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Stora, UPM Fall as RISI Says Newsprint Prices May Decline 20%

European paper companies’ shares tumbled after RISI, a forest industry information provider, said 2010 newsprint prices will probably fall more than expected.

Stora Enso Oyj (STERV), Europe’s largest papermaker, fell 2.8 percent to 4.95 euros as of 5:46 p.m. in Helsinki, where it’s based, while Europe’s second-largest, UPM-Kymmene Oyj (UPM1V), slipped 2.2 percent.

“Price drops of 16-20 percent combined with increasing costs in 2010 will be a killing combination for producers with high gearing, maturing debts and high costs,” RISI said in the January issue of its Paper Trader Europe publication.

Companies haven’t closed enough capacity to keep supply and demand in balance, RISI said.

“Before the new year, I thought prices would decline 15 percent,” said Oslo-based DnB NOR ASA analyst Einar Kilde Evensen in a phone interview. “This is going to be very tough for the paper companies.”

Holmen AB (HOLMB), the Swedish company that sells newsprint to the Financial Times, retreated 2.9 percent to 187 kronor. Norske Skogindustrier ASA (NSG), the biggest Norwegian newsprint producer, fell 3.1 percent to 9.55 kroner.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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