Metso said on Tuesday it aimed to save 30 million euros ($39.4 million) a year through the job cuts, which will take place during the first half of 2013.

It plans additional cuts in overseas capacity and staff, also related to paper industry clients, it added, without providing details.

European papermakers such as Finnish company Stora Enso (STERV.HE) and UPM-Kymmene (UPM1V.HE) have been suffering from falling paper demand and overcapacity for years.

"The gains made by new communications technologies have weakened growth in the consumption of printing and writing paper. As a result, the market for new printing paper machines has slowed," said Pasi Laine, head of Metso's pulp, paper and power business.

Pohjola analyst Pekka Spolander said the lay-offs were not a surprise because Metso has temporarily laid off paper unit employees in Finland since the beginning of the year amid fewer orders.

"China is the main market and it has been quiet there. The situation is a combination of economic cycle and restructuring" of the paper industry, he said.

Shares in Metso were 3.7 percent lower at 30.58 euros by 0854 GMT, while the Helsinki bourse was down 1.3 percent.

($1 = 0.7612 euros)

(Reporting by Terhi Kinnunen; Editing by Mark Potter)

• A Permanent Economic Emergency