Stora Enso Oyj and UPM-Kymmene Oyj, Europe’s largest papermakers, declined in Helsinki after Morgan Stanley cut recommendations for their shares, citing an accelerating decline in demand for paper.
Stora Enso fell as much as 1.9 percent, the biggest intraday drop since Feb. 26. The stock was down 0.8 percent at 1:53 p.m. Helsinki, where the company is based. UPM fell as much as 1.6 percent and was down 0.7 percent.
“Around 25 to 40 percent of European demand will disappear within 10 years,” Markus Almerud, an analyst at Morgan Stanley said in a note. “The rapid fall in paper demand poses significant challenges to the industry, which we believe urgently needs to consolidate.” He downgraded Stora Enso and UPM to equal-weight from overweight.
Both companies have reduced capacity as consumers shift to online media and the euro-area debt crisis crimps demand. Stora Enso said last month it planned to cut 3.4 percent of European newsprint capacity, eliminating 600 jobs in the process.
UPM said in January it would cut 860 jobs as it shuts and sells some facilities in Finland, Germany and France. That followed previous measures to remove capacity and consolidate in the industry, including UPM’s 900 million-euro ($1.16 billion) purchase of Myllykoski Oyj and Rhein Papier GmbH in 2011.
“The Myllykoski deal was not the spark we hoped for,” Almerud said. “We believe the challenges that face the industry will be difficult to meet -- demand is falling too fast.”