Outlook for Newsprint Industry Gloomy Amidst Bankruptcy Filings and More Capacity Contraction

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Researched by Industrial Info Resources (Sugar Land, Texas)--Economic conditions in the newsprint manufacturing industry continue to deteriorate. Capacity reductions over the past decade and manufacturing consolidation have contributed to some market stabilization and positioned some mills to remain running, but the outlook appears weak. Demand is projected to remain on a downward slope as more readers and advertisers move online. Despite efforts to improve costs, tight margins are being further squeezed by record high prices for raw materials. Additionally, high debt loads and recurring quarterly operating losses continue to place added pressure on balance sheets.

The newsprint market has suffered another blow with the recent bankruptcy filing of two of North America's largest newsprint manufacturers. The latest bankruptcy filing by SP Newsprint Holdings LLC and the decision by White Birch Papers, both owned by newsprint magnate Peter Brandt, to idle a mill in Quebec demonstrate the latest casualties of an industry riddled by diminishing demand. This past September, NewPage Corporation, also seeking protection from creditors, idled its mill in Port Hawkesbury, Nova Scotia, which included a newsprint machine and a machine that produces glossy paper for magazines.

In contrast, leading newsprint producer AbitibiBowater, soon to be called Resolute Forest Products, emerged from bankruptcy at the end of 2010 and has since reported improvements in operating earnings over the past three consecutive quarters, despite net losses. Abitibi also has substantially reduced debt to $586 million, from $941 million at the beginning of the year.

The forecast for newsprint production in 2012 is likely to include more capacity reductions. Whether those reductions come in the form of temporary curtailments or permanent machine and mill shutdowns may be predicated on how well some companies manage operating costs and the strength of their balance sheets.

Expenditures have been nearly non-existent at North American newsprint mills. With the exception of a $150 million biomass-to-energy project at a mill in Alberta, spending plans call for projects with low investments, with emphasis on projects that improve cost or energy efficiency, or have an environmental impact.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.