Rise in newsprint prices
24 percent rise can be crippling for the industry
Newsprint prices in the country have spun out of control by moving up sharply by 24 percent in a matter of just over three months to touch a high of $760 per tonne an increase of $145 since December 2007. And the bad news is that the newsprint makers see no sign of abatement in these Indian spot rates for the rest of 2008 as demand for standard 45 gsm being used by most publishers continues to rise on the back of consolidation across global newsprint industry and increased momentum in price of raw materials.
Data sourced from Resource Information Systems Inc (RISI), an independent US-based newsprint industry analytics body and Indian newsprint experts shows the trend clearly. US-East Coast prices, which are the ex-mill rates ready for shipment, have risen from $608 to $710 per tonne, an increase of $102 in just three months.
While this is expected to gallop to $ 770 by Q3 of 2008, Indian spot rates — the benchmark prices for Indian newsprint trade — is expected to follow with a probable hike of another $90 to touch $850-levels for the same period. The price hike comes on the heels of a period of stability in 2007 marked by US-East Coast prices hovering around $615-630 per tonne. “India, which relies to a great extent on imported newsprint majorly coming from North America, has for some time purchased imported newsprint at very competitive rates,” said N Murali, MD, Hindu Group in an interview with a leading financial daily.
This was possible mainly due to two factors: first was as a result of vast capacities created by international newsprint manufacturers who sold at economical rates to India due to demand from markets like UK and parts of Europe declining. The second was the strong push by Chinese newsprint companies two years ago as an attempt at making inroads in the Indian market.
He added that the trend reversed as big North American newsprint manufacturers went for consolidation through buyouts, cutting excess capacities and changing product mix. RISI data shows that beginning 2007, the global demand for newsprint was 38.3 million tonnes while supply was 40.5 million tonnes — a surplus of 2.2 million tonnes. However, by end-2007, mills were putting final touches to their closures as a result of which by early 2008, capacities of two million tonnes were cut, thus taking the prices up.
China was another big factor. According to Indian Newspaper Society chairman (NP committee) Mohit Jain, the new capacities that China had built are now feeding the demand from domestic publishers.
“Old News Print (ONP), which was one of the main raw materials for recycled Chinese newsprint, has seen a $130 increase to $270 per tonne in just 5-6 months. Add to that the rising crude prices, which have breached the $100 mark, wood pulp which has gone up from $575 to $750 per tonne and rising freight rates... all of which have made newsprint a whole lot expensive than before,” he said.
Domestic newsprint makers too feel the brunt of increased raw material inputs. Says Emami Paper Mills ED P S Patwari: “The newsprint industry in India operates on very thin margins and uses the same raw materials that other international producers use. So, there isn’t much differential in pricing. As global newsprint industry was not booming and domestic publishers preferred buying mainly imported newsprint, no new capacity increase is on anvil,” he added. However, some like Dainik Jagran chairman & MD M M Gupta say that inferior quality of domestic newsprint is also to be blamed as publishers with large all-colour presses were not comfortable with domestic newsprint. As a result, while quality improved, the prices too went up proportionately.
Some publishers, however, feel there is more to the story than meets the eye. “Globally, 85 percent of newsprint trade is in the hands of 4-5 big manufacturers who now control the trade. When competitors join hands, you know what happens,” says Dipankar Purkaystha, CEO of Kolkata-based ABP Group which publishes English daily The Telegraph and Bengali title Ananda Bazar Patrika, both leaders in their respective markets.
