Holmen sees 2009 newsprint prices up sharply

Mikko Helander, CEO of M-real, speaks at the Reuters Paper Summit in Helsinki August 21, 2008.

STOCKHOLM/HELSINKI (Reuters) - Swedish papermaker Holmen (HOLMb.ST) sees newsprint prices rising substantially in Europe next year, its chief executive said on Thursday.

"I think we have a clear case of going forward with a price increase," Chief Executive Magnus Hall told the Reuters Paper Summit. "Absolutely in newsprint in Europe, definitely...We are speaking of a substantial price increase."

Holmen is trying to export as much newsprint outside Europe as possible, he said, while fulfilling existing contracts in Europe.

Hall also said he sees 10 percent price hikes in Europe for fresh fiberboard, despite demand falling by about 1 percent in the first half of the year. "I am fairly optimistic about that."

The head of Finnish M-real MRLBV.HE, Mikko Helander, told Reuters at the summit the firm was hiking cartonboard prices by 95 euros per tonne, and is already booking orders at that price. He said he sees consumption of cartonboard, used for packaging, growing steadily in the long term.

COSTS

Overall cost inflation is also coming close to a halt, Holmen's Hall said.

"I don't think we see much of cost inflation going forward at the moment, but we must of course compensate for what has happened."

Wood prices are flattening out after a period of rising, Hall said, adding "It is not increasing now."

A big part of the planned hike in Russian wood export duties is priced into the market, he added.

"I also think oil driven costs are going to cool off a little bit so I don't think we will see much cost inflation going forward."

M-real's Helander said the company is finishing its 300 million euro cost saving program, and will start new restructuring this year to compensate for rising costs.

He said M-real's access to pulp from Metsa-Botnia's pulp mill would help the company keep costs in check. "Pulp from Uruguay to M-real, and Latin America in general, is competitive. The main reason is wood."

(Reporting by Sakari Suoninen, Tarmo Virki and Anna Ringstrom; editing by Sue Thomas)