Industry executives gathered at a June 18 workshop to share strategies on how to combat what session co-moderator Richard E. Wyckoff, director of operations at The Tribune-Democrat in Johnstown, Pa., called "Excedrin headache number 127"--wild fluctuations in the cost of newsprint.
Newspapers reacted to the extreme price hikes and volatility that began in 1988 by cutting back sharply on usage, said Ross Hay-Roe, financial analyst with Equity Research Associates. As a result, the newsprint market has stopped growing in the United States and continues to decrease in Canada. To compensate, mills increased production of other grades of paper that appeal to commercial printers, thereby "cannibalizing their own businesses," he said.
However, the recent decline in daily newspaper consumption is beginning to wane. In April 1996, year-over-year consumption was down by only 1.3 percent, the lowest rate of decline in the last 15 months. But newsprint purchases dropped by 13 percent in the same period. The difference between consumption and demand represents the draw-down of publishers' inventory, Hay-Roe explained. "Given the extremely high inventory levels, a decrease in demand is a virtual certainty," he said. Expect the newsprint industry's bear-market conditions to prevail until inventories have normalized, Hay-Roe predicted.
Cultivation of kenaf as an alternative fiber to newsprint is progressing successfully, according to Don Soldwedel, president of Western Newspapers Inc. of Yuma, Ariz. Key permits are in place for a 5,000-acre kenaf mill in Macallan, Texas, and Soldwedel says he intends to deliver newsprint by the end of 1998.
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