As newsprint prices surge, print pins hope on festive season

After a brief period of relief, newsprint prices have surged to a new high due to factors such as increased container freight expenses and geopolitical disruptions, particularly in regions like Russia. The cost of newsprint has risen 7-8% recently, crossing $600 per metric tonne compared to $500 six-seven months ago. With newsprint prices significantly impacting the financial decisions of the print sector, industry leaders are concerned if costs continue to rise, it could pose substantial challenges for the industry and affect their business operations.

However, some industry leaders remain cautiously optimistic, anticipating growth opportunities ahead, particularly with the approaching festive period and the costs of newsprint remaining still lower compared to the peak of the COVID-19 pandemic.

Impact of rise in newsprint prices 

According to Rakesh Sharma, President of INS, in increase in newsprint costs alongside rising input and operational costs, will significantly affect the overall revenues of newspapers.

Suggesting what print industry could do to survive the situation, Sharma shared, “Publications can control the cost. The revenues are dependent on the package operations, and everybody has to make a strategy for enhancing their revenues. And if those targets and opportunities are not happening, then they can go in for cost control to keep it high on the bottom line.”

According to HT Media Q4 FY24 earnings concall, their average newsprint cost for that quarter was Rs 50,000 per tonne. As per DB Corp Q4FY24 earnings calls, their average newsprint cost for the quarter was Rs 49,500 per tonne. 

A senior executive of a leading English newspaper shared that in recent months, newsprint prices have seen a notable increase, surpassing $600 per tonne after hovering around $500 six months ago. This rise is attributed to several factors including escalating container freight costs in the Asian market, particularly in Japan, Korea, and China. The availability of containers has become restricted, further complicating supply chains. 

“Despite earlier reports of a decline in prices, recent trends indicate a hardening of newsprint costs, influenced by geopolitical tensions and sanctions affecting shipments from Russia. These developments are expected to impact newspaper operations, potentially affecting pagination and advertising strategies amid rising operational expenses driven by the strengthening US dollar against the Indian rupee,” he added. 

Manoj Singh, Vice President at Madison Communications, notes that there have been significant changes in newsprint pricing over recent years. Before the COVID-19 pandemic, newsprint costs were approximately $480 to $500 per metric tonne. Most of India's imported newsprint comes from Russia, owing to its proximity compared to Canada. However, post-COVID-19 and amidst the Russia-Ukraine conflict, these prices skyrocketed to around $1100 per metric tonne.

He said, “I don't think it will go down. Now the range would be $650-680. It can increase though because there are various factors. But it is not going to go down.”

Impact on circulation growth 

Amit Chopra, Joint Managing Director, Punjab Kesari, said the circulation revenue won't get impacted because it is dependent on the cover price. “The point is how much is it going to affect the profitability of a newspaper. The problem is that even though the prices go down by 10-15 dollars, there will not be much difference for us because the dollar has become more expensive. So, the price is almost the same. Indigenous suppliers haven't reduced prices at all.”

He further added, “We've not seen any publication increasing the number of pages in the last two years. So, it will not change anything. I don't think this is going to be a factor impacting the pagination.” 

Sharma informed that newspapers generally keep a ratio of 60-40 for news and advertising. He added, “So, if the advertising increases, the number of newspaper pages increases. The minimum column for advertising is always capped. Beyond that, it is always ad iteration.”

According to Singh, increasing news pages may not help the print industry unless they get advertising. Most of the newspapers follow a 60:40 ad vs edit ratio. If they have enough advertising, they can increase. I don't think it would be a great move to increase the number of pages when you are not getting ads.

“Most of the regional papers use domestic newsprint. Even for inside pages, they use domestic newsprint which would be 15-20% cheaper than imported newsprint. Additionally, either they have to increase their cover price or they will have to increase their card rate or operating rate. Otherwise, I don't see any other model as far as print revenue is concerned. There are other revenue models that they can work for digital, but for print, there are only two sources. One is subscription and another is the rate. Either they increase their rate or increase their cover price and both are very tough, both are challenging for newspapers,” said Singh 

Outlook for upcoming quarter 

According to Girish Agarwal, Non-Executive Director at DB Corp, in the earnings call, had said the first half (H1) has been fantastic for them and for Indian language newspapers. He mentioned that the way the Indian economy is shaping up, the upcoming quarters look very promising.

Speaking about the Bhaskar group, he had said that they would want to achieve some more circulation growth. He also mentioned that DB Corp was doing multiple things to increase the circulation revenue, including launching reader schemes, putting more infrastructure, making sure paper reaches to more readers, increasing the number of pages and connecting with more readers. Agarwal is hopeful of a double-digit growth this year.

Another senior executive, on the condition of anonymity, suggested that while costs are increasing, the overall impact on the industry might be mitigated. He pointed out, "We are seeing a notable uptick in advertising spending on print media following the recent elections. As we approach the festive season, which traditionally boosts ad revenues, the industry outlook for the second half of the year appears optimistic."