Newsprint inflation puts pressure on the press

In all those years of plummeting print runs, UK newspaper publishers had at least been spared one worry. The exodus of readers to digital media has kept the cost of paper used in printing presses one of their biggest expenses.

Today, however, inflation poses a new threat to the declining environment. After more than a decade of cheap newsprint, prices have risen in recent months at the fastest rate since at least the mid-1990s. Higher energy costs, required to power printing facilities, have increased. are another concern.

Unless the pressures ease, some executives have said, publishers will be forced to increase cover prices, reduce the number of pages, or speed up the closure of more titles. A senior industry executive described the rising cost of newsprint as a “crisis” that threatened to cause even more “radical changes” over the next five years. “Some titles won’t survive,” the person said.

Daily Mail and General Trust, the company behind the nation’s best-selling daily, has previously announced that it is revising the number of employees in response to increased spending.

Concerns over input costs, meanwhile, weighed on shares of London Daily Mirror publisher Reach, which have fallen by nearly a third since early September.

Most UK newspapers are produced by three companies – News Corp, Daily Mail and General Trust and Reach – to which other publishers outsource the printing © Edward Smith / Getty

People familiar with the company, whose portfolio includes around 110 regional titles, said it is leading discussions on the terms of the semi-annual newsprint supplier agreements that are due to be renewed next month.

Henry Faure Walker, managing director of Newsquest, which publishes 22 dailies including The Northern Echo, The Herald in Glasgow and The Argus in Brighton, called recent newsprint inflation “dramatic”.

But he said the move online meant newsprint costs “were having less impact today than they would be five or ten years ago.”

Local and national publishers are learning to adapt to digital, which at Reach, for example, generates around a quarter of revenue. Even after the recent massive sell-off, its shares have further quintupled over the past three years as investors have grown more confident in its ability to manage the transition.

Susan Panuccio, CFO of News Corp, told a conference this week that digital is now part of the “DNA” of Rupert Murdoch’s global portfolio of publications, which includes The Times and The Sun in the UK. .

Still, she added: “This does not mean that there is [not] going to be significant cost reductions in different markets at different times. . . Obviously, the impression remains disputed.

Most UK newspapers are produced by three companies – News Corp, DMGT and Reach – to which other publishers outsource the printing.

At the start of the pandemic, a collapse in newspaper sales caused newsprint prices to plummet. However, subsequent supply imbalances caused a surge.

Over the past year, according to commodity data provider Fastmarkets, European newsprint prices have fallen from around € 445 to € 535 per tonne. Executives and analysts said some printers saw much larger increases of around 60%.

Just a few weeks ago, according to Douglas McCabe, chief executive of Enders Analysis, the pressures were so great that some companies feared they would not be able to obtain enough newsprint to meet their needs, although he suspected that the “great fear of availability” had recently subsided.

Line graph of € per tonne showing that European newsprint prices have skyrocketed

The supply of raw material is limited in part due to competition from the technology sector, with which newspapers compete not only for readers and advertisers, but increasingly also for production facilities.

While some factories have closed completely in response to the decline of newspapers, others have converted their machines to produce cardboard in order to meet the growing demand for e-commerce.

As a result, the number of newsprint factories has shrunk and the UK has just one factory, at King’s Lynn in Norfolk, leaving printers dependent on imports from Scandinavia and Canada.

Newsprint milling is energy intensive, so higher natural gas prices have been a big issue. The same is true of the higher costs of fiber. Prices for old newspapers and sorted graphic papers, the main source of fiber for newsprint, have roughly tripled in the past year, said Alejandro Mata, director of Fastmarkets.

None of the options open to publishers to reduce impact are attractive.

Cover price increases threaten to deter even more consumers from buying a newspaper.

Prices have risen steadily over the years: between 2010 and 2018, the average price of blanket among nationals increased by almost 60%, according to Enders. McCabe said he suspected that “quality” publications, particularly weekend editions, had more leeway to push through further increases than tabloids.

Reductions in page count, on the other hand, may be obvious to readers at both ends of the market.

Newsagent in Barnsley sorts orders before his team delivers newspaper copies

Newspaper prices have risen steadily over the years: between 2010 and 2018, the average cover price among nationals increased by almost 60% © Leon Neal / Getty

Free titles were particularly vulnerable, analysts said, because by definition they cannot raise prices. These publications have already been particularly affected by the drop in home-work trips: Metro’s daily circulation was 1.1 million in September against more than 1.4 million before the pandemic.

Faure Walker said: “Free newspaper publishers and small local publishers are likely to feel more pain from the dramatic increase in newsprint prices than perhaps the larger publishers. “

Job cuts are not a panacea for preserving the future of newspapers, especially since many newsrooms are already operating on tight budgets.

Publishers must invest in quality content to succeed digitally, said Chris Morley, national coordinator of the National Union of Journalists. “It makes no sense to cut journalism jobs because of a temporary phenomenon.”

The big worry is that cost pressures will continue, McCabe said, adding that even the most hardened newspaper executives had been “concerned about the speed and ferocity” of the rising costs.

“Most companies appreciate that [energy inflation] will stabilize and may even start to fall again in due course, ”he said. “But it’s an aspect of their business that they can’t control. No one likes to be in a situation where you have lost control.

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