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Canadian newsprint tariffs start to take a toll on U.S. newspaper industry

Canadian newsprint tariffs start to take a toll on U.S. newspaper industry
Jason Campbell adjusts rolls of newsprint before printing at the Columbian newspaper in Vancouver, Wash. (Natalie Behring / Getty Images)

Little noticed amid the trade war discussion, tariffs levied by the Trump administration on the Canadian paper used to make newsprint are starting to take a toll on U.S. newspapers and printers.

In the last few months, the Commerce Department has put in place two sets of duties on producers and exporters of uncoated groundwood paper from Canada. The first, in January, ranged from 4.42% to 9.93% of the wholesale price after a preliminary determination that suppliers had received financial assistance from the Canadian government.

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Then in March, a separate preliminary finding by the Commerce Department resulted in anti-dumping duties of 22.16% for some Canadian paper producers and exporters.

Together, the two sets of duties have raised the price of newsprint by about 30%. Final results for both investigations are expected in August.

Some U.S. newspapers and third-party printers say they've already seen the effect of the tariffs in industries that are already facing declining revenues. The Tampa Bay Times said it will eliminate about 50 jobs by June to try to manage the estimated $3.5-million additional cost the paper will pay per year as a result of the tariffs.

"It's really going to have a devastating effect on the newspaper industry, and it will ripple through the rest of the printing industry," said Frank Romano, professor emeritus at Rochester Institute of Technology and an expert in printing. "You're almost taxing some newspapers out of business."

The petitions that led to the tariffs were filed in August by North Pacific Paper Co., a Longview, Wash., producer of uncoated groundwood paper — the material on which most newspapers are printed.

Two decades ago, there were about 15 newsprint mills in the U.S., said Paul Boyle, senior vice president of public policy at the News Media Alliance, a trade group representing almost 2,000 news organizations. But as the newspaper industry fell on difficult times and demand for newsprint steadily decreased, the mills began to disappear.

Today, there are only a handful left in the nation, Boyle said.

The U.S. demand for newsprint is 2.4 million tons, he said; Canadian paper mills provide about 60% of that. At the Tampa Bay Times, about 80% of its newsprint supply was Canadian, said Paul Tash, chairman and chief executive of the Tampa Bay Times/Times Publishing Co.

"America does not produce enough newsprint to meet the needs of American customers," he said. "There's not a lot of spare capacity in the market."

Tronc Inc., parent company of the Los Angeles Times, declined to comment on how the tariffs would affect the paper. But during an earnings call Wednesday, Tronc Chief Financial Officer Terry Jimenez said newsprint was at "historically extraordinarily high prices," mostly due to the tariffs.

"A government-supported policy that makes the production of newspapers costlier at an inflection point in the industry is unwise and unwarranted," Tronc Chairman and Chief Executive Justin Dearborn said on the call. "We strongly oppose the tariffs and believe they are counterproductive to public policy and to free markets broadly."

North Pacific Paper, which is owned by private equity firm One Rock Capital Partners, said it understands the concerns voiced by newspaper publishers. But company spokesman David Richey said the firm strongly disagreed "with the notion that their industry requires low-priced, subsidized newsprint from Canada to sustain their own business model."

The company closed one of its three paper machines last fall, a move a company spokesman attributed to the prior trade environment.

"We are not asking for anything but a level playing field with the Canadian producers," Richey said.

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Boyle of the News Media Alliance said the new tariffs would be unlikely to spur a paper mill rebirth. His organization is part of a coalition of dozens of newspaper publisher groups, printers and paper producers that are protesting the tariffs and plan to make their case to the U.S. International Trade Commission this summer.

"I think it's foolish to believe someone's going to start a newsprint mill and spend $200 million to $300 million to build a mill … when you see a decline in newsprint," Boyle said.

Other representatives of printing companies that produce items such as magazines, catalogs and retail advertising inserts say they're also preparing for a major financial hit. Canadian newsprint makes up about 20% of the volume moving through the presses at printer Quad/Graphics, a Sussex, Wis., company that has 20,000 employees in 25 states, including about 750 in California.

Quad buys about 300,000 tons of Canadian uncoated groundwood paper each year and expects to see an annual cost increase of about $15 million, said Pat Henderson, director of government affairs.

This comes as Quad's top-line revenues have been falling about 5% a year. The company has made 15 acquisitions since 2010, but print volume is still on the decline, Henderson said.

"The supply will not meet the demand," he said.

Twitter: @smasunaga

UPDATES:

11:15 a.m.: This article has been updated with details from a Tronc call with analysts.

This article was originally published at 3 a.m.

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