New Delhi: The rising cost of newsprint is likely to see foes become friends in the Indian newspaper publishing business.
The commodity, whose prices have gone up more than 35% in the past seven months, accounts for 55-65% of the total cost of producing a newspaper. Newsprint, most of it imported into India, used to trade at $380 (Rs18,420 then) per tonne in late 2002. It rose to $560 in July-August, and is now being sold at more than $760 per tonne.
The steep price increase is putting tremendous pressure on the balance sheets of newspaper publishing companies and forcing newspaper executives to mull over ways to protect their profit.
This price hike and supply crunch is also coming as several newspaper groups have added new editions, especially in Hindi and other regional languages, and others have said they plan to launch new newspapers in the coming year, raising questions about the profitability of some of the launches.
Meanwhile, the measures being explored by various newspaper groups include reducing the number of pages, discontinuing the use of more expensive glossy paper for their supplements, using lower-grade paper in the main paper and, among the more adventurous, even compressing the size of newspapers, say several industry executives involved in such conversations.
Buffer stock: Newsprint reels being stacked at HT Media’s printing press in Greater Noida. The firm is the second largest newsprint consumer in India at 160,000 tonnes per annum. (Photo: Sanjay Sharma/ Mint)
They also said that the publishing companies are exploring ways to augment revenues, perhaps with an advertising rate hike, so as to try and soften the impact of rising newsprint prices.
The most noteworthy—and likely—initiative, however, is the effort to join hands to form a principal newsprint buying company that could negotiate better with the big multinational paper suppliers.
English dailies in the metros, such as Bennett, Coleman and Co. Ltd’s (BCCL) The Times of India and HT Media Ltd’s Hindustan Times, because of their large circulation and print-run, are among the most affected by the increase in newsprint prices. These newspapers use high-quality imported newsprint in large volumes. In fact, Sunday editions of these dailies often run into 80-85 broadsheet pages.
“There is a crisis. We have seen prices go up by $200 in a matter of six months. Despite these high prices, mills are cutting capacity and closing plants. There is a real risk of supply drying up,” said Mohit Jain, director (business and commercial) at BCCL, which also publishes The Economic Times. Jain, who heads the newsprint committee at the Indian Newspaper Society, an independent society of newspapers, is also leading the effort to bring together publishers over this issue.
“The logical solution to the current scenario is for the publishers to sit together and take strong decisions on cutting pagination and reducing base weight,” said Sharad Saxena, executive director of HT Media, which also publishes Mint as well as Hindustan. HT Media is the second largest consumer of newsprint in the country at 160,000 tonnes per annum. BCCL is the largest, at some 400,000 tonnes, or about 1% of global consumption.
Some measures have already been taken. Some newspapers, such as The Economic Times, have replaced some of its glazed supplements with regular newsprint. Several newspapers have started mixing thinner paper in their printing, according to several people in production departments, who did not want them or their publications identified. These persons said 43 gm per sq. m (gsm) paper is being used alongside the conventional 45gsm. Gsm is the measure of the thickness of newsprint. The lower the gsm, the lower the opacity of the paper and the visual contrast with black ink or colour.
BCCL’s Jain said the ad-edit ratio, or the ratio of advertisements and editorial content in a newspaper, could also go up in favour of ads in a bid to ease the pressure on revenues. This ad to edit ratio is currently 40:60 for most papers.
“In an exam, you don’t get more marks just because you wrote more answer sheets,” he added.
India consumed about 1.8 million tonnes (mt) of newsprint in 2007, according to industry estimates. The country’s paper mills produced about 1mt of newsprint, according to the Indian Newsprint Manufacturers Association (Inma), an industry body, while the rest is imported. India mostly imports newsprint from North America, Europe, Russia and the Scandinavian countries.
Most large Indian newspapers use a mix of domestic and imported newsprint. Typically, while English dailies use an 80:20 mix in favour of imported newsprint, regional language dailies employ the same ratio in favour of Indian newsprint. This ratio tilts in tune with global price volatility.
