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Last Updated: Tuesday, 21 June, 2005, 15:23 GMT 16:23 UK
Finnish paper strike dents growth
Machinery in a Finnish paper plant
The shutdown at the paper plants is hitting other Finnish industries
A lock-out at Finland's paper factories is expected to hit the country's economic growth hard, Finland's biggest bank has said.

Sampo has cut its growth forecast to 1.9% from 3.2%.

The paper sector accounts for one-third of Finland's exports and 40-50% of manufacturing output.

Paper firms are due to meet trade unions on Tuesday in an effort to end the five-week lock-out, prompted by a dispute over pay and working hours.

The lock-out began on 18 May when firms - including Stora Enso and UPM-Kymmene - shut out staff after weeks of union protests and wildcat strikes.

Employers want to cut costs by keeping paper plants open during Christmas and mid-summer, limit paid sick leave and outsource some services and jobs.

'Lag'

Every month that the Finnish paper plants stand idle knocks 0.3% off the country's annual gross domestic product (GDP), according to Tarja Heinonen, chief economist at Sampo.

A resolution of the dispute is unlikely to return things to normal immediately, she said, as many paper users will have found other suppliers in the meantime.

There will be "a lag" before production gets back to pre-strike levels, Ms Heinonen told BBC News.

Analysts estimate that the stoppages have cost paper firms about 300m euros so far.

On top of that, industries such as shipping have also been hit by the lock-out.

Paper slowdown

The lock-out comes at a time when Finnish firms are looking to cut production as demand wanes in Western Europe and North America.

Finland produces about 4% of the world's total paper market and 20% of Europe's graphic paper.

Paper consumption has dipped in the first two quarters of this year as global growth has cooled, said Hakon Lerstad of ABG Sundal Collier.

As a result, there is oversupply in a number of key markets.

The lock-out may however lead to a magazine paper shortage in Europe.

While the stoppage is unlikely to lead to significant shortages in every sector, for magazine producers a long strike could create a problem in "an already tight market", said Johan Swahn, an analyst at Handelsbanken Capital Markets.


SEE ALSO:
Strike shuts Finnish paper mills
31 May 05 |  Business
Finnish strike may hit local jobs
09 Jun 05 |  Cornwall


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