West Fraser Timber Co Ltd T.WFG

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Trees Weekly

Lumber Price Momentum is Modestly Positive OSB Prices Stable in All Regions, Except Canada

Pressure on lumber equities over the past week contrasts with modest gains for broader markets. The average share-price decline across our coverage universe over the past week was 0.7%, led by lumber producers (-1.9% on average). Sector losses last week compared with modest gains for the S&P/TSX Composite (+0.1%) and the S&P 500 (+0.8%). Since recent highs less than two months ago, the average share-price decline for our coverage universe is 14.4%.

Lumber price momentum is modestly positive. The Western SPF 2x4 benchmark cash price ended last Thursday at US$418/Mfbm — up 3% w/w, but down 7% versus the most recent high in mid-July. The Southern Yellow Pine composite price declined 1% w/w, belying the 3% w/w improvement in the #2 2x4 benchmark (wider dimensions came under pressure). Market reports referenced ongoing oppressive weather in the South, which undermined field consumption. Equities with exposure to lumber: CFP, IFP, WFG, WEF, and MERC.

OSB prices are moderating in Canada, but are stable in other regions. The North Central OSB benchmark price held steady over the past week at US$510/ Msf — consistent for five consecutive weeks following a 132% rally since the start of the year. Prices in Canada declined US$20-US$25/Msf (4-5%) w/w (cumulative two-week decline of US$30-US$45/Msf or 6-8%). Anecdotal commentary noted an overall cautious tone prevailing among buyers, with severe heat and humidity in the U.S. South being a contributing factor. Equities with exposure to OSB: LPX and WFG.

July pulp data released last week was encouraging (see Industry Note). Global shipments provided by the PPPC showed a 6.0% y/y increase, the second consecutive positive y/y comp. Softwood mill days of supply are still above the long- term average of 32 days, but are down from the recent peak of 54 days at the end of May. Industry leaders have proposed US$50/tonne price increases for bleached eucalyptus kraft pulp effective September 1, following a 40% price collapse since late 2022. Equities with exposure to market pulp: CFX/CFP, MERC, and WFG.