If we characterize the newsprint business in 2007 as the “perfect storm” for Producers, then we can use the same analogy for newspaper Publishers in 2008.

Total US consumption was down 10.5% in 2007 while dailies were down 10.8%. Canadian demand was down 4.2%. Exports were the lone bright spot, up 7.3%.

Mill inventories were out of control earlier in the year which led to price weakness. They ended the year up 41,000 mt to a modest 367,000 mt. End-user inventories, on the other hand, were down 129,000 mt for the year to a low of 705,000 mt or 34 days supply.

One speculated wild card did not materialize in 2007. Many people thought that Chinese imports to the USA would be the trigger for lower operating rates. This did not occur.

In 2007 newsprint consumption fell over 10% in the face of falling newsprint prices what can we expect will happen to consumption in 2008 if newsprint prices increase?

With reference to the Supply & Demand balance we expect that newsprint consumption will decline by 11.8%.

Newspaper Publishers will be very aggressive in cutting costs and as newsprint is their 2^{nd highest cost it will be dramatically reduced. We are likely to see broadsheet page widths reduced to as low as 11 inches. Pagination will also be reduced in the face of reduced advertising lineage and revenue. Circulation continues to erode. And basis weight is also declining as 45 gsm will become the dominant basis weight on its way to 43 or 42 gsm in a year or so.}

On the supply side, Producers will continue to consolidate. We are likely to see a western consolidator in addition to AbitibiBowater and White Birch in the east. Canadian mills will bear the brunt of closures due to outrageous energy and fibre costs on top of a strong “petro” dollar. My speculation is that over 1 million tonnes of newsprint capacity will idle or close in 2008.

Overall, 2008 will have a tighter supply & demand balance and a corresponding higher mill operating rate. Better supply management should stabilize prices once they get to a level that reflects some level of profitability.