UPDATE 1-Deutsche Bank cuts Int'l Paper, Temple-Inland to hold

May 12 (Reuters) - Deutsche Bank downgraded International Paper Co (IP.N) and Temple-Inland Inc (TIN.N) to "hold" from "buy", citing valuation and near-term pricing risk for both containerboard producers.

"At $11.94, Temple-Inland is actually above our 12-month price target of $11. At $14, International Paper is within $2 of our $16 price target," the brokerage wrote in a note to clients.

Containerboard prices in some offshore markets are well below U.S. prices, and there are some signs that pricing pressure is intensifying in the domestic market, Deutsche Bank said.

"The risk of deeper and more dramatic pricing declines should underscore the industry's need for timely & permanent capacity cuts," the brokerage said.

Deutsche Bank, however, said both companies are expected to generate healthy free cash flow over the next 12 to 18 months.

Shares of International Paper fell 6 percent to $13.16, while those of Temple-Inland were down 7 percent at $11.11 in morning trade on the New York Stock Exchange.

For the alerts, please double click [ID:nWNAB8205] (Reporting by Arup Roychoudhury in Bangalore; Editing by Deepak Kannan) (arup.roychoudhury@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: arup.roychoudhury.reuters.com@reuters.net))