RISI Economists

Despite rebounding exports, US newsprint price recovery jeopardized by excess supply

By Kevin Conley Sun, Mar 14, 2010

CHARLOTTESVILLE, VG, March 14, 2010 (RISI Economists) -Surging offshore exports and a more moderate decline in domestic demand allowed North American newsprint shipments to climb above year-ago levels in January for the first time in two years. Despite the 15.1% drop in total US consumption, North American apparent consumption was down only 8.5% in January compared to a year ago, aided by inventory purchasing and a minor 1% decline in Canadian demand. However, the drop in North American demand was easily offset by a 57% year-over-year jump in overseas exports in January, fueled by rebounding newsprint demand in Latin America and Asia. It should be noted that in January of 2009, North American offshore shipments sank to their lowest level since 1989.

North American producers will continue to pursue export opportunities as a relief valve for excess supply as demand in their domestic market remains on a downward trajectory. While prospects remain limited for any expansion in exports to the oversupplied European market, Asia holds some promise as both prices and demand rebound, particularly if China remains on the sidelines. Last year, rising costs and the collapse of Asian newsprint prices prompted Chinese producers to withdraw from the export markets and swing capacity to more profitable grades. However, the distinct possibility remains that rising prices and demand in Asia will encourage Chinese producers to shift capacity back to newsprint, luring more Chinese tonnage into export markets.

Latin America remained the top export destination for North American newsprint, even after shipments to the region plunged 29% or 301,000 tonnes in 2009. In January, offshore shipments to Latin America surged 55% compared to year-ago levels. Reports indicate that Latin American newsprint demand is rebounding strongly following the severe 23% estimated decline in 2009 as advertising markets recover and publishers rebuild depleted inventories. Latin America remains the most likely market for North American producers to improve their export position in 2010, particularly if the newsprint supply disruption from Chile continues for an extended period due to damage incurred in the February earthquake.

- Kevin Conley works out of RISI's Charlottesville, Virginia, office and can be contacted by phone: 434-978-2927 or e-mail: kconley@risi.com.


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