In science there’s a principle called the “butterfly effect” that suggests something as small as a butterfly flapping its wings in Brazil can result in a tornado in Texas. While the global newsprint markets aren’t quite as poetic an illustration of chaos theory, they aren’t far off.
Newsprint market prices have not moved in the five months since the small adjustments at the first of September, and they will likely remain unchanged until sometime in the second quarter. Market indications point toward a small decrease in pricing to publishers in North America, but the amount and timing are very uncertain.
At the end of August 2018, when the specter of tariffs on Canadian newsprint imports was removed, publishers were dealing with an extremely tight market that left them paying high prices for paper that was difficult to get. Both Catalyst and Kruger, Inc. had effectively exited the North American newsprint market, while White Birch had announced plans to temporarily reopen their shuttered Bear Island mill in rural Virginia.
Fast forward to February 2019, and a lot has changed, even if the price hasn’t.
Catalyst has re-entered the North American newsprint market after shipping 100 percent of its newsprint overseas during 2018. While deliveries are limited to locations in the western U.S. and Canada, the impact of the tonnage has helped to soften the overall market, making newsprint easier to get.
Kruger, Inc. once again began taking orders for newsprint in late 2018, as the plan to convert their Bromptonville, Ontario, mill to packaging grades looked to take longer than originally projected. This move helped bring some relief to publishers on the east coast of the U.S. who had been struggling to find a reliable supply of newsprint.
White Birch restarted their Bear Island mill, but reports indicate its return to production hasn’t been quite as smooth as company officials had hoped. Although less than anticipated, this newsprint tonnage injected much-needed supply into the Mid-Atlantic states where publishers had also been feeling the impact of supply shortages.
Combined with these increases in available supply, a report at the end of 2018 showed U.S. annual newsprint demand dropping by 11 percent for the third year in a row. This drop in consumption isn’t a surprise to any publisher who weathered 2018, and it also contributed to a softening market.
With all of these factors pointing to excess supply, but prices aren’t dropping, are newsprint producers just piling up the profits? The short answer is “yes,” but that is not necessarily a bad thing for newspaper publishers.
As the market for packaging continues to expand worldwide — one mill official described it as “exploding” — newsprint producers have options for their product. Some of these packaging materials are very similar to newsprint, allowing producers to quickly switch back and forth between products.
As one mill official explained, “all of these [producers] will continue making newsprint as long as it makes sense.” Translation: as long as it is profitable. So, while paying higher prices for newsprint has been extremely difficult for the publishing community, significant price reductions would not be healthy for the industry in the long term. The key will be finding a market point where both newsprint producers and publishers can survive.
Considered on its own, the North American newsprint market is complex. However, it is part of an increasingly global market where actions on the other side of the world impact how we operate our newspapers.
During the second half of 2018, publishers in India purchased huge amounts of North American newsprint, building up their inventories. This helped prop up prices in North America, even as production was increasing and consumption was falling. However, in early 2019 Indian companies have “turned off the tap” and virtually stopped ordering North American newsprint altogether. This could put downward pressure on domestic prices, particularly into the second quarter of 2019.
Changes in the recycling laws in China that took full effect at the end of 2018 also have affected newsprint supplies and will continue to have a wide-reaching impact moving forward. Chinese companies have begun making strategic purchases and partnerships worldwide, including in North America, but exploring the impact of those changes will require a column of their own in the near future.
Tony Smithson is Vice President of Printing Operations for Bliss Communications in Janesville.