Newsprint production cut coming

NEW YORK, Dec. 3 (Reuters) — AbitibiBowater Inc.’s plans to drastically reduce newsprint production will cut excess capacity in North America and underpin a newsprint price rise next year.
The North American newsprint industry has been hurt by high wood, energy and labor costs, coupled with falling newsprint prices and declining demand.
In a bid to tackle the issues, the industry has been consolidating and reducing production capacity. It also plans to raise newsprint prices by $60 a ton in the first quarter of 2008, following this quarter’s $25-per-ton price rise.
AbitibiBowater, the largest North American newsprint maker, was formed in October following Bowater’s purchase of Abitibi-Consolidated. The company recently announced it would close or idle several mills and reduce annual newsprint production by about 600,000 tons by the first quarter of 2008. Canadian newsprint makers account for about 60 percent of North American production.
The industry’s plans to push through another price increase in the first quarter could further squeeze profit margins of newspaper companies.
AbitibiBowater’s production cuts represent about 5 percent of North American capacity and are even more significant given that it comes at a time when newsprint inventories in North America are at the lowest point in more than 15 years.
AbitibiBowater plans to conduct a mid-year review in 2008 and determine whether
additional capacity cuts are required.
North American newsprint demand is down 11 percent this year. The decline is expected to continue, but the North American industry has been bolstered by rising newsprint exports, spurred by a weak U.S. dollar and strong demand and pricing in Europe. AbitibiBowater sells about a third of its newsprint outside of North America, and it expects exports to increase.

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