Rising newsprint cost mounts trouble for Covid-hit newspapers
The newsprint price, which was below $300/tonne in 2020, now stands at $700-$750/tonne
While newspaper publishers have started witnessing recovery in advertising and circulation revenues post the second wave of Covid with hopes of strong growth in the coming quarters, they might well be staring at another crisis soon due to increased newsprint prices.
The newsprint prices, which were below $300 a tonne in 2020, have been going upwards since December. It currently is in the range of $700-$750 a tonne. This rise in cost has been impacting the balance sheet of publishers as for most of them newsprint amounts to 50-60% of the cost.
According to the Indian Newspaper Society (INS) Vice President Mohit Jain, the newsprint prices have gone up very sharply in the last nine months. “There are multiple reasons, including sharp curtailment of the capacity of newsprint production, for this rise. Secondly, newsprint manufacturers have now developed a new grade called brown paper or corrugated medium, and export of this brown paper is becoming a viable business for newsprint producers,” he added.
Jain further explained, "It (newsprint) has an essential requirement in China for packaging purposes and so its demand has been increasing because of the growing preference for e-commerce. Therefore there is this shortage of newsprint."
Additionally, Jain said that International Ocean Freight has gone up by 4-5 times which has also led to an increase in prices since most of the newsprint in India is imported.
According to Jain, another reason for the spiraling of newsprint cost is lower domestic production. "The waste collection of newsprint in India has been disrupted because there is less consumption and less generation. The whole supply chain of newsprint waste collection has been disrupted, and that's why the local newsprint mills in India are unable to get sufficient quantity of recycled fiber (old newsprint) and hence their capacity is down."
“This price rise is here to stay. The prices are likely to be under heavy stress for the foreseeable future," he cautioned.
INS has already made two requests to the government, to reduce customs duty (which is currently 5%) and increase the DAVP advertising rate because the input is going down, he informed.
Sivakumar Sundaram, Chairman Executive Committee, BCCL, said that the entire global supply chain for almost all products and services is in disarray and newsprint is no different. Sundaram said, "First, there was an imbalance due to Covid as movement of shipment containers was restricted. After that, following vaccination rollout in western countries, there was a surge in pent-up demand for products in these countries and this further worsened the imbalance. Given the supply chain disruption, the recyclable newsprint stock, an essential component for domestic feed, is also short in supply."
Sundaram further shared, "We use a healthy combination of international and domestic newsprint, and this temporary shortage on both domestic and international supply has resulted in the rise of newsprint prices. We expect it will take some more months before the situation normalises, both in terms of pricing and supply. We have been watchful of these developments and have built our inventory to keep the price rise in check. That being said, we remain watchful on how it is shaping up going forward."
As earlier reported by exchange4media, according to market and consumer database company Statista, India imported newsprint valued at over Rs 49 billion in 2020, a decrease from the previous year's Rs 68 billion.
The newsprint price hike has significantly impacted the print industry, says M V Shreyams Kumar, Managing Director, Mathrubhumi Group. "With no change in the subscription rate of newspapers, it is quite essential to improvise on the overall revenue generation for the business. For long-term survival and keeping unforeseen circumstances in mind, the print players would need to gear up to move beyond the pure-play print revenue stream to the digital media to retain the consumer base."
Sharing the same sentiment, Varghese Chandy, VP-Marketing & Advertising Sales, Malayala Manorama, said the advertising fraternity should understand these realities and stop demanding discounts and free insertions that have become the norm, because it is leaving the newspapers bleeding.
"During Covid times, it has been proved that the newspaper is the best medium for correct information when social media is full of fake news. People turned to newspapers or websites run by newspapers for accurate information. Unlike other sectors, unfortunately, when newsprint prices go up, neither circulation unit price goes up nor the advertising. On the contrary, advertisers are demanding free ads/discounts."
During Q1 FY22 earnings call, Piyush Gupta, Group CFO, HT Media Ltd, shared that they had not anticipated such a sharp increase in newsprint prices; the spot prices versus six months ago are up 50%.
"Though we had not anticipated, we knew a bit of disruption would come, so we decided to up-stock or increase our coverage. That is keeping us in excellent stead as far as the imported newsprint is concerned. The spot replacement price on imported newsprint is north of $600 a metric ton, and we are still managing the old prices. We have sufficient cover to tide over it."
He further added that the bigger problem, however, is on the domestic newsprint front because of the shortage of old newsprint. India only makes recycled newsprint because of environmental laws, and now the old newsprint is priced so high that the cost of domestic newsprint is headed north of Rs 40,000 a metric ton.
"Maybe, it will take a quarter or two for the price to stabilize. But I believe we might see a little bit more escalation in the price before it stabilizes or comes down. We are already seeing an impact of about 12% to 15% depending upon the use of domestic or imported newsprint or a mix of that. We believe another 5% to 7% will happen before the prices start stabilizing or coming down."
Similarly, Girish Agarwaal, Promoter Director Dainik Bhaskar Group, during their Q1 FY 22 earnings call, had said that the newsprint rate in Q1 last year was Rs 35,000 to Rs 36,000 per tonne. This year, the rate is almost Rs 41,000. "There has been a nearly 15% increase in the newsprint rates for us. Surprisingly, the Indian newsprint rate has increased much sharper than the imported."
While the Indian newsprint manufacturers have increased the price by almost 35%, it is not that high for the imported newsprint as they had forward buying in the stock.
"We are analyzing the market trends right now; there has been an increase in newsprint prices all across. The imported newsprint price is almost 700 USD per tonne. The Indian newspaper society has indicated this kind of prices in the future as well, and the reasons are obvious that there is a huge shortage of raw materials."
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