Newsprint Price Hike: "Damage" or "Rebirth" (Ⅰ)

(NPES International Printing E-Commerce Website 2008-09-16) Given the domestic and international situation, the newsprint industry has started to recover, it is expected that the price will become stable after a period of adjustment, but it is natural that the price still remains high in the short term.
From a long-term point of view, the system creation and mechanism innovation of Newspaper System is the fundamental way out for newsprint. Encountering the great impact from the paper price hike, the traditional business model is unsustainable, which provide a good opportunity for the transition of media.
Newsprint, which occupies 70% of the cost of newspaper printing, is the most important raw materials in the Newspaper operation. At present, the soaring price of newsprint has been directly touched the lifeblood of newspapers and continues to bring enormous impact on the press. To Analyze the causes of newsprint price hike and reveal the fluctuations, its focus is to grasp the operation rules and seek policy to response.
Fluctuations of price, spirally rising on the whole

Ⅰ .The basic trend
Since the 1990s, Given the price fluctuations of China's newsprint, it shows "W" direction on the whole.
The first characteristic: "Three high and two low" wave-like movements. The first high point is in 1995 (it is also the highest point), the price is more than 7,000 yuan per ton. There are several times of slight price drop after that. The price rises again in 2000 and reached the second high point at the end of 2004, which is 5,900 yuan per ton. The Decline stated since 2005 and dropped to around 4,500 yuan in mid-2006, which cut down nearly 1,000 yuan and is the lowest for many years. The market implementation price is 4,850 yuan per ton at the end of 2007. The domestic newsprint price rose sharply since the beginning of 2008, which is far beyond people's expectation. The newsprint implementation market price reached 5,300 yuan per ton in March; newsprint price rose 600 to 700 yuan per ton in a short period of three months compared to the price at the end of 2007, the price increase range is more than 10%. The price of newsprint has been raised to 500 yuan per ton in June. Parts of the domestic paper manufacturer’s paper price has nearly close to 6,300 yuan per ton in August, it is expected that the price may exceed 6,500 yuan per ton in the second half of 2008, which will become the third high point.
The second characteristic: the price spirally rises on the whole. The domestic newsprint price is 600 yuan per ton in1980 rose to the current price, which is more than 6,000 yuan per ton and gradually increased 10 times in less than 30 years. Whether 6000 yuan per ton has met the price peak, when the price hike will stop and cut down? These questions are newspaper operators required to think about and resolve.
The third characteristic: The Newspaper industry had undergone serious "Damage". Formerly, every time of newsprint price hike is accompanied by the rapid revenue growth of Newspaper advertising, but paper price hike in 2008 came out under the circumstances that the traditional media advertising market was in overall weakness. Related data show that China’s Newspaper Ad receiving income in 2007 was just only 6% of the same period in 2006, considering the layout discount, the actual receiving rate indicators and factors of rising prices, actually, the advertising revenue increase range of domestic newspaper industry is limited on the whole.

Ⅱ. Analysis of driving forces
From the development operation of paper industry point of view, this round of newsprint price increase is the result of three factors and their comprehensive functions.
First, the rising price of raw materials. The raw materials of domestic newsprint mainly come from imported waste paper and pulp; paper manufacturers mainly use the waste paper from USA as the main raw material. The annual supply volume of global waste newspapers is dropping year by year, which result the waste paper price showed the increasing trend. The domestic price has reached 250 U.S. dollars per ton at the end of January 2008, which led to the gross profit rate of domestic newsprint industry sharply declined; the whole newsprint industry is more difficult to operate than before.
Second, adjustment of industrial structure. Paper industry is a highly competitive industry; the market's "invisible hand" leads the development of paper industry. Since 2005, newsprint market was seriously poor, but cultural paper, packing paper and tissue market is good, so some newsprint manufacturers have transferred their business. Speeding up the integration within the industry and the concentration of production ability trend is obviously, which bring in the production volume tension periodically, and make the initiative of the current paper enterprises in product bargaining is upgrading, the market supply and demand tilted to the "seller".
Third, adjustments of national policy. Paper industry with high energy consumption and high pollution is the focus in national emission reduction and energy-saving policy and regulation. In accordance with national energy-saving and emission reduction plan, China has increased its momentum to obsolete backward papermaking process throughout the country in 2007, and closed down a large number of small paper and pulp production line. Only in September 2007, there are more than 1,500 small pulp enterprises are closed down or rectify throughout the country, which led to the newsprint shortfall increased on the whole, the relation between supply and demand becomes tense and imbalance.
In addition, the effects on paper industry from the current macroeconomic environment can not be ignored. The appreciation of the Renminbi, the rising costs of raw materials and labor, the lower export tax rebate, and added the effect from American subprime loan crisis, multiple factors are intertwined, resulting in increased pressure on paper companies to survive. Newsprint price increase becomes the last option of the industry.
Judging from the newsprint supplied by Newspaper offices, there are two factors have led to rising newsprint price. First, reducing supply. The production capacity of paper manufacturers is limited, added with unexpected natural disasters which brought about the tension of production capacity, resulting in insufficient supply of newsprint. The second is the increasing demand. Olympic print media become warming, the newsprint consumption volume of professional newspaper, City newspapers and newspapers in second-tier cities increased rapidly and stimulated the demand for newsprint.

Ⅲ. The future trend
The paper price follows the price curve rule of economics: the increased demand for paper, paper making enterprises to invest in new plants or increase more production lines, and massive products poured, resulting in oversupply; paper prices fell, paper industry is in difficult circumstances, some paper manufacturers closed, paper price rose due to insufficient supply of paper.(Author: Wang Jiasi)