Struggling to recover from pandemic, print industry now hit by rising newsprint costs

Newsprint cost has shot up by 20% in the past three months and is expected to go up further by at least another 10% this month

e4m by Tasmayee Laha Roy
Updated: Feb 8, 2021 9:05 AM
newspaper

Already struggling to come back to normalcy from the pandemic-induced lull in businesses, print publishers now have increasing newsprint prices to deal with. In the wake of the Covid-19 pandemic, newsprint cost has shot up by 20% in the past three months and is expected to shoot up further by at least another 10% this month.

Newsprint prices, which had gone below 300USD/tonne in 2020, has now touched close to 500USD/tonne and is expected to go up by another 100 USD/tonne in the coming months. Turns out, some of the popular paper mills that exported newsprint to India have either shut down or migrated to new businesses in the pandemic causing a demand-supply imbalance and pushing newsprint prices for Indian buyers.


The imbalance and other bottlenecks


Talking of demand supply, according to the marketing head of a popular Indian language daily, newsprint consumption has been very low almost throughout 2020, which is reflected in the financial results of various publishers. “The consumption has however started recovering in the fourth quarter of 2020, but the numbers are far below the levels seen in Q4 of 2019. India's earlier newsprint consumption of about 2.5 -2.7 mn MT per annum has gone down drastically due to the impact of the pandemic. It would be difficult to say if the newsprint consumption volume of 2019 may even be touched any time soon or ever again,” he said.

With no relief announced for the industry in terms of waiving import duties on newsprint in the 2021 Union Budget, the print fraternity is struggling to boost their business.

“Close to 50-60 per cent of our costs go into acquiring newsprint, and with no relief in import duties from the government, we are only left with increased costs. At tough times like these, increasing newsprint prices are a major concern for the printing industry which also has to pay salaries to the lakhs of the employees engaged in the sector,” said MV Shreyams Kumar, Managing Director, Mathrubhumi.

However, it is the smaller players that take the worst hit with increasing raw material costs.

“While regional newspapers use a mix of indigenous and imported newsprint, the cost of imported newsprint still burns a hole in our pockets. The increase in newsprint prices pushes our production cost by at least 20 per cent. While revenues have finally started stabilising, it is still slow compare to pre-Covid times. Factors like increase in raw material cost adds to the burden for the industry. We are looking forward to March for better numbers,” said Harsh Chaudhary, director at Rajasthan’s Dainik Navajyoti.

 

Crisis management


In response to the situation, most print players are taking a step towards usage of indigenous newsprint to balance out costs and strategizing other aspects of production to accommodate growing costs.

“As a response to reduced revenues attributed to reduced ad volume, we have rationalised pagination without compromising on news quantity and quality. However, the situation is now improving and the market started seeing recovery in Q3 FY'20-21, though the numbers are below the pre-Covid levels. In an effort to rationalize the costs, publishers across the industry are continuously reviewing their processes and practices for optimization and automation to rationalize the costs and keep the operations as lean as possible,” said another newspaper owner.

But why is switching to indigenous newsprint in full capacity not an option?

Indian publishers completely switching to indigenous newsprint may not be a preferred option because imported newsprint in India mostly comprises lower grammage, about 42 GSM and below, and Indian newsprint manufacturers are not producing the same quality paper.

Secondly, the capacity of domestic newsprint mills is below the demand. Further, many of the domestic mills have developed swap capability of shifting their production to other paper grades. Hence, in such circumstances, if the publisher even wishes to shift consumption from imported to domestic newsprint, it seems impossible.

Is the crisis short-term?


The good news, according to experts, is that the reduced supply and increasing cost is a short to medium term situation.

“In the market, the shortage of supply of newsprint is being attributed to vessel space shortage or empty containers being diverted to China. We understand that this crisis is a temporary phase in the market and is short lived. We anticipate the supplies to recover shortly. Even though there has been a curtailment of about 4.9 mn MT of newsprint capacity world-wide through downtime, closures and shifting of production to other paper grades during 2020, the global demand decline is outpacing the capacity curtailments. Hence, this supply shortage may be a temporary phase in the market,” said a media expert.

 

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