Sandvik warns of Q2 operating loss, shares drop

* Order intake level has fallen April-May

* Sees Q2 operating loss of 2.2-2.5 bln Swedish crowns

* Order level intake level down 40-50 percent

* Current market situation "very weak"

* Stock down 6.9 pct, underperforming local bourse

(Adds analyst comment, share price)

By Daniel Dickson

STOCKHOLM, June 17 (Reuters) - Swedish specialty steel and tool maker Sandvik (SAND.ST) said on Wednesday it would post an operating loss for the second quarter due to weaker demand and the cost of scaling back production capacity and inventories.

The news sent Sandvik shares down as markets opened, falling 6.9 percent by 0710 GMT to underperform a 1.5 percent fall in the Stockholm bourse's blue-chip index .OMXS30.

Sandvik forecast an operating loss of 2.2-2.5 billion Swedish crowns ($282-$320 million) in the quarter and said order bookings had gradually declined in April-May and were 40-50 percent lower than a year ago.

"The current market situation is very weak, which has a substantial effect on a business like Sandvik's," the company said in a statement.

"Implemented and approved actions will have a gradual effect, but the weak volume trend in the second quarter and probably also the third quarter will have a significantly negative effect on earnings."

The company said its production rate had been lowered about 10 percent below the rate of order intake in the second quarter and that cost-cutting measures, both carried out and planned, would result in savings of nearly 6 billion crowns.

"The degree of weakness in demand is what's new here," Evli Bank analyst Magnus Axen said. "But that the result is affected so negatively can be expected in light of Sandvik's business model."

($1=7.816 Swedish crowns)