By Kevin Conley, Senior Economist, Graphic Papers, RISI
CHARLOTTESVILLE, VA, Aug. 14, 2008 - Compared to the same period last year, US newsprint consumption dropped 9.4% in the first half of 2008 with monthly levels retreating at a double-digit pace since March. Aided by the removal of 600,000 tonnes of capacity by AbitibiBowater in the first quarter, producers' supply-side management has so far kept pace with the rapid descent in demand with North American mill inventories down 120,000 tonnes from year-ago levels in June.
Producers' efforts to maintain market balance in the face of such ugly demand numbers have been rewarded with monthly increases to newsprint prices. The third quarter $60-per-tonne price hike is gaining traction and if fully successful will push the average US price of newsprint to record levels.
However, reports indicate that the third quarter price increase is being met with more resistance from buyers compared to the first half of the year and while the largest producers are holding firm, a few smaller producers are beginning to show more flexibility to the announced $20-per-tonne monthly price hikes.
Newspaper publishers, who are facing a financial crisis with the record declines in print advertising revenue, are eager to slow the rapid rise in newsprint prices and have a fairly effective weapon in their arsenal.
While consumption has been declining at a double-digit pace over the past several months, total consumer inventories have not and warehouses are well stocked. In terms of days of supply, stocks held by US dailies have been on an upward trajectory throughout the year and hit a high not seen since 2001 with 49 days of supply at the end of June.
This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service.
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