Newsprint prices down by 50 per cent in six months

By Dhaleta Surender Kumar , afaqs!, New Delhi | In Media Publishing | July 20, 2009
Newsprint prices have come down to $460 per tonne from $960 in December 2008

Newsprint prices have fallen by more than 50 per cent in the last six months; and publishers expect the prices to go down further by 5-10 per cent in the coming months.

The imported newsprint prices, which hovered around $1,000 per tonne in October 2008, have come down currently to $460 per tonne. Three months ago, the price was $570. There's more good news for the publishers.

& #BANNER1 & #The price of the Indian rupee as against the US dollar, which hovered around Rs 51 in April, has become stronger by Rs 3 this month.

The current imported newsprint prices are likely to stay for at least the next three quarters, and may even see a further decline of about 10 per cent.

Although this sounds like good news for the publishers, advertisers, who aren't getting the benefit because of the fall, aren't too happy. Arun Tyagi, vice-president, Media, Reliance ADAG, says, "Newspapers fix ad-rate cards on the basis of readership, circulation and newsprint prices. The last takes up nearly 60 per cent of the total cost of newspapers.

"There was a huge discounting on the rate cards by the newspapers to lure advertisers during the economic slowdown. But this discounting was done after hiking the rate cards. Even though the newsprint prices have come down, the rates remain inflated."

A media planner, who wished not to be quoted, feels that the fall in newsprint prices, even though not transpiring into great profits for publishers due to the reduction in ad-sales, may however affect the share prices of the listed media companies.

"The share market works on sentiments. If not investors, traders keep a track of the newsprint prices, and that surely impacts the stock market. This sentiment wave may impact the share prices in the range of 5-10 per cent," he says.

One man's loss is another man's gain. The cheer within the print industry has come actually because of the loss of one company - the newsprint giant AbitibiBowater, which has sought bankruptcy protection in the US and Canada in April after lenders refused to accept a proposed debt restructuring.

While Tyagi feels that the consortium formed by some major publishers will be able to negotiate the newsprint price and bring it down further by 10 per cent, Sunil Mutreja, president, marketing, Amar Ujala, feels that AbitibiBowater will have to increase the newsprint prices to survive.

Mutreja says, "The company went into an acquisition mode and acquired almost 45 per cent of the newsprint companies in Europe - and that included sick companies. The prices crashed because of over-capacity. At $460 per tonne, nobody can survive."

One of the reasons for the spiral in the newsprint prices last year has been attributed to the Olympic Games in China. With the games over, China has again started exporting newsprint, making matters worse for the US giant. AbitibiBowater owns and operates 23 pulp and paper mills and 30 wood products plants in Canada, the United States, the United Kingdom and South Korea.

India consumes 25-30 lakh tonne newsprint annually, of which 60 per cent is met by imports. Even though PP Prakash, general manager, material operations, Malayala Manorama feels that the prices are at the rock bottom, he's of the view that the prices may not rise till April 2010. Prakash adds, "It will take time for AbitibiBowater to restructure, and then January to March is usually a lean period. So, prices may not rise till then, and that's good for the Indian publishers."

However, he laments the fact that Hindustan Paper Corporation, the largest newsprint manufacturer in India, hasn't done any new investment for long. "Rama Newsprint and Papers and Emami Paper Mills have done a bit of expansion in the recent past, but considering the forest and pulp availability in India, these minor expansions won't help much in the long term," says Prakash.