Some Asian newsprint prices fall over Q4 with further declines expected next year
An in-depth look at what has caused the newsprint paper price drop in Asia with a focus on trade between China, Russia and India
In Asia, newsprint prices have fallen this quarter in the face of easing logistics costs and good supply.
In Hong Kong, Taiwan and Thailand, demand continues its structural decline, though the recovery from the Covid-19 pandemic and its lockdowns seems to have perked up the market somewhat.
Price falls are manifesting mainly as a sharp narrowing of the range, with the cheapest deals still reported around the $800/tonne mark for both 42 and 45 g paper, but the most expensive down from $900/tonne to $850/tonne.
Meanwhile, prices to Singapore were down to $740-800/tonne for 45 g paper and $770-830/tonne for 42 g paper, against a range of $750-880/tonne and $780-880/tonne in Q3. The concentrated buyer side of the market there has been ordering well short of normal allotments during the second half of the year as it draws down stocks.
The Indian market, meanwhile, has a larger pricing spread than the other Asian markets surveyed. In the third quarter, both 42 and 45 g newsprint prices were reported in a range of $800-1,000/tonne. In late Q4, the cheapest spot deals have been reported at around $700/tonne, with prices ranging all the way up to $925/tonne. Most deals seem to be in a narrower $725-900/tonne range, though.
Good newsprint supply to Asia
A few factors are keeping newsprint supply to the Asian markets surveyed high.
An important one is the continuing general fall of shipping costs, visible across the region but especially dramatic to India.
Despite substantially lower Indian newsprint prices this quarter, newsprint mills elsewhere in Asia, which had stopped sales there last year due to insufficient margins, are still selling very actively there.
Indian buyers are pretty much spoilt for choice. However, we are still getting orders from this market with good margins.
Contacts also report an increase in supply from North American mills to Asian buyers, although contacts pointed out this mostly looked like working through backlogs.
The other two factors are somewhat tied to the Chinese market.
Swing mills in Asia and Russia that can produce either newsprint or packaging products are heavily favoring newsprint this quarter. This is because their packaging products are marketed to Chinese buyers, who are inactive at the moment.
Consequently, the production ratio is as much as 90:10 in favor of newsprint at swing newsprint/recycled packaging mills in Asia, with any restrictions on newsprint production linked to the short supply of old newspaper furnish.
In Russia, where some newsprint mills can also produce virgin packaging grades for the currently-moribund Chinese market, the proportions reportedly vary between 50% to 80% in favor of newsprint.
Russia-China trade dynamic
The other important factor linked to China is that the newsprint market there is slowing down.
In import terms, it is currently saturated with Russian tonnage. Due to overland shipping policies favoring monotowns (such as the ones around some Russian newsprint facilities), cheap energy, and extremely low fiber costs consequent to international sanctions on Russian wood products, Russian mills can sell newsprint in China at prices other virgin newsprint producers cannot afford.
But Russian newsprint mills are continuing to increase shipments to India, specifically, as buying in China slows down due to domestic economic struggles, and as Chinese buyers haggle the prices down more and more.
“Chinese buyers understand that their market is the last hope for huge producers; not only regarding newsprint and pulp and paper industry. It’s the same situation for many other Russian businesses searching for new markets for their goods,” explained a market contact.
Although shipping costs to India for Russian suppliers are currently more than 50% higher than to China, margins for India are better even at $700/tonne, the contact explained.
And those logistics costs are expected to fall as more freight providers start using new routes, including overland through China and then from Chinese ports.
Currently, the bulk of Russian tonnage for India seems to be shipped from Turkish ports via private freight companies.
Buyers in India put Russia’s current share of imports into the country behind Canada’s but up substantially from Q3.
Russian producers are doing little business with the other Asian markets surveyed. This is in large part due to logistics – sea shipping from Russia, though becoming easier, is still constrained, so large orders are necessary to make it worthwhile. And buyers in the region are also voicing ethical objections to business with Russian firms.
