WRAPUP 1-Nordic papermakers Norske Skog, M-real ail in Q1

* Norske Skog sees Q1 results "significantly weaker" than Q4

* M-real posts deeper Q1 losses, sees demand staying weak

* M-real says may cut production more than earlier planned

* Norske Skog shares lose 1.8 pct, M-real down 2.4 pct

(Combines separates, adds detail, quotes; updates share prices)

By Aasa Christine Stoltz and John Acher

OSLO/HELSINKI, April 22 (Reuters) - Nordic papermakers Norske Skog (NSG.OL) and M-real (MRLBV.HE) said on Wednesday weak demand kept their business under heavy pressure in the first quarter, and M-real said the weakness would persist.

The paper industry has struggled for more than six years to emerge from a slump caused by soft demand and overproduction, which has held prices down and kept results poor.

The current global economic downturn has further damaged demand for basic materials, including paper and board.

Norway's Norske Skog warned that first-quarter results would be substantially weaker than in the fourth quarter of 2008, but better than in the first three months of last year.

The announcement preceded Norske Skog's official figures due on May 7 and results from Nordic rivals Stora Enso (STERV.HE) on Thursday and UPM-Kymmene (UPM1V.HE) on April 29.

"Demand has been weak in the beginning of 2009, which is in part linked to reduced customer inventories," Norske Skog said, adding that it had taken "extensive downtime" at several mills.

"This is the primary reason for the substantially weaker (gross operating) result compared with the fourth quarter of 2008," Norske Skog said, but added that the result would be better than in the first quarter of 2008.

Norske Skog, one of the world's biggest producers of newsprint and a large supplier of magazine paper, has said earlier that 2009 operating earnings would improve on 2008.

Fondsfinans analyst Per Haagensen said while it was not unexpected that Norske Skog's volumes were lower at the start of the year, it was a "positive surprise" that results would improve from a year ago.

But CSFB analyst Lars Kjellberg said: "The warning tells us things are still difficult, and I don't see it as good news."

Norske Skog said special items in the first quarter would include a loss of around 1.35 billion crowns ($199 million) on energy contracts and gains of about 270 million from the sale of a Czech mill and from financial items.

At 1023 GMT shares in Norske Skog were down 1.8 percent at 14.73 crowns in Oslo, and M-real's stock was down 2.4 percent at 0.41 euros. The DJ Stoxx basic resources index .SXPP was up 0.3 percent.

M-REAL LOSSES DEEPEN

Finland's M-real, which makes consumer packaging and fine paper, reported deeper though smaller-than-forecast underlying losses for the first quarter, but said it expected demand and delivery volumes to remain weak.

M-real posted a pretax loss excluding non-recurring items of 62 million euros ($80 million) in January-March, widening from a loss of 21 million a year ago, but beating all 13 forecasts from analysts polled by Reuters. The analysts' loss estimates ranged from 75 million to 125 million, with an average of 98 million euros.

"During the coming months, demand and delivery volumes seem to remain clearly weaker than during the corresponding period last year," M-real said in a statement.

"Production may be curtailed more than planned due to weak demand," it said. "The risk of declining product prices exists."

CSFB's Kjellberg noted that M-real's costs were declining, but said: "If demand stays weak, it's a question of how much (of the benefit) they will give away in price declines." (Additional reporting by Camilla Knudsen and Richard Solem in Oslo, editing by Will Waterman) ($1=6.781 Norwegian Crowns) ($1=.7738 Euros)