Newsprint prices in downward cycle

Global and Indian newsprint demand remains flat

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Newsprint prices have come under pressure from the September 2018 peak prices of US$ 780 to US$ 550 a metric ton. Although there was talk of prices going up to US$ 800 and even higher, we believe that in July and August 2018, the Indian newspaper buyers had sufficient stocks in their warehouses for the winter holiday season as well as pipelined contracts stretching well into 2019.

While newsprint producers and distributors implied that prices would not come down to earlier levels, other industry experts were confident that the industry’s cyclical nature would again bring prices back to earth. Indian publishers were confident of the prices coming down and although this has happened, the unfavorable dollar-Rupee exchange rate remains an impediment even at the current price of US$ 550.

The average price of newsprint in Asia came down by US$ 15 a metric ton in October 2018. Some of the global markets were flat while European producers were at that time contemplating price hikes for 2019. Newsprint demand in India was constrained by poor growth in the normally robust holiday season from September to December with global demand down by 9% in September and down by more than 5% in November 2018. Global newsprint prices were extremely region specific and erratic in the period.

Newsprint prices eroded from US$ 780 to US$ 680 to US$ 600 to US$ 580 to the currently prevailing US$ 550. Even now many of the Indian buyers are holding back because of the unfavorable Rupee-dollar exchange rate, which is at Rs. 71.50 to the US$ down from a peak of Rs. 75 per dolar in the middle of the year but nowhere near the Rs. 65 per dollar of a year ago. Thus, newsprint at US$ 550 still feels like a price of US$ 600 with Russian supplies dominating the Indian market.

Large Indian newsprint buyers are looking forward to a rate of US$ 500 or even US$ 475 per metric ton of newsprint in perhaps six months from now – and they are hopeful that the US dollar will also continue to moderate against the Indian Rupee. Their typical stock is for two to three months with an additional two-and-a-half month supply pipelined with contracts at current rates.

Local newsprint prices have also come down under the pressure of global declines. Indian newsprint producers such as Khanna, Emami and Rama have reduced their prices by 10 to 15%, so that they are now in the Rs. 34,000 to Rs. 42,000 (US$ 500 to 600) range per metric ton.

Elections

There is always some hope that elections will bring extra revenue, which is apparent since mid-February 2019 in the bump in political ads and increased pagination. However, this bounty of extra ad pages from central and state governments and public sector agencies, companies and institutions is likely to dry up as soon as elections are announced with a six-week run up to the election in May or early June. As soon as the election dates are announced, the Election Commssion’s Code of Conduct, which bans the use of public funds for electioneering and sops, comes into immediate force.

Public sector newsprint mills in bad shape

The Indian government’s Department of Investment and Public Asset Management has already approved the sale of state-owned Hindustan Newsprint. Although private local newsprint manufacturers’ interest should be high, it cannot be at the same level as it was in July and August of last year since they have had to drop their prices in alignment with global rates. The trend is clearly to use recycled fiber for better yielding printing and writing papers as at Tamil Nadu Papers Limited, which is further distancing itself from its newsprint origins and now starting up a new paperboard machine.

In the meantime, a fire broke out in early February 2019 at the Nepa newsprint mill in Burhanpur, Madhya Pradesh. No injuries were reported in the fire as the mill has been closed for a long time undergoing a renovation and refurbishing project. A mill official says it will likely resume newsprint production by the end of the 2019 calendar year.

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Naresh Khanna
Editor of Indian Printer and Publisher since 1979 and Packaging South Asia since 2007. Trained as an offset printer and IBM 360 computer programmer. Active in the movement to implement Indian scripts for computer-aided typesetting. Worked as a consultant and trainer to the Indian print and newspaper industry. Visiting faculty of IDC at IIT Powai in the 1990s. Also founder of IPP Services, Training and Research and has worked as its principal industry researcher since 1999. Author of book: Miracle of Indian Democracy.

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