Clear or cloudy horizon?

Pulp & Paper, Aug 2005 by Cook, Chris, Mies, Will, Rudder, Greg, Smith, Bryan, Vasconcellos, Sandra

A similar change occurred in Canada, where daily newspaper circulation declined to 4.9 million in 2003, from 5.5 million in 1993. The dailies in Canada dropped to 101 in 2003 from 108 in 1993.

The North American daily circulation decline from 1993 to 2003 yearly amounts to about 0.7% and an average loss of 476,000 subscribers/year.

North American newsprint demand receded 7.7% overall in the first five months of this year compared with the same period last year, undermined by declining circulation, stagnant growth in ad lineage, and aggressive conservation measures by newspaper publishers.

But although consumption has fallen, producers have been closing capacity as fast as demand shrinks. Early this year, NorskeCanada took out 140,000 tonnes at Port Alberni, B.C. and Irving Paper exited newsprint production with the conversion of 135,000 tonnes at St. John, N.B., to uncoated mechanical paper production.

Operating rates at North America's newsprint mills in May were 95% and inventories were 5% below their five-year average, signaling that manufacturers were managing supply. The persistent decline in demand will provoke further capacity cuts, contacts said.

Bowater, North America's second largest newsprint producer by capacity, is moving ahead with plans to remove 175,000 tonnes of newsprint through the conversion to uncoated specialty grades at its Calhoun, Tenn., mill, an $80-million project that will be completed by mid-2006. Other plans to withdraw newsprint capacity include the conversion to ultra lightweight coated at Bowater's Thunder Bay, Ont., mill and the closure of a newsprint machine at AbitibiConsolidated's Grand Falls, Nfld., mill. However, final approval and timing for these efforts are still pending.

The market began 2005 absorbing last December's $30/tonne 30-lb newsprint increase. A total of $25 of a $35/tonne increase proposal in April was implemented during the second quarter. Another new $35/tonne increase was slated to start in June. High operating rates will likely allow incremental rises through September, raising the price of U.S. newsprint another $20-$30/tonne. Yet another increase - the third one in 2005 - was rumored for October.

BOXBOARD

Demand softens in second quarter

Total folding carton production (including exports) from January through May this year increased 0.3% to 3.19 million tons from a year ago, with export shipments dropping 5.7% to 551,000 tons over the same period, according to the American Forest & Paper Assn.

Solid bleached sulfate (SBS) folding carton producers separately announced price increases of $40/ton for February and March, and attributed continuing high energy, chemicals, and freight costs to the need for margin improvement.

The increases faced stiff resistance from buyers in April and May due to soft demand, SBS June prices posted in some cases an average increase of $20/ton, as producers were able to implement some of the $40/ton March increase.

Back orders declined to 295,000 tons in May from a peak of 430,000 tons at the beginning of the year. Producers responded to the demand softening by lowering operating rates to just below 94% in May from 96% in January and February. SBS production was slightly down through May at 854,000 tons, a 0.3% decrease year-to-date from 2004, according to the AF&PA.