Oct. 8 (Bloomberg) -- UPM-Kymmene Oyj and other European papermakers will emerge from the economic crisis in better shape than they entered it after closing unprofitable plants and cutting production, UPM Chairman Bjoern Wahlroos said.

“The industry is coming out of this cyclical downturn rather well,” Wahlroos said in an interview in Helsinki yesterday. “They will emerge in a much better shape than what they have ever been in before.”

The global economic crisis has forced European papermakers to idle production and temporarily lay off thousands of workers after demand slumped. Finland is home to Europe’s two biggest papermakers, Stora Enso Oyj and UPM, part of a Finnish industry that has shut 18 percent of its capacity in the Nordic country since 2005, according to Finland’s Economy Ministry.

Stora Enso said in August it will shutter the Sunila pulp mill in Finland, and it plans to close the Varkaus paper mill complex by the end of 2010 if poor sales and pricing of uncoated fine paper continue. Finland plans to cut energy taxes to help suppliers of lumber, pulp and paper like Stora Enso and UPM regain competitiveness against rivals further south.

UPM rose as much as 25 cents, or 3.2 percent, to 8.10 euros and was up 2.8 percent as of 12:11 p.m. in Helsinki. UPM has declined 10 percent this year, valuing the papermaker at 4.2 billion euros. Stora Enso gained as much as 2.8 percent.

Not all papermakers are poised for success, Wahlroos said. Paper companies that don’t have access to cheap energy, don’t own their pulp or who are focused on producing newsprint will “not have a good run over the intermediate future,” he said.

The forest industry employs 200,000 Finns, accounting for 19 percent of exports in the first half of 2009. Its share of Finland’s economy has halved in eight years to 2.9 percent in 2008, according to the Finnish Forest Industries Federation.

The European forest industry may have been too concentrated on consolidation in recent years, meaning it lost focus on a shift in demand from the U.S. and Europe to Asia, Wahlroos said.

“It missed to some extent the fairly dramatic change in competitive circumstances, which simply was due to the fact that demand for paper and pulp is growing on the other side of the globe, in China and India and elsewhere,” Wahlroos.

To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net.

Last Updated: October 8, 2009 05:18 EDT