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October 27, 2022updated 24 Jan 2023 10:23am

Pulp friction: Why paper has become a huge headache for publishers

By Bron Maher

News publishers’ digital challenges are legion, but a more conventional problem has come into sharp focus this year: the price of paper.

In its half-year results released in July, publishing giant Reach reported a 65% year-on-year increase in its newsprint costs – up £13.6m.

Gannett, the US publisher that owns USA Today and, in the UK, local newspaper chains Newsquest and Archant, in August estimated it had taken a year-on-year hit in the second quarter of $23m (£20.4m) from inflation in newsprint and fuel prices.

To understand the story of paper price increases this year we need to look at the invasion of Ukraine, the weakening pound and the onward march of Amazon.

But first: do you know how a newspaper gets made?

Paper price rises begin at the first stage

Ignore anyone who says recycling is pointless: 70% of UK paper production uses reclaimed wood fibres. But the cellulose from which paper is made degrades from repeated use, meaning sustainably-managed forestry has to make up the final 30%.

Most wood is used for construction and manufacturing. Forest Research, an agency within the UK’s Forestry Commission, estimates that in 2021, 6.3 million tonnes of industrial wood – 56% of the nation’s total – was delivered to sawmills for processing into lumber. Only 400,000 tonnes, 3.6% of the total, went to pulp and paper mills.

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Forestry is the first place in the story a price increase butts in. The pandemic created roaring demand for home improvement, and since then the construction industry has bounced back. The Financial Times reported last year that despite cooling demand as lockdowns eased, “lumber brokers expect lofty prices for years” owing to “strong demand for new homes after decades of underbuilding”.

And that was in June 2021 – months before Ukraine, the country that provides 10% of Europe’s softwood, got invaded by the one that provides 22% of global supply.

According to a Wood Resources International report written-up by trade journal Packaging Europe, in 2021 Russia, Belarus and Ukraine together accounted for 25% of the world’s timber trade. Sanctions have since sharply curtailed Russian wood exports; production in Ukraine has meanwhile been understandably disrupted. Industrial research firm IBIS World puts UK timber prices up 34.5% year-on-year in 2022, and up 51% on 2018.

Thankfully, much of the UK’s graphic paper comes from recycled paper from China or wood harvested in Scandinavia – but less and less of the latter is being turned into paper.

Pulp: competing people

Paper is made from pulp, a fibrous material obtained by either chemically disintegrating wood chips in a vat or – preferred for newsprint – crushing wood in a grinder. (Much UK newsprint comes from recycled paper – more on that later.)

The white paper in your printer, as well as many magazines, is compositionally distinct from the material news gets printed on. Newsprint is cheaper, and retains the coarse lignin which gets bleached out of other products, resulting in the distinct look and feel of a newspaper. Lignin breaks down under light and air exposure, which is why newspapers discolour rapidly – a quality that’s bad for books and archival paper, but fine for short-lived products such as news. 

The trouble is, other industries are competing for high-lignin pulp. Kyle Jardin, an economist and Northern Ireland manager for the British Printing Industries Federation, told Press Gazette: “There’s quite a long investment cycle when it comes to making paper.”

Jardin said if you go back a few years, “paper consumption was falling across the western world of printing. Paper was looking like a less attractive proposition for people that are making pulp - because there are other alternatives that can be done, not all pulp goes towards making paper”.

Before the pandemic, there had been a perceived reduction in demand for paper products in general, and newsprint in particular.

For those mills able to make printing paper, Jardin said, “other options were looking more attractive than making paper. Going back a few years, things like biofuel, some packaging grades - corrugated packaging was looking attractive because of the rise of Amazon, home deliveries, that kind of thing.

“Some papermakers took a decision to either slightly wind down their papermaking facilities and maybe retool their investments and their equipment towards making other types of packaging or going towards biofuel.”

