Shortage pushes up newsprint prices
THE price of the paper on which this article is printed is double the price a year ago.
On spot markets, newsprint now costs about US$900 (S$1,260) per metric tonne compared to about US$420 over a year ago.
This steep rise is due to a worldwide shortage of newsprint. The tight supply does not look likely to ease, at least for this year and possibly next year as well.
Hence, newspapers worldwide have had to increase cover prices, or find some means of cutting costs.
In Singapore, the cover prices of all newspapers published by Singapore Press Holdings were raised by 10 cents last month. Newsprint accounts for about 24 per cent of the operating costs of SPH.
In Malaysia, prices of newspapers went up by as much as MRO.20 (S$0.11) this year. In Hongkong, the South China Morning Post raised its price by HK$1 (S$0.18) to HK$6.
In the United States, newspapers from coast to coast are reported to be. cutting staff, trimming the amount of news in their publications and even reducing the width of their pages to save money.
Even In Britain, where a price war initiated by Mr Rupert Murdoch’s News International has been raging since 1993, an increase in newspaper prices appears imminent.
According to a Financial Times report last month, he told the World Economic Forum in Davos that he may raise the prices of his titles in response to the increase in newsprint costs, although he has not yet decided on any specific amount.
How did this market situation for newsprint come about? Increased demand is the main factor for the price rise, coupled by the high cost of wood pulp, the basic raw material in making newsprint.
The general economic improvement in the West and the booming economies in the Pacific Rim have led to a surge in demand that caught paper suppliers by surprise.
Says Mr Kurt Monnich, managing director of Stora Singapore: "The growth last year in our main markets were far above our expectations.".
The company is the world’s third-largest producer of newsprint. AbitibiPrice and Fletcher Challenge are No.1 and 2 respectively.
"In Britain and Germany especially, demand has gone up because advertising and the number of pages in newspapers have increased," says Mr Monnich.
Mr Henry Goh, senior materials and process manager in the newspaper services division of SPH, says:
"In 1994, a number of economies in the Pacific Rim started picking up rapidly. Suddenly, they wanted so much paper, especially China. This has caused the shortage."
SPH is the main user of newsprint in Singapore; nationwide, about 125,000 tonnes of newsprint are consumed a year.
Aggravating the tight supply situation was the six-week strike at three Fletcher Challenge mills in British Columbia in Canada that ended early last month.
In addition, many publishers are now trying to build up stocks of newsprint, adding to the demand.
Mr Goh says: "Publishers did not use to carry high stocks of newsprint since it could be obtained so cheaply. But when the tide started turning in early 1994, many publishers quietly started building up stocks in order not to be caught at a high price."
The price of wood pulp, used In making newsprint, has also gone up steeply.
Pulp is what is left of the wood after impurities — not required in paper-making —have been extracted by a cooking process.
The main producers are North America and Scandinavia. Price of pulp are now about about ‘US$825 per metric tonne double that of a year ago.
The world’s paper makers are currently facing a shortage of pulp. Demand has increased for all paper products, not just newsprint. Says Mr David Goh, executive director of Master Printers’ Association, which represents printers here:
‘Prices have increased significantly, not only for newsprint, but also for paper in general. Prices of some types of paper have gone up even more than newsprint."
So there is little incentive for paper makers to divert resources to producing more newsprint. But even if they wanted to, it may not be possible. Most are operating at full capacity.
Mr Monmch says: "Our newsprint machines ár~ running at full speed, there is no way to increase production further.
"The paper machines arc highly specialised, so it i.~ not possible to switch other machines to the production of newsprint."
The inadequate capacity of the pulp-and-paper indus try to meet current demands is due to the low 1ev el of investment over the past few years.
Says Mr Monnich: "Be cause of the very poor profitabillty of this industry there was not the will t invest in new machines."
But he expects the high prices now to encourage manufacturers to invest ir new machines. But because there is usually a time laps of about two years between the investment decision and the time the machine start~ production, the new machines are not expected to come on-line until next year or even 1997.
So Mr Monnich expect~ the tight supply situation to continue until then.
Mr Henry Goh and Mi David Goh also see the present market conditions being sustained throughout the year, and probably well into 1996 as well.
For newsprint and other types of paper, it is a sellers’ market now.
Says Mr David Goh: "Pa per stockists now keep their stocks for regular customers. Printers who do no have a regular supplier will find themselves at the mercy of the suppliers, whether they want to supply or not.’
Mr Monnich says: "Then are a number of newsprint users in this part of the world who are having enormous problems attracting quantities right now.
"I’ve had enquiries from people who have never asked us before."
For SPH, there is little problem getting supplies be cause of its long-term relationships with suppliers.
Source : The Straits Times 16th Mar 1995
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