a 200,000 tonnes/year newsprint machine at its Braviken Mill in Sweden in third-quarter 2013, citing the strong Sweden kronor, in addition to a weak market and rising raw material costs.
Holmen plans to shift its production capacity away from newsprint to eventually have 75% of a projected 1.15 million tonnes/year comprise specialty printing papers, and expects this percentage to expand further, according to the company’s news release.
The export market substantially improved when the Kondopoga newsprint mill in Russia shut down 75% of its 750,000 tonnes/year capacity in fourth-quarter 2012. Most of that output went to Asia, according to The Reel Time Report.
Some machines restarted in Russia. However, on March 21 Kondopoga indicated that it had restarted some of the idled output and was now operating at about half its capacity. Three of the paper machines were to stay online until about May 20, with another machine due to restart shortly, according to the press release.
By the second-quarter of this year, another 800,000 tonnes/year of newsprint capacity either had been or will be removed in Europe, The Reel Time Report noted, adding that this could might be enough to cut European newsprint export volume.
Newsprint prices in Asia were “very low” in the first quarter of this year and do not seem to be headed toward any improvement in the second quarter, according to The Reel Time Report, citing Positively Newsprint’s quote of US$580/tonne adjusted for 48.8g newsprint.
The outlook for the export market will remain under the cloud of excess capacity into the second quarter, and a rebound in North American newsprint exports is not forecast during the next few months, The Reel Time Report stated.
Newsprint prices dip in U.S., Europe. Newsprint pricing in the U.S. fell another $5/tonne in March, but this trend is not likely to last beyond May, when it is expected that below-cost prices will be reached, resulting in production curtailments, according to The Reel Time report.
The Reel Time Report posted March U.S. prices of $600/tonne for 30-lb. newsprint and $635/tonne for 27.6-lb. newsprint.
U.S. newsprint prices fell in February after tumbling in January, the first drop in more than two years. Prices in the east were down $20/ton in January and $10/tonne in February, while prices in the west declined about $25/tonne over that time.
This leaves prices in the U.S. West about $15/tonne lower than in the east, The Reel Time Report noted in its March newsletter, reporting February prices of $640/tonne for 27.6-lb. newsprint and $605/tonne for 30-lb. newsprint.
FOEX reported on March 26 that all of its benchmarks for both Europe and the U.S. fell in the prior week compared to a week earlier.
In the U.S., 30-lb. newsprint was off by $3/tonne, to end at $608.33/tonne and 27.7-lb. newsprint fell by $2.67/tonne, to end at and $648.17/tonne. The European benchmark slipped by €3.27 (US$4.97) per tonne, to end at €478.58/tonne, FOEX reported.
Some producers innovating with new grades. Some newsprint producers have undertaken strategic plans to either reduce their exposure to newsprint or make value-added newsprint grades that compete in other markets.
Sweden-based Holmen, is moving toward cheaper paper that competes with magazine grades. The challenge has been to develop these new products, said CEO Magnus Hall in a Feb. 28 Bloomberg report.
Holmen’s new TRND newsprint grade offers magazine-quality paper that is cheaper because it has a matte rather than a glossy finish and uses fewer chemicals, a company spokesperson told Bloomberg. It’s also slightly thicker than traditional magazine paper.
Catalyst Paper Inc. in Canada has introduced a newsprint grade that weighs just 40 gsm but can meet pressroom requirements, according to a Feb. 26 press release from the company. The paper will be marketed to emerging markets in Latin America.
However, Norske Skogindustrier ASA plans to remain mostly in newsprint while converting some of its capacity.
Norske Skog will convert one newsprint machine at its Boyer mill in Australia to coated paper and expand the product range at its Saugbrugs mill in Norway. Coated paper used for catalogues and inserts could account for as much as 25% of its output eventually.
However, the Norwegian company intends to remain a major newsprint manufacturer, after spending heavily to make those assets more competitive, according to Norske Skog CEO Sven Ombudstvedt, Bloomberg reported on March 29.