Newsprint prices set to increase as demand slows – Pulp & Paper Edge report

Global newsprint prices look set to increase as international demand for the medium declines, according to a report in the latest issue of industry bible, Pulp & Paper Edge.  The report, published this month by one of the leading providers of market analysis on the pulp and paper industry in Australasia, IndustryEdge, says that the decline of global appetite and demand for newsprint diminishes looks set to improve newsprint prices around the world. According to the report, the latest figures from the United States indicates that for March 2013 – compared with the same period in 2012 – demand for newsprint was down by 12.1 per cent, with newspaper driven demand down by 11.7 per cent and from commercial printers, down by 14.8 per cent. However, the falling demand could lead to greater value in the medium, with the world’s largest manufacturer of newsprint, Norske Skog, reporting that it expects newsprint price increases in the second half of 2013.

This is based on significant capacity reductions of over 1 million tonnes which, for Norske Skog, could arrest some of its slide in profitability, most of which is attributed to lower prices.

In the March quarter, Norske Skog reported operating earnings of NOK (Norwegian Krone) 174 million (AU$30 million), down by 54.8 per cent from the corresponding period in 2012. In Australia, total import volumes have remained relatively stable over the past year, averaging 23 ktpq (kilo-tonnes per quarter). However, imports declined rapidly from a high of 45.7 kt in the June quarter 2010, to just 20 kt in the December quarter 2011. The most recent quarter, March 2013, recorded almost the lowest quarterly imports on record. The report says prices are impacted by many factors, but near universal supply to demand imbalances are key amongst them. Discounts are offered when producers have too much supply and must reach out to a new or opportunistic market, without the advantages of proximity, relationship and service. According to the report this seems to be occurring regularly with imported newsprint in Australia. It is a situation that can only improve if capacity reductions are sufficiently deep to bring global supply and demand into closer alignment. To access the full report, click here.