Russia's De-Valued Newsprint Now Affecting N.A. Producers

 

A report in yesterday's Montreal Gazette, Que., Canada, details how low-cost Russian newsprint is biting a big piece out of North American producers’ traditional export markets in Asia and Latin America – especially India.

 

The Russian shipments, offered at prices reflecting the Ukraine sanctions and the ruble’s 50% drop against the U.S.dollar, added to a rough 2015 start for the North American newsprint industry, analysts said Wednesday.

January domestic shipments were down 16% year-to-year (and down 10.1% from December, 2014) while actual demand dipped 15% from a year earlier, accelerating from the 2014 level of 9%, according to the industry’s January statistics.

The North American industry’s total offshore shipments dropped 18.4% from a year earlier, with Asia (excluding Japan) down 29.3% and Latin America down 10.5%.

"Trade sources reported a huge influx of cheap Russian newsprint showing up in Asia following the ruble’s collapse due to the Ukraine sanctions," said Paul Quinn, forest products analyst with RBC Dominion Securities, Inc.

Prices have declined to unprofitable levels for most North American firms.

North American producers have shut down 1.14 million metric tons (net of restarts) of capacity in the 13 months to January 30, 2015, following 1.7 million net metric ton of shutdowns in 2010-2013. Selling prices have continued to weaken due to lower overall demand.

The sharp drop in the Canadian dollar –  pulp and paper sells in U.S. dollars globally –  is providing Canadian producers with a respite, but Quinn forecasts more newsprint machine changeovers to containerboard to reduce newsprint capacity.

Low-cost Russian exports of papermaking softwood pulp, especially from one massive new mill, are having a strong impact in Asia and in the Chinese market, he said. Hardwood pulp prices are being held down by future capacity increases in Russia, Europe, Scandinavia, Asia and Latin America.