Newsprint price increases squeeze all newspapers

Rural and other community newspapers with strong local-news franchises have been insulated from Internet competition, but all newspapers are being hit by big increases in the cost of newsprint -- which, incidentally, tends to be produced in rural areas.

"The price of paper stock, a daily publisher's second-biggest expense after labor, has climbed 26 percent to a 12-year high of $700 a metric ton since October, pushed upwards by supplier consolidation rather than demand," Sarah Rabil reports for Bloomberg News. Abitibi- Consolidated Inc. and Bowater Inc. merged in October, creating AbitibiBowater Inc., the world's largest manufacturer of newsprint, with 45 percent of the North American market.

With daily papers' advertising revenue down, that means fewer pages to print, and less demand for paper. Record oil prices and a strong Canadian dollar have further squeezed the company, which is losing money and "has closed mills to reduce supply," Rabil reports. It has raised newsprint prices $20 a ton "every month this year, even as consumption of newsprint by daily newspapers fell 15 percent in the 12 months through March. The jump in prices is 'unprecedented' in a period of falling demand, said Ed Atorino at Benchmark Co. in New York, who has followed newspapers for 25 years." Newsprint producers can raise prices easily, Rabil writes, "because AbitibiBowater, White Birch Paper Co. and Kruger Inc. control 75 percent of the North American newsprint market, said CreditSights Inc. analyst Chris Ucko." (Read more)