CHARLOTTESVILLE, VA , Feb. 7, 2013 (Viewpoint) -
For the past several years, the European newsprint industry has been plagued by excess supply caused by withering domestic demand. While demand has retreated 2.7 million tonnes since 2008, capacity has fallen by only 1.5 million tonnes. Although European producers have attempted to make up for this shortfall by taking advantage of the weak euro and aggressively targeting offshore markets, the 298,000 tonne improvement in net exports last year fell short of mitigating the annual demand decline by 520,000 tonnes. As a result, the already weak newsprint market deteriorated even further, and we expect demand declines in Western Europe to continue to outweigh the modest growth in Eastern Europe, which will hamper the industry's efforts to return the market to balance. Even excluding the extremely poor levels caused by the global financial crisis in 2009, total European operating rates have averaged less than 92% since 2010, and Western European operating rates sank below 90% in the first three quarters of 2012.
Some relief is on the way for the industry, however, as a major round of recent and impending capacity closures focused in Europe may finally alleviate this market imbalance. Stora Enso recently announced the permanent shutdown of 475,000 tonnes of newsprint capacity in the second quarter of 2013 at its Hyltebruk and Kvarnsveden mills in Sweden; the company already closed another machine at Hyltebruk in the fourth quarter of last year. In Russia, Kondopoga's financial troubles have shuttered all but one machine at its 750,000 tonne mill since the fourth quarter of last year, leaving newsprint capacity down 565,000 tonnes for the immediate future. The company will avert bankruptcy and plans to modernize and eventually shift away from newsprint production. Burgo will close 160,000 tonnes of newsprint production at its Mantova, Italy, mill in February, and SCA plans to phase out the 140,000 tonne PM2 at its Ortviken, Sweden, mill as part of its plans to reduce exposure to standard newsprint. Table 1 lists European newsprint capacity changes above 50,000 tonnes in 2012-2013.
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