Newsprint prices surge, industry braces for precautionary measures

Given the loss of supply from Japanese mills due to tsunami, along with the hike in crude oil and old newsprint prices, cost pressure is likely to continue on publishers…

e4m by Nitin Pandey
Updated: Apr 18, 2011 10:51 AM
Newsprint prices surge, industry braces for precautionary measures

Newsprint, which according to experts accounts for 35 to 50 per cent of total costs of newspapers companies, is haunting publishers once again. In recent months, there has been sharp hike in newsprint prices. Domestic newsprint, subscribed by the majority of the Hindi and language publishers, has registered a 25 to 30 per cent price hike. Consequently, publishers are set to the brace some balance-out measures by increasing cover-price of newspapers, reducing number of pages in each edition and even hiking ad-rates soon.

Meanwhile, imported newsprint price that too has been volatile, has seen marginal increase of average 5 per cent. As the rate gap between imported and domestic newsprint decrease, publishers are moving towards imported newsprint, which is a setback for domestic newsprint mills.

KK Goenka, MD, Prabhat Khabar, remarked, “Earlier the difference between domestic and imported newsprint was more than Rs. 5 per Kg. Now we are gradually shifting towards the imported newsprint, as price gap has shrunk to Rs. 2 per Kg.”

Magazine industry and the newspapers who import big chunk of newsprints are, however skeptical about future trends. Mitrajit Bhattacharya, President-Publisher, Chitralekha Group, stated, “We never take knee-jerk reactions. We are observing the newsprint prices world over and trying to re-order some consignments from Japan, which got cancelled, post the tsunami.”

Mohit Jain, Director, Business & Commercial, Bennett, Coleman & Co Ltd and Chairman, Newsprint Committee, Indian Newspaper Society, commented, “We had felt that the market would be under the price pressure, and had accordingly extended our coverage beyond the regular norms, apart from strengthening the partnerships to ensure contract compliance.”

Amid all permutation and combinations, exchange4media takes a look into how newsprint prices have behaved in recent months.

The Number Game…
Kulbir Chikara, Editor, Hari Bhoomi, noted that since October 2010, Indian mills have increased newsprint prices by almost four to five times. The price band is wide for the newsprint price, depending upon the grade and quality. Yet Joshi of The Times of India noted, “The top-end prime Canadian material is above USD 700 per ton.”

According to Sunil Poddar, MD, Poddar Global, at present the newsprint prices are hovering at around USD 680 to USD 715 per ton.

The Light Weight Coated (LWC) paper is available currently around USD 1000-1100 per ton for 54-60 GSM paper. Nevertheless, Bhattacharya of Chitralekha noted that, this is indicative as prices vary by roll size, supplier, mill, opacity, GSM and many other parameters.

Experts believed that due to loss of supply from Japanese mills, there will be upward pressure on prices but will hold below USD 1100 per ton (for LWC) in the short run.

Why Hike?
Experts stated that availability of wastepaper, which is required for production of newsprint, in West has reduced by 50 per cent, and in Europe by 20 to 30 per cent. This shortage has impacted the prices of raw material required for newsprint hence affecting newsprint prices. This is one of the reasons that have impacted newsprint paper mills in India too, to the extent that some mills had to shut business.

Poddar, who deals in newsprint, pointed out that this was another reason that had led to hike in domestic newsprint price.

He also noted that this has affected specially language and Hindi dailies because being cheap, domestic newsprint was a feasible product for them. Now, it will certainly affect their expenditures and budgets.

Meanwhile, Goenka of Prabhat Khabar observed, “The Indian mills which manufacture ‘B’ quality papers are wrapping up their businesses. However, ‘A’ quality domestic newsprint still competes with imported newsprint.”

The other factors that had impacted the cost of newsprint include rise in crude oil prices, hence hike in freight charges (for import of newsprint), the tsunami in Japan and subsequent effect on production of newsprint and the mismatch of demand and supply ratio.

The Balance-Out Measures
As a big share of revenue of any publishing house depends on the newsprint prices, with the hike in it, publishers are bound to take precautionary measures to balance-out their budget. Chikara of Hari Bhoomi, remarked, “We are trying to get into long-term agreement with the suppliers. Almost 25 percent increase in cost is unbearable. We have to increase its price of newspaper as well as rate of advertisement.”

On the same lines, Goenka of Prabhat Khabar commented, “Publishers are now seriously thinking of reducing total number of pages in every edition. As per market situations, newspapers are increasing cover prices of newspapers.”

Considering that Crude Oil is already hovering at USD 120s per barrel and ONP (Old Newsprint) is around USD 280 per ton, cost pressure is likely to continue which would push producers for an even better realisation from publishers. Now, it is up to publishers how they divide pressure, perhaps between readers and advertisers, to bear the uncanny rise in the newsprint prices.

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