UPDATE 4-UPM posts Q1 loss, sees no demand rebound in 2009

* Q1 opg loss 95 mln euros vs 9 mln loss forecast in poll

* Sees 2009 deliveries "markedly" lower than 2008

* Sees deliveries in Q2 picking up from Q1

* Core units in line, weakness in pulp, plywood - analyst

* Shares up 3 pct after early falls

(Adds details, CEO quotes; updates share price)

By John Acher

HELSINKI, April 29 (Reuters) - Finnish papermaker UPM-Kymmene (UPM1V.HE) reported a deeper-than-forecast loss for the first quarter on Wednesday, hit by poor demand, and said 2009 deliveries would fall "markedly" below last year's level.

After a steep early drop, UPM shares rebounded and rose as much as 4 percent as analysts said the below-forecast performance was confined to the pulp and plywood divisions though operating results were weak across the board.

"Weak demand in most products continues," Chief Executive Jussi Pesonen told a news conference. "We need to focus on cost savings and cash ... Profitability is the No. 1 focus for UPM in the coming quarters."

"This year we do not expect economic activity to pick up in a way that would have a substantial impact on the demand for our main products," Pesonen said in a statement.

The paper industry has struggled for more than six years to emerge from a slump, hit by overcapacity and soft demand, which have kept earnings poor and held prices down.

UPM's January-March losses before interest and tax totalled 95 million euros ($124 million), against a profit of 193 million in the same quarter last year.

The result undershot an average loss forecast of 9 million euros in a Reuters poll of 12 analysts, and was at the low end of the range of estimates.

Shares in UPM opened sharply lower but recovered to trade up 2.9 percent at 6.74 euros by 1323 GMT, aided by a rising Helsinki bourse and outperforming a flat DJ Stoxx basic resources index .SXPP.