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Paper Money

illustration by Oslo Davis

By Michael Arndt

Paper Money

With newspaper advertising and circulation in decline, U.S. demand for newsprint is plunging. Newsprint prices are another matter. Seemingly turning the law of supply and demand on its head, the cost of newsprint has jumped 29% from last summer, to $735 a ton. And industry leader AbitibiBowater plans to hike prices 11% more by yearend. Gracia Martore, chief financial officer of Gannett, the nation’s biggest newspaper company, calls the increases “unprecedented.”

What gives? The double-digit drop in U.S. consumption is being more than offset by increases in Asia and Latin America. Citigroup Global Markets analyst Chip Dillon notes that mills in North America are happy when domestic customers cut orders because it frees up tonnage to ship abroad—where the commodity often fetches even higher prices.

Newspaper readers will notice the marketplace shift. Gannett, publisher of USA Today, is moving to skinnier pages, while Tribune is slashing the number of pages in the Los Angeles Times and its other dailies by 15% to 20%. As long as demand holds up overseas, though, those cutbacks aren’t likely to lower prices.