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UPM-Kymmene, Stora Enso Lay Off Thousands

Two of the world's biggest paper makers announced thousands of layoffs, mill closures and production cuts to counter high costs and overcapacity in the industry.

HELSINKI, Finland (AP) -- Two of the world's biggest paper makers on Wednesday announced thousands of layoffs, mill closures and production cuts to counter high costs and overcapacity in the industry.

UPM-Kymmene Corp., the world-leading producer of magazine paper, said it will ax 1,600 jobs in 2009 and 2010 and cut production. Another Finland-based company, Stora Enso Oyj, announced mill closures and 1,700 layoffs, including 600 workers in Germany and 400 in Russia.

Both companies gave profit warnings in June and said they would announce new cost-cutting measures on top of earlier moves that axed hundreds of jobs, shut paper and pulp mills and reduced production.

The companies' shares jumped on market expectations of the announcements.

Stora surged more than 6 percent to 8.04 euros ($11.37), and UPM was up 4.6 percent at 12.77 euros ($18.06), in early afternoon trading on the Helsinki Stock Exchange.

Stora, one of the world's top forest products groups, said it also plans to transfer 1,450 employees in 2009 to a joint venture with Swiss-Swedish electrical engineering company ABB Ltd., and invest 135 million euros ($190 million) to improve efficiency. UPM said it plans streamlining measures that would save 70 million euros ($100 million) in fixed costs.

Analysts had expected more.

"This is just a sticking plaster, it's not a big enough bandage," said Olli Joutsimo from Glitnir Bank. "They are such big movers globally in the field that we could expect similar announcements elsewhere too."

Finland's Union of Salaried Employees demanded the government step in and take countermeasures to safeguard jobs in the Nordic country.

"This is a black day for the Finnish forest industry," union President Antti Rinne said, but stopped short of calling strikes or other industrial action. In 2005, the Finnish forest industry lost more than 1 billion euros ($1.4 billion) because of strikes that were called to protest layoffs and cutbacks.

Earlier this year, Finnish wood products companies reported plunging profits and sales caused by high raw material costs, a strong euro and a global economic downturn. Also, the world's largest paper maker, U.S.-based International Paper, cautioned it expects "continued input cost pressures."

Stora and UPM have both said that paper deliveries will be down in 2008, partly caused by hikes in wood export tariffs by Russia, a major supplier for companies in Finland and elsewhere in Europe.

According to Russian media reports, Moscow intends to increase the tax on wood exports to 15 euros ($21) per cubic meter (1.3 cubic yards) -- up from 10 euros ($14) per cubic meter.

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