Covid, in prompting a drop in demand for paper publications, worsened the situation markedly. In February 2021 SCA, a major paper producer, exited the graphic paper market, citing a 30% to 40% drop in demand caused by the pandemic - depriving buyers of 800,000 tonnes of the stuff annually.

In June of the same year, citing low prices driven by low demand, Finnish paper producer Stora Enso closed its major Veitsiluoto plant, which had previously produced the medium weight coated paper required by glossy magazines. That took 260,000 tonnes of paper off the market.

And in September 2021 the company shut yet another plant at Kvarnsveden, losing a further 565,000 tonnes of magazine and newsprint capacity a year.

Meanwhile the pandemic drove a huge increase in the number of home deliveries - and with them the amount of paper packaging needed.

The British Printing Industries Federation published research in August indicating the UK had consumed 12.4% more paper packaging in Q1 2022 than in Q1 2021.

Home deliverers, be they Amazon, Etsy or food vendors, have an advantage over print publishers when it comes to the price of paper. If there is a 10% increase in the price of paper for Ikea, it is only a fraction less profitable to ship a mattress. But for GQ or The Times, that increase is substantially more painful because it hits the price of the product itself.

And there are other sources of volatility: at the end of 2021, Finland’s papermakers’ union went on a 112-day strike in pursuit of a renewed contract, knocking out 50% of Europe’s magazine paper production as well as a major source for US publishers’ paper.

In some cases in Scandinavia, where the shortage was most acute, magazines were printed on newsprint or ran without covers.

High energy costs

Among UK printers, paper is by far the largest cost, accounting for an average of 37% of their cost structures.

Newsprint prices in particular have risen faster than other kinds of paper, up 18% year-on-year in July. Only magazine paper (16%) and cartonboard (i.e. packaging, 20%) rose a comparable amount.

But, Jardin said, as large as the paper price increases have been, the cost that’s alarming printers the most now is the same one that’s hammering everyone.

Every stage of the paper-production process - hauling felled trees, crushing them into splinters or zipping the resulting paper through room-sized printing machines - uses a lot of energy.

Before 2022, Jardin and the BPIF say, raw paper costs were what drove price increases for printers. Those pressures persist: but now they’re joined by the same heaving energy prices to which every other industry and individual is subject.

Some 68% of printing companies surveyed by BPIF in July put rising energy costs as a top business concern, and 65% the rising price of paper. Numerous printers are operating at full capacity to meet demand, but that capacity itself is constrained by a shortage of labour and supply chain issues.

Some printers are being hit with €200 - €300 (£174 - £260) energy surcharges at days' notice by paper mills unable to absorb accelerating energy costs. Orders are being placed with mills at 30 days' notice - markedly down from two years ago when contracts might be drawn up six months before.

Another problem for newsprint arises in shipping: besides the rising fuel costs, much of the recycled pulp used for newspapers comes from China, meaning it has to secure passage on ships that have become notoriously high-demand since the start of the pandemic.

Worse still, that haulage - as well as pulp, ink, chemicals and more or less every commodity or international service that goes into making a print product - is priced in dollars, further stinging any manufacturer or publisher based outside the United States.

One industry source with whom Press Gazette spoke said they had seen prices up 75%, or in certain places 150%, on last year.

Will paper prices come back down?

With all the mill closures and more potentially on the horizon, it is unclear when prices will settle. The industry source said: "The camel's back is creaking."

For now, publishers have a few options to try to get above the rising waterline: they can reduce their paper grade, sacrificing thickness and texture. They can reduce their print volumes and pagination (the number of pages within a paper) - Reach, for example, has dropped each by about 5%.

And as many publishers including Reach have, print news publishers can pass the cost pressures onto consumers. That would be unattractive to most companies - but even that option isn't available to all publishers, with freesheets particularly vulnerable.

Press Gazette asked one editor at a newspaper if they had a view of the rising cost of newsprint. The reply came back: “It's sub-fucking-optimal.”

Featured pictures: Shutterstock

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