While the International Trade Commission’s decision to reverse newsprint tariffs was a victory, things aren’t necessarily going back to the good old days.
Price reductions are expected nearly immediately — but only by about 5 to 8 percent, according to Tony Smithson, vice president of printing operations for Bliss Communications, which owns The (Janesville) Gazette. Smithson breaks down the various reasons for this and discusses what to expect from the newsprint market going forward in the following Q&A for the Wisconsin Newspaper Association.
- RELATED: ITC reverses newsprint tariffs
By Tony Smithson
Vice President of Printing Operations, Bliss Communications
Q: Now that the newsprint tariffs are going away, will newsprint prices go down?
A: Yes. We expect to see announcements very quickly, and the price changes will likely be effective almost immediately.
Q: Will the prices go back to where they were before the tariffs?
A: No. Expect to see reductions of 5 to 8 percent, depending on the supplier. There are several reasons for this.
First, the threat of tariffs made changes to the newsprint market that will be slow to reverse, if at all. One supplier left the market, and others committed to export contracts, so the supply remains very tight. Suppliers know that a tight market supports higher prices because we don’t have a lot of options as buyers.
Second, not all suppliers were assessed tariffs at the same amount, so there was a wide gap in what various suppliers were charging. Those whose prices went up more will come down more, and those who didn’t go up as much may not reduce their prices at all. The price gap will close quickly as the suppliers move toward a new “market price.”
Third, the opportunity to generate additional profit is too tempting. Public companies, in particular, will face a lot of pressure to keep the prices as high as the market will bear.
Q: Newsprint suppliers will receive a refund of the money they paid in tariffs. Will we receive a refund on what we have paid?
A: No. None of the suppliers we have talked to are even considering any kind of refunds.
Q: Without the tariffs, do we still need to worry about our newsprint supply?
A: Yes. The supply of newsprint is still very tight, and lead times are long. Trucking challenges continue to get worse, so we recommend publishers get orders in early and keep inventory levels high as we move into the fourth quarter.
Q: Will the newsprint market stabilize, or will this crazy roller-coaster continue?
A: Signs are pointing to a more stable market for the remainder of 2018. White Birch is committed to reopening the Bear Island, Va., mill for two years, and NORPAC restarted the second machine at their Longview, Wash. mill. Both of these should help with supply issues and keep prices from going up. Publishers made a lot of changes to products to reduce newsprint consumption and those changes are not likely to be reversed.
There is a rumor on the grapevine of an additional price decrease before the end of 2018, but at this time that’s pure speculation. The nice part is that we can speculate based on plain old supply and demand economics without artificial government influence.