With almost daily announcements of changes in the newspaper industry, the resemblance to the action of a board game is uncanny. The newsprint market is in a similar state of flux, although the moves are less public.
The consensus is that the next move will be for one or more producers to permanently reduce newsprint production capacity this year.
So at this point in the game, it’s a good time to consider what pieces are still on the board, and what will happen when one or more of them is removed.
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Resolute Forest Products: The top five producers of newsprint in North America represent 80% of the market, and nearly half of that (38%) is Resolute Forest Products. With six mills and seven newsprint machines, logic suggests that Resolute is a likely candidate to reduce production as demand continues to fall. However, RFP’s economy of scale and diversity give it an advantage when prices are falling. Any changes to Resolute’s capacity will primarily impact the eastern US.
White Birch: White Birch is a strong player in the Northeast with five machines across three mills. They are also very active in the export market, making them less likely to reduce capacity. One mitigating factor is that some of White Birch’s mills have aging technology. This results in higher production costs and an increased likelihood of capacity reduction. Again, any changes to White Birch’s capacity would be felt in the East.
Kruger: As a privately-owned company, Kruger is a difficult company to get information from. Kruger’s three mills in eastern Canada run a total of five paper machines. Kruger has been very public about their intention to move into markets like food packaging, so they are a likely candidate to remove capacity from the newsprint market. After backing away from supplying newspapers during 2018, Kruger stepped in to fill capacity when White Birch closed their Bear Island, VA mill. Kruger’s history of quick moves makes them a wild card.
North Pacific Paper (NorPac): The number four player is the largest producer in western North America. Although their Washington State mill has two paper machines, one has already been converted to packaging paper. After NorPac’s attempt to get tariffs placed on Canadian newsprint failed, they have been vocal about their desire to get out of the newsprint market. Because of their delivery footprint, any changes to NorPac would affect the western US.
Alberta Newsprint: ANC runs one of the newest and most efficient newsprint operations in North America. With one mill, one paper machine and a dedicated power plant, capacity closure at Alberta is extremely unlikely. Many industry insiders predict that Alberta will eventually be the last producer of newsprint in North America. As Alberta has capacity available, they could offset any closures by other plants in the West.
While market share beyond the top five producers accounts for only 20% of the market, any changes in this group will have a disproportionate impact on publishers in the West.
Paper Excellence (Catalyst): Paper Excellence is a Chinese-Indonesian company that has purchased several pulp producers in North America and Europe in recent years. It would make sense that their goal is to produce pulp for paper manufacturing in Asia, but the company has stated that they are committed to producing paper in North America. However, the Catalyst plants have recently taken extended periods of down time. This could be an indicator of potential capacity reductions in the future. Located in British Columbia, they only serve Western customers.
Ponderay Newsprint Company: Located outside of Spokane, WA, Ponderay has been a primary supplier to publishers on the West Coast, and has at times been the only supplier available to parts of the Southwest. The company recently took over its own management and marketing after severing its relationship with Resolute Forest Products. Although it has a good customer base, the mill generally has higher costs than its competitors, and it doesn’t benefit from currency-exchange like the Canadian mills. Both of these factors could come into play in capacity reductions.
Inland Empire Paper: Also located in the Spokane, WA area, Inland serves the western US. Like Kruger, IEP is a privately-owned company, so specific information about their operations is harder to come by. However, they are generally seen as an efficient producer and will be able to weather falling prices better than some of their US-based competitors.
To paraphrase Ben Franklin, nothing this year is certain but death, taxes, and falling newsprint demand. The pieces on the board will start moving soon, so it’s best for publishers to keep an eye on the action.
Tony Smithson is the regional director of printing operations for Adams Publishing Group’s APG Printing Solutions.
