04 July 2009

CEO comment on market outlook

Stora Enso's Market Outlook published on 23 April 2009

Near-term Market Outlook

In Europe market demand is forecast to remain weak and clearly lower than a year ago for all the Group’s products, with no material improvement anticipated until the economic environment starts recovering.

The supply and demand balance in the industry has improved, although the recent rapid deterioration in demand has disturbed the balance slightly. Advertising expenditure has fallen sharply and is predicted to remain weak, significantly reducing demand for graphic paper grades in the coming months.

Newsprint demand is also affected by declines in circulations of paid and free newspapers. Markets for packaging and wood products are likely to remain weak, although some seasonal improvement in demand is anticipated in the second quarter for some consumer board grades, corrugated packaging and wood products. Production of wood products is expected to decrease in Europe, and this should gradually improve the supply and demand balance.

In Europe publication paper prices are forecast to stay the same as in the first quarter of 2009. Prices for coated fine paper sheets are expected to increase. Prices for coated fine paper reels, uncoated fine paper, some packaging products and wood products are likely to remain under pressure.

In China demand for uncoated magazine paper and coated fine paper is forecast to remain weak. Prices for uncoated magazine paper are expected to be exposed to price pressure in competing with coated magazine paper, but coated fine paper prices show signs that they have bottomed out.

In Latin America prices for coated magazine paper will remain under pressure due to increasing imports. Local demand is expected to stay fairly stable.

Stora Enso forecasts its cost deflation excluding internal actions to be 4% for the full year 2009, the main contributor being reduced fibre costs.