Newsprint dearer than ever: Will prices stabilise or touch new highs?
According to industry players, the top price for newsprint for the year was $1000/tonne, up from $450/tonne in Jan-March 2021; prices have dipped but remain on the high side
Increasing newsprint prices have remained the print sector’s big worry throughout FY23. Disruption in the supply chain of newsprint due to the Russia-Ukraine war, compounded with a scarcity of waste paper used in recycling led to the prices going as high as $1000/tonne.
Although there has been a dip to $850-900, it continues to remain high. Some industry executives are hopeful that it will come down to $600-700 per tonne.
Girish Agarwal, Non-Executive Director, DB Corp, reflected upon the rising newsprint prices during the Q1 earnings call. “We were at around Rs 41,000 per ton ($514), which this year is at Rs 62,000 per ton ($777). It is a big 50 - 51% jump in the overall price of newsprint.”
Agarwal further said, “In Q4 last year, the price was roughly around Rs 50,000 because we had old stock, but as a silver lining the Government of India is thinking to do something with regards to the custom duty of 5% on imported newsprint.”
He also highlighted that the rising dollar price is also a worry. “The newsprint is one big elephant in the room which we are still struggling with,” Agarwal had said.
To mitigate the impact of newsprint prices on the business, some publishers have reduced the number of pages while some have increased the cover price. According to Agarwal, nobody has left the space because of the issue, but yes “a lot of people are compromising in their product”. “If their pages were 16, they have brought it down to 14 or 12. They are also using poor quality newsprint.”
According to Mohit Jain, President of Indian Newspaper Society (INS), newsprint is now more expensive than steel. "Newsprint landed cost is probably about Rs 86/kg, which is more than steel in the current circumstances." He also shared that two years back the newsprint prices were around $450/tonne and it went up from $450 to 1000 per tonne in May-June of this year. Currently, it's around $900/tonne and it's still not stable.
Jain explained that multiple factors are leading to an increase in newsprint prices. Apart from the impact on Russia’s supply, Jain said there was a massive backlog of goods caused by Shanghai's numerous shutdowns. "We don't know if pricing has stabilised or if it will start rising again."
"We must also wait and watch how the geopolitical situation resolves because if trade channels continue to be obstructed, we will have a problem. Climate is another aspect that is becoming increasingly important. Shanghai is ready for a second typhoon, which will disrupt cargo transit. Now, every minor factor is contributing to the greater picture and putting pressure on the ports," Jain pointed out.
Jagran Prakashan in its FY22 annual report also cited the rising newsprint prices as the reason for its poor financials. “We, however, hope that the team will take this challenge also and mitigate its impact, though the current geopolitical conditions suggest that the availability of newsprint and hence its prices are key risks to our expectations for the financial year 2022-23.”
Jagran also said that this has offered an opportunity to correct cover prices, which will strengthen the newspaper industry business model and make it more predictable by reducing its dependence on advertising revenue in course of time.
Touching upon another critical aspect, Jain said, “Apart from high newsprint prices, publishers have to pay 5% customs duty, and we have been fighting with the Finance Ministry to actually take it off or reduce it. Today publishers are having a very tough time because of the cost pressure. Even the issue of increasing the DAVP rate is pending with the government for a year,” he said.
Sharing further insights, M V Shreyams Kumar, Managing Director of Mathrubhumi Group, said: "We almost doubled this year compared to the previous year, which could be caused by a shortage of used newspapers because most mills recycle them, followed by the energy crisis and freight rates that have increased about 2-3 times." However, he noted that freight rates have begun to fall.
Some mills that were demanding $ 1000-1050 per tonne two quarters ago have reduced it to less than $950 per tonne, industry players said.
According to Kumar, an increase in newsprint pricing combined with a 5% custom tax has had a significant influence on the newsprint business. “It also puts downward pressure on ad rates. Ideally, it should be about 600 USD/tonne. That is when the newspaper sector will be able to breathe," he remarked.
He also stated that there was no sign that print prices would fall but there has been a modest decline. "We can't say what will happen in the next month. We notice that it is currently easing slightly, but we cannot say to what amount."
Reflecting on the seriousness of the issue, Amit Chopra, Joint Managing Director, Punjab Kesari, said the viability of newspapers was at great risk. “At these prices, it's difficult to make profits,” he said.
Sharing some reason for hope, Chopra said: “The prices might see a slight uptake if there is more demand during the festive period. But I believe that most of the newspapers have stocked up the material for the next few months, which might not lead to high demand and high pricing.”
“The advertising revenue is growing and even circulation revenue is coming back to pre-Covid levels specially for the vernacular newspapers, but the cost of material is so high that there is little scope for the cover price increase or ad rates increase which is a problem. I believe that over the next few months things will get better,” Chopra added.
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