* To take 592 million euro hit in Q3
* To close paper mill, sawmill and pulp mill in Finland
* To cut up to 1,100 jobs in Finland, or 4 percent of workforce
* Plans further capacity cuts due to continuing weak demand
* Shares rise 1.7 percent
(Adds politician comments, details, updates shares)
By Brett Young
HELSINKI, Aug 19 (Reuters) - Europe's biggest paper maker Stora Enso will close mills in Finland due to weak demand, slashing up to 1,100 jobs and booking an almost 600 million euro ($846.1 million) charge in the current quarter, it said on Wednesday.
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. Stora and rivals such as UPM-Kymmene and Norske Skog have curtailed production and slashed thousands of jobs as a result.
The Finnish government said in a statement it was preparing to help communities affected by the cuts, while the mayor of Varkaus, home of one of the plants under threat, was quoted by a business website as saying: "At the moment this almost feels like the end of the world."
The global downturn has eroded demand for basic materials, including paper, as print advertising has dropped steeply during the crisis.
"The operating environment has deteriorated faster than ever before: long-term structural cost inflation in fibre and energy costs has recently been followed by dramatic weakening in demand," Chief Executive Jouko Karvinen said in a statement.
Stora, Europe's largest paper maker by sales, said it would permanently close its Tolkkinen sawmill by end of 2009 and its Sunila Pulp Mill during the second quarter of 2010, and curtailments at other sawmills would continue. It added it would also permanently shut its Varkaus Mills by end-2010 unless the uncoated fine paper demand picks up and pricing clearly recovers.
"If you look at the closures they have said they will make for sure ... it's moving in the right direction, but it doesn't have such a big impact on the market," said one Helsinki-based analyst.
"But if they also go through with the Varkaus (mill) closure, the effects will be much bigger; to have an effect on pricing and results, Varkaus is essential," the analyst added.
The announced cuts represent up to 4 percent of Stora's total workforce and come on top of thousands of other job cuts announced by the firm this year. Stora had, on average, 16 percent fewer staff at end-June than a year ago.
RIVALS ALSO CUTTING BACK
Stora's Finnish competitor UPM announced similar sharp job cuts and mill closures in Finland in 2006. More recently, Norway's Norske Skog said in June it would cut 600 jobs, or some 9 percent of its workforce, due to weak demand.
Stora already warned in July that Finnish cuts were coming, saying for its previous three quarters the profit made outside Finland had been almost entirely lost due to the weakness in the Nordic country.
Stora said it would write down 245 million euros in assets due to plant closures, and an additional 347 million due to the weak long-term outlook in publication and fine papers, resulting in a 592 million euro ($837 million) third-quarter hit.
The company said operating profit should improve by 140-160 million euros annually depending on the final closure plans.
Stora shares were 1.7 percent firmer at 4.70 euros at 1133 GMT, outperforming the DJ Stoxx Basic Resources Index which fell 1.5 percent.
The Finnish Paper Workers' Union said in a statement it would take a stance on Stora's actions at a board meeting on Thursday. "Moderation could have been expected from a respectable firm in this situation, when there are already signs of a slight recovery," it added.
Austrian carton and cardboard maker Mayr-Melnhof also on Wednesday said utilisation in its eight factories was down to 85 percent and unlikely to rise in the second half of the year, but that it did not plan to permanently shut sites. (Reporting by Eva Lamppu, Tarmo Virki and Brett Young; Editing by Dan Lalor and Jon Loades-Carter) ($1 = 0.7074 euro)