Globally, newsprint is a cyclical commodity. The current price point is not an all-time high. In fact, it’s not even close. In November 1995, prices had gone up to $1,000.
When newsprint prices had hit a record in 1995, Indian newspaper publishers had collectively hiked ad rates by about 30% and successfully pushed the government to pay a 30% surcharge on rates paid by the Directorate of Advertising and Visual Publicity (DAVP), the government’s advertising arm and one of the largest advertisers in Indian newspapers.
India has some 79 newsprint mills of which four—Nepa Ltd, the Mysore Paper Mills Ltd, Hindustan Newsprint Ltd and Tamil Nadu Newsprint and Papers Ltd—are in the public sector. “The top-end manufacturers produce best quality newsprint that is comparable with the one being imported,” said Inma president Raji Philip. The body counts about 30 mills, accounting for 80% of the domestic production, as its members.
Loaded fact: Almost half the newsprint used in India is imported; there are 79 mills in the country. (Photo: Ahmed Raza Khan/ Mint)
The country’s newsprint mills have an installed capacity of about 2mt, according to Philip. However, mills are diverting their attention to other paper products as “newsprint manufacturing has been a loss-making proposition in India”, he added.
Of India’s total consumption of 1.8mt, about 1mt was domestic newsprint, he claimed. Publishers’ representatives, however, say this figure is closer to 800,000 tonnes and the rest is imported.
Globally, a slew of factors are pushing the prices up, notes N. Murali, joint managing director, Kasturi and Sons Ltd, publisher of The Hindu and the Business Line. Rising crude oil prices are pushing up shipping rates as well as the cost of production of newsprint, a highly energy-intensive process. Appreciation of the Canadian dollar and the euro versus the US dollar is hurting newsprint mills, as Canada and Europe are the major centres of newsprint production and the US is a major consumer. “The big mills are in a bad shape as the consumption in the US is declining by more than 10% year-on-year,” said Murali.
Even a spate of mergers among the biggest mills doesn’t seem to be helping. Abitibi Consolidated Inc. and Bowater Inc., two of the world’s largest newsprint makers based in the US, merged in early 2007 to form AbitibiBowater Inc., which now has a capacity of 5.9mt, or about 14.75% of global capacity. But a consistent decline in the consumption has not helped ease the pressure.
“India is almost at the bottom of the global newsprint realization chain. Basically, surplus capacity is shipped to us by North American producers. Since they are in a bad shape, and cutting capacity, first supplies to dry up will be ours,” said BCCL’s Jain.
In India, the Chinese suppliers, who were aggressively selling to the local buyers until recently, have pulled out as recycled newspapers, the primary raw material for recycled newsprint, is in short supply.
“Its price has also gone up,” said Murali, adding, “Incidentally, Chinese consumption is also going up in the run-up to the Beijing Olympics. I don’t think they will resume supply before the end of Olympics in April.”
The Hindu has announced an ad rate increase of 15% starting 1 April. “We are relatively comfortable because of our strong long-term relationships with suppliers,” Murali said. His firm is part of a buying group referred to in industry circles as the Southern Consortium. Apart from Kasturi and Sons, Mathrubhumi Printing and Publishing Co., publisher of Malayalam daily Mathrubhumi, Malayala Manorama’s publisher Malayala Manorama Co. Ltd, and Deccan Herald’s The Printers (Mysore) Pvt. Ltd, have been buying imported newsprint together since 1992, when the government allowed individual firms to import newsprint .
Jain said publishers are likely to seek some relief from the government. “We will take a representation to the government asking for abolition of the 5% customs duty on newsprint,” he said. “Also, we’ll persuade them to impose a 30% surcharge on DAVP ads.”
And while existing players are raising alarm, some newer players seem sanguine.
Jagati Publications Pvt. Ltd is set to launch Telugu newspaper Saakshi with a planned print run of 1.2 million copies, according to K.R.P. Reddy, the firm’s director for marketing. “There is a shortage of newsprint, but we have made all arrangements,” he said.