Soaring newsprint costs make life even harder for newspapers

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“IIT’S LIKE TASERING an elderly person who is already on a pacemaker, ”explains a British newspaper responsible for the newsprint market, where prices have increased by more than 50% in a few months. The cost of paper that powers presses around the world is at record highs, pushing newspaper spending from Mumbai to Sydney. When times were good, before ads ran online, newspapers had a supporting partnership with paper mills. As the ads disappeared and the broadcasts fell, the relationships became more transactional. They are now at the stage of screaming.

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Stationery stores have seen their worst for years as newspapers reduced pagination, went fully digital, or shut down for good. Newspapers were able to reduce the cost of business-fighting newsprint as demand dwindled. The price-taking paper mills suffered in silence. Many have been reluctant to shut down massive machines costing hundreds of millions of dollars.

This hesitation has disappeared; factories are withdrawing newsprint capacity and diversifying. Norske Skog, a Norwegian pulp and paper company, announced in June that it would close its 66-year-old Tasman plant in New Zealand, for example. Many factories convert machines to make packaging for e-commerce. UPM, a Finnish company, this year announced the sale of its Shotton newsprint mill in Wales to a Turkish containerboard and packaging manufacturer. For JCS Volga, a Russian mill, newsprint accounted for 70% of production; today, half of what it manufactures is packaging. The factories “of price takers have become capable co-participants in a declining market,” says Tim Woods of IndustryEdge, a research company for the forest and paper industries in Australia and New Zealand.

The pandemic, with people working from home, resulted in even less newspaper purchases, which again depressed demand for newsprint and increased pain for paper suppliers. In the past 24 months, European factories have responded by shutting down nearly a fifth of their newsprint capacity, says a buyer from a major UK newspaper group.

Then the economies reopened. The demand for newsprint has exploded. This, combined with greatly reduced capacity and soaring energy prices, resulted in a price shock. Particularly controversial are the energy surcharges that some paper suppliers seek to pass on. News organizations believe that this amounts to breaking contracts. European newspapers will have to pay 50-70% higher newsprint prices in the first quarter of 2022 compared to the previous year. As for their counterparts in Asia and Oceania, they face prices about 25 to 45% above their usual level. Kenya’s Nation Media Group pays around $ 840 a tonne, up from $ 600 in the past, says Dorine Ogolo, the company’s purchasing manager. North American prices increased earlier and more gradually; contracts are fixed monthly rather than semi-annually. But again, newsprint prices are 20 to 30% higher in 2021 than in 2020.

The German Printing Industry and Media Association has warned that factories will force newspapers to ditch print editions, injuring each other in the process. “This is the famous branch that they both sit on,” he said recently. But factories can sell packaging instead. “We’re not going to save the publishing industry by being unprofitable ourselves,” says a plant executive in North America.

For some publishers, price increases will wipe out profits. They will have to carry out an additional restructuring involving the elimination of titles and dismissals. Iwan The Monk of EMGE, a UK paper industry consultancy, expects the number of closed papers to increase sharply in 2022 compared to a typical year. This will reduce demand and bring the market back to equilibrium. But newspapers will have more difficult conversations on paper, period, says Douglas McCabe of Enders Analysis, a research firm. More digital adrenaline is a possible retaliation for stationery tasers.

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This article appeared in the Business section of the print edition under the title “Paperchase”


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