Stora Enso, the world’s top paper and board maker, has said newspaper and book paper prices would fall this year and warned first-quarter profit would be flat, citing high wood costs.

“This is the fourth profit warning since October, and the second relating to wood products. And the situation does not seem to get any better during the remainder of this year,” Reuters quoted an analyst who did not want to be named.
Stora said annual talks with customers on newsprint and book paper prices had nearly finished and prices would on average decline by 3 per cent to 4 per cent in local currencies.
The news comes as paper makers are trying to regain pricing power by cutting capacity after six weak years as paper demand growth has slowed and costs are rising.
“A price decline of 3-4 per cent in newsprint is surprising. I would have thought we would see that rather in printing paper,” a Stockholm based trader said. Stora Enso said it was planning further reductions of sawn wood production this year and the Wood Products unit would “struggle to produce an operating profit” for 2008.
Stora Enso is an integrated paper, packaging and forest products company, producing newsprint and book paper, magazine paper, fine paper, consumer board, industrial packaging and wood products. The company has an annual production capacity of 13.1 million tonnes of paper and board and 7.5 million cu m of sawn wood products. Stora Enso serves primarily business-to-business customers, through its own sales and marketing network. Its sales totaled 13.4 bilion euros in 2007.
Meanwhile, the top maker of magazine paper, UPM-Kymmene, expects paper demand will continue to be good in 2008, though demand for sawn timber products is weak, its chief executive Jussi Pesonen said.
“Paper demand continues to be good. Already announced and completed capacity reductions further improve market balance in Europe,” Reuters quoted Pesonen as saying in a speech to shareholders.
UPM’s profitability programme for 2006-2008 was proceeding as planned and the company expected cost savings of around 150 million euros in this year and 200 million euros in 2009, he said. Paper makers have for years suffered from over-capacity and weak demand that have made paper price increases difficult. Companies such as UPM and Stora Enso have launched profitability programmes to cut capacity and hundreds of jobs.
Pesonen said he could not rule out further capacity cuts.
“UPM will participate in (industry) restructuring only if it creates value for the company and its shareholders,” he said.