However, with relatively inexpensive Russian newsprint increasingly present in India, sales there from other Asian mills may need to be redirected.
On the negative side in supply terms, western European buyers have been increasing inquiries for newsprint internationally, including to Asian mills that might otherwise sell that tonnage regionally.
Prices have been at record highs this quarter in western Europe, though they were a little down in November due to drops in the cost of energy in October.
Meanwhile, high overland shipping costs from central and northern Europe and machine conversions across the continent have seen regional sales drop to southern European buyers.
And in October, the European Union formally banned the import of Russian newsprint. At that point, the business was a shadow of its former self, as shipping was restricted to often-bottlenecked rail routes into Germany; but immediately before the October ban, inquiries from western European had been increasing.
So far, the volumes of Asian newsprint going to Europe are not big, with some mills having concluded just a few deals to test the waters. But Asian sellers expect the business to increase if shipping to Europe gets cheaper next year.
There has also been some concern in Asia that the high western European prices on offer would lead to Canadian mills favoring business there over Asia.
However, that has been constrained by the ongoing weakness of the euro against the US dollar, and contacts report that North American Q4 pricing to Europe is not at the bottom of the range there.
Unlike swing mills elsewhere in Asia that tend to vary their output between newsprint and recycled packaging materials, Indian swing mills usually go between newsprint and other printing and writing grades.
With the price of imported newsprint falling this quarter, contacts in India report those swing mills are increasingly favoring other grades with better margins.
Domestic mills are facing the heat. Many of them finding it difficult to secure long term newsprint orders.
Furthermore, the re-entry of some Indian newsprint capacity onto the market is still pending, with market contacts reporting that Kerala Paper Products and NEPA, which both announced near-term restarts of commercial production, are not yet active providers.
Nevertheless, both market contacts and figures from the Indian Newsprint Manufacturers Association indicate that sales there are still evenly split between domestic and international suppliers, contrary to the first half of the year when imports radically dominated the market.
Most contacts surveyed expect further price declines in the first quarter of 2023, especially if shipping rates keep falling.
With normal contract prices as low as $700/tonne for 42 g paper in India under discussion for January from Russian suppliers, there may be a knock-on effect of dissuading non-India Asian mills from selling there, again depending on shipping costs.
And there remains an open question about what will happen to Canadian newsprint supply in the first half of next year, if Paper Excellence/Domtar is allowed to close its deal to take over Resolute, a supplier of long standing to Asian markets. Paper Excellence has bought and shuttered hundreds of thousands of tonnes per year of newsprint capacity in Canada over the last ten years.
Resolute can produce 214,000 tonnes per year of newsprint at its Clermont mill in Quebec, Canada; another 193,000 tpy at its Gatineau mill, also in Quebec; 230,000 tpy at its Thunder Bay mill in Ontario; and, in the USA, 229,000 tpy at its Grenada mill in Mississippi.
There is already a feasibility study underway for the post-purchase conversion of the Gatineau mill to newsprint production.
In late October, the companies concerned announced that the Thunder Bay mill would be sold contingent on the deal, in an effort to facilitate the regulatory review process.
A big question in terms of the Indian market, and supply to Asia generally, is if Canadian mills will try to compete with Russian mills on the basis of price there, and maintain their leading sales position.
Contacts report that this quarter Canadian mills have been working through shipping backlogs to India, and so not many fresh deals have been struck; the first part of Q1 is likely to see more haggling.
“Earlier, North Americans were selling at $940-950/tonne CFR to Indian ports and they did not want to lower the price since they can sell at those levels in their domestic market,” explained a trader there.
“However, (North American) demand is low and they will come back with offers very soon. We need to see whether they will be able to compete with the Russians or not.”
If, as some contacts expect, decreasing shipping costs enable Russian mills to take advantage of their current low fiber and energy costs in India as they have in China, the situation may be dramatic.
“I believe that for Russian newsprint, 2023 will be a year of battle for sales volumes. A price war year. Everybody will continue selling newsprint no matter what the price is,” forecast a contact.