Falling Demand a Problem for Paper Makers

January 30, 2005 – A Vancouver-based newsprint company recently shut its mill after four consecutive years of losses. Rather than deliver newsprint for less than its production costs, Norske Skog Canada Ltd. decided to cancel its contract with the Los Angeles Times.

This move by Norske is just one of the responses of newsprint makers from the steps made by newspaper companies such as The Times to shrink the size of their papers to cut costs. They are trying to negotiate for higher prices from global newspaper companies, as well as secure government support for a $350-million plan to switch the newsprint to a more profitable paper grade.

In the United States, newsprint consumption fell 16 percent between 1999 and 2004, providing much pressure on the leading producers of newsprint from the manufacturing and demand side. This is according to the Montreal-based Pulp and Paper Products Council.

Despite the newspaper industry's continuous growth, there has been a significant decrease in circulation and advertising. This is due to the considerable number of successful companies going online for their advertising needs. It was apparent that there is a substantial shift of advertising from the traditional print to the Internet. Hence, newspaper publishers are cutting costs by reducing consumption of materials.

The trend left small players to reduce, if not stop altogether, the production at high cost plants. Even the large companies are feeling the effects of the shrinking market for newsprint. One alternative that these companies are forced to take is to delay price increases rather than shut their mills down. Still others were forced to just pack up and leave.

To make matters even worse, some analysts say that in order for some to survive the crisis, another 200,000 tonnes of production may have to shut down.

Nevertheless, newsprint executives are still hopeful despite the widespread fall of the once-prosperous industry. One paper maker said that the challenge now for the newsprint industry is to understand what it takes to be prosperous in this business. The company however indicated that the answer would not be easy to find even for veterans in the newsprint industry. They just hoped that the situation improve soon, so as to prevent the supply to shrink, and for other producers to stay in the game.

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