World Paper and Printing Markets
Industry Trends
When a medium like newspapers or magazines starts to slide, it generally doesn’t stop. There may be different terraces at which it levels off, or it may slide more slowly for a while. But the volumes of print we saw as recently as the 1990s will not be the pattern of the future..
What does this mean for the print media’s paper suppliers? Ignoring the potential impact of exports and imports, it means that the papermaking capacity needed to serve such a medium will decline over time.
Clearly the mill or mills at the top end of the cost curve are in trouble in almost any market, sooner or later. When a market is shrinking and capacity is struggling to shrink as fast, high-cost mills will frequently be under water from a cash point of view. This has certainly been true for much of this decade in North American newsprint.
But history has shown that the problem goes deeper in the cost curve than just the mills whose capacity is immediately redundant at a given demand level. Time after time, when prices are declining, they keep dropping until the marginal mill is under water – and then they keep falling. For example, by the summer of 2007 as much as half of the Canadian newsprint industry was cash-negative – but nobody would argue that half the Canadian industry was unneeded from the demand point of view.