Rising cost of newsprint bedevils papers

Sep 30, 2008 (The Santa Fe New Mexican - McClatchy-Tribune Information Services via COMTEX) -- ABH | Quote | Chart | News | PowerRating -- It's an unwelcome letter newspaper publishers around the country are receiving from suppliers of newsprint.

The price of newsprint -- the primary raw material in the production of a newspaper -- is going up ... again.

One letter from a newsprint company to a publisher put it this way:

"Dear valued customer, we will increase the price of our ... newsprint by $60 dollars per metric ton in the fourth quarter."

And just to make sure there's no misunderstanding, the letter added, "Once again, recognizing the challenging business environment, we will implement $20/month in October, November and December."

"There are three things that are happening," said Al Waldron, production manager of the Santa Fe New Mexican. "The big thing is the Abitibi/Bowater merger. They have more than 50 percent of the market right now." In the past year, the cost of newsprint has gone up 32 percent, Waldron said.

Other factors in the rise of the price of newsprint are the weak dollar and the increasing cost of wood pulp, which is used to make newsprint, Waldron said.

PAGE, the second-largest newspaper buying group in the country, took note of the Abitibi/Bowater merger and its impact on the price of newsprint.

(The New Mexican is one of the 1,200 independent newspapers that belong to PAGE, and buys its newsprint through PAGE from Catalys, which has a plant in Snowflake, Ariz.)

In a letter to Colin Keeler at Abitibi/Bowater, Chuck Berky of PAGE said, "Your fourth-quarter price increase announcement ... is both shocking and unwise. The newspaper industry needs to do everything it can to adjust to what looks like a possible 46 percent increase since your merger by year's end."

The letter goes on to criticize a move that "may further destroy the industry you rely on to buy your products."

Berky continues: "You are driving the newspaper and their readers to rely more and more on electronic media and the Internet for the delivery of news."

For its part, AbitibiBowater responded by pointing out that the industry is experiencing "unprecedented cost inflation" in the cost of newsprint, especially for ONP (Old Newspapers for Recycling) because of global demand.

The cost increases come at the same time North American customers are cutting their newsprint consumption, said Colin Keeler, Abitibi/Bowater's vice president of North American sales.

"Accordingly, we will reduce our newsprint output by 30 to 35,000 (metric tons) per month for the balance of the year," Keeler said.

Ginny Sohn, The New Mexican's associate publisher, said in a statement, "Newsprint and payroll are the two biggest expenses for a newspaper. We've tried to minimize our newsprint waste as much as possible, and we have recently reduced our web width on our press.

"We recycle our waste newsprint and all our returns by bailing them here at our New Mexican Plaza production facility and shipping them back to Arizona to the recycler."

The increasing cost of newsprint has affected newspapers large and small around the state.

"The cost is impacting the bottom line throughout the industry," said Manuel Chavez, production director of the Albuquerque Journal. "Lineage is down everywhere. If you're not in a buying group, you could have a tough time."

The Albuquerque Journal, unlike many newspapers, has not reduced its web width and is still at 50, as it has been for many years.

"The industry is adopting 48, and some are down to 46," Chavez said. "At what point does a newspaper stop being a newspaper as far as size goes? ... It looks weird to me."

It didn't used to be so easy to raise the price of newsprint.

"It used to be what would happen is that the bigger mills would raise their price, and then the smaller mills would not go along with that," Waldron said. "Now, everybody's jumping on the bandwagon. This is the highest price I've seen in 18 years. We're going to continue getting price increases for the next three to six months."

If there's any help out there, it's PAGE Group," Waldron said. "There are 1,200 newspapers involved. We have very strong buying power. PAGE is the second-largest buying group in the country."

At the Santa Fe Reporter, a weekly publication, "we're kind of absorbing the cost of newsprint," said Andy Dudzik, the newspaper's publisher. "We're trying to be smarter about papers."

The Reporter recently started distributing in Albuquerque, where it has met with a favorable reception," he said. "That's where it's kind of a tough balancing act" between the demand for papers and need to cut costs by reducing the number of papers printed.

If the prices continue to rise, Dudzik predicted, "there's going to be a merging of players in the market."

The new owner of the New Mexico Sun News, Clyde Straub, said he knew before he bought the publication, a Santa Fe biweekly, that the price of newsprint was going up, which would make it harder to make a profit.

"I was researching (the purchase of the publication) three or four months before we completed the deal," he said. "It is a concern. I think the bigger papers are struggling big-time; for smaller papers, it's not as big a hit -- but people don't realize it's still a hit. We're liable to lose a lot of little papers, too."

Straub already has a plan to deal with the higher price of newsprint.

"The only real reaction is to raise advertising rates," he said. "We will be raising rates."

Contact Bob Quick at 986-3011 or bobquick@sfnewmexican.com

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