The decline in third-quarter sales, which has been blamed on higher raw material and energy costs, has led both firms to look at prices rises.

UPM chief executive Jussi Pesonen said that to combat the fall in profits, the paper merchant would continue efficiency improvements, which could lead to machine closures and job losses.

It plans to install a 400,000 tonnes-per-year supercalendered paper machine at one of its European paper mills, but the decision on where it will be fitted will not be announced until the end of the year.

It will come on stream in 2007 at which time the firm will remove 200,000 tonnes of capacity elsewhere.

Pesonen added that UPM was also planning to raise prices for uncoated woodfree papers next year.

UPM's sales for Q3 were 1.4bn (2.2bn), down 8.4% on the same period last year.

Norske Skog reported a rise of 0.7% in Q3 sales. Chief executive Jan Oksum said he remained "optimistic" about price rises for newsprint in 2006, which he expected to be higher than those for magazine papers.

Oksum said price increases for magazine papers this year had not achieved the levels wanted, and in some cases hadn't changed.