Paper crisis could put news titles out of business

Paper shortages fuelled by soaring electricity prices and shipping costs could put some Australian newspapers and magazines out of commission, as publishers grapple with the rising cost of newsprint.

One of the world’s biggest paper suppliers, Norwegian-owned Norske Skog, is in the middle renegotiating contracts with newspaper and magazine publishers as it battles to keep its only Australian paper mill running and profitable.

However, its proposed price increases, which industry sources say are between 30 and 40 per cent, could prove fatal to some mastheads or lead to a reduction in the size or number of newspapers distributed in the lead-up to the federal election.

Tony Kendall, managing director of regional publishing company Australian Community Media (owner of The Canberra Times and Newcastle Herald, as well as hundreds of regional publications), said the price hike, scheduled for July, posed the worst crisis for local publishers since World War II.

“[The full price increase] will push some of our publications into negative profitability,” Mr Kendall said. “I think there’ll be widespread closures. I don’t know how independent publishers will cope.”

Norske Skog is the main provider of paper to the local publishing industry. It runs a mill in Tasmania and until recently ran a New Zealand Mill. The Tasmanian mill – known as Boyer – produced Australia’s first newsprint in 1941 and remains one of the state’s major employers. But industry sources, familiar with the position of Norske Skog, said it had lost money in Australia for more than a decade and was told by its parent company that it can only support local publishers if it is profitable to do so.

The company told publishers last year it planned to increase the price of newsprint by about 30 per cent and the cost of glossy paper – used for real-estate pullouts and suburban titles – by between 35 and 45 per cent. The decision was related to electricity prices, high cost of freight shipping and reduced newsprint demand rather than an attempt to generate large profits.

Paper is expensive because of the amount of energy needed to produce it. Publishing companies are competing against packaging and toilet paper companies for limited fibre resources globally, which are driving up costs. Failure of Norske Skog to secure the price increases will result in the closure of the Tasmanian mill, which would cause major problems for the local publishing industry.

Companies including News Corp Australia, publisher of The Australian, The Daily Telegraph and The Herald Sun, and Nine Entertainment Co, the owner of this masthead, are trying to renegotiate their prices. The impact on these businesses is more likely to be an increase in cover price or advertising rates over time rather than closure. Nine sources, who spoke on the condition of anonymity, said the company was close to finalising a deal and that it had not had any issues in negotiations.