West Fraser Timber Co Ltd T.WFG

TD Notes

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Trees Weekly

Modest Lumber Price Gains
OSB Prices Softening in Some Regions

A rising tide lifts all boats. Share prices across our coverage universe increased 2.6% on average over the past week. Positive momentum was widespread, led by lumber producers (+3.0% on average) and CFX (+5.8%). Sector gains last week tracked the S&P/TSX Composite (+3.6%) and the S&P 500 (+2.5%). Since recent highs less than two months ago, the average share-price decline for our coverage universe is 11.4%.

Lumber price momentum is modestly positive. The Western SPF 2x4 benchmark cash price ended last Thursday at US$420/Mfbm — up <1% w/w, but down 7% versus the most recent high in mid-July. The Southern Yellow Pine composite price increased 2% w/w, driven by strength for 2x4 dimensions (up 5-8% w/w). Market reports referenced subdued activity ahead of a holiday long weekend. Equities with exposure to lumber: CFP, IFP, WFG, WEF, and MERC.

OSB prices are stable-to-down moderately. The North Central OSB benchmark price held steady over the past week at US$510/Msf — consistent for six consecutive weeks following a 132% rally since the start of the year. Prices in Canada declined US$5/Msf (1%) w/w and prices in the U.S. South West declined US$10/Msf (2%) w/ w. The latter represented the first w/w regional decline since mid-December 2022. Trade periodicals referenced a slow pace of trading, with buyers sticking to contract needs and tight supplies at the mill level. Equities with exposure to OSB: LPX and WFG.

Pulp prices bumping along the bottom. Final August northern bleached softwood kraft (NBSK) pulp prices in North America as reported by Fastmarkets RISI declined US$70/tonne (5%) to US$1,270/tonne (list). The current net NBSK pulp price for imports into China is US$668/tonne — down slightly over the past week, but still up 3% versus the most recent low at the end of June. Weak paper