By Sakari Suoninen, Nordic Forestry Correspondent
HELSINKI (Reuters) - Stora Enso (STERV.HE: Quote, Profile, Research, Stock Buzz) is prepared for a planned rise in Russian wood export duties, the head of Europe's top paper and board maker said on Wednesday.
The company is ready whether the duties come into effect or not, and even if they are in place only for a short period, CEO Jouko Karvinen told Reuters Paper Summit.
"We have been working for 18 months ... We have cut our imports of wood from Russia by 40 percent, that's a lot more than others," Karvinen said. "The important thing is that if it comes, we know how to deal with it."
Stora is also prepared if Russia raises lumber export duties to 50 euros per cubic meter, effectively doubling the cost of wood, Karvinen said. Russia increased the duties to 15 euros per cubic meter earlier this year.
If the duties are raised, Stora would only import chips from its sawmills, which are still exempt from the duty, he said.
Stora has added to its domestic wood buying and has moved sourcing to areas it previously left to others, and Karvinen said he was hopeful for domestic wood supply, despite a slowish start to the year after a record 2007.
"Within this quarter, which is about 40 days away, we will come with a plan that addresses the cost and margin situation in various areas," Karvinen said.
PERFECT STORM
The European paper industry has for years suffered from overcapacity, which has kept a lid on prices, while increasing costs of wood and energy have eaten into already low margins.
Many analysts have said industry consolidation could help the demand/supply balance.
"I dare to say we became stronger, we divested north America, we became more focused, strengthened the balance sheet. I don't wake up every morning saying that I want to be the CEO of the biggest forest company in the world," Karvinen said.
"The company became 20 percent smaller during my first year as CEO," he said.
A recent slew of weak economic data from Europe has not had an additional impact on demand, Karvinen said.
"No, it has not suffered more than we previously thought, the primary issue is cost inflation."
The company said in its second-quarter results release they saw early signs of weakening demand in some paper grades, including newsprint and fine paper. Weakening manufacturing hits packaging demand, Karvinen said. Continued...
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