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Costly newsprint to hit publishing cos’ bottomline
Published on 19 Feb. 2010 11:40 PM IST
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Newspaper publishers are bracing themselves for a sharp drop in their profitability, thanks to an unbridled hike in newsprint prices, which has also prompted many of them to reschedule or shelve major expansion and growth plans. According to Economic Times, data sourced from RISI (International forest product & paper consultancy firm) shows that US East Coast prices — the barometer of global rates — has moved up by over 25% in just five months to touch $582 per tonne in January 2010 against $464 in August 2009. North American Newsprint manufacturers have also announced another price hike of $50 per tonne for contracts starting March 2010. Rise in prices is not unjustified as manufacturers face increased pressure on the input side — old newsprint/waste paper, energy (crude & gas), chemicals and transportation — which has been increasing globally. Manufacturers are struggling to keep newsprint prices aligned to their rising input costs. World’s largest newsprint manufacturers AbitibiBowater, Stora Enso and Norske Skog have reported heavy losses in 2009. UPM has been the only company to report a small profit last year. AbitibiBowater’s North American operations are currently still under Chapter 11. Last week, its UK operations too filed for Administration (Chapter 7). Against this backdrop, Indian publishers for whom newsprint constitutes the single largest cost element, accounting for 40 to 60% of total cost, are bracing themselves for a massive hike. Last year, the government on the recommendation from Indian Newspaper Society (INS) had supported the industry by exempting customs duty on newsprint. This helped Indian publishers weather the tough economic conditions post-2008 meltdown, when advertising spends (the main revenue source) had tanked. India, with an annual consumption of 1.8 million tonnes, imports 50% of the requirement as domestic capacity has always been lagging the demand growth. Quality concerns of domestic newsprint also force publishers to look for imported newsprint. Domestic price, which generally has a lag effect vis-a-vis international price, has already moved up 10% and is expected to soon catch up. Not to forget in the entire story that exchange rate plays a critical role, which continues to stay adverse. Rupee, which is currently at 47 to a dollar, has depreciated 18% from 39.75 in February 2008. Domestic manufacturers too are affected by same problems as their international counterparts , and are waiting in the wings to match price hikes. Publishers are emphasising the fact that unlike other industries , newspapers have a duty toward the society and are seen as the conscience-keepers to the nation — being at the forefront in safeguarding people’s right to freedom of speech — an invaluable part of a vibrant democracy. It goes without saying that if the growth of this industry is cut short, the future will be bleak. It remains to be seen whether Indian government shares this belief and supports publishers by continuing the duty-exemption on imported newsprint for them to sustain and grow in the long run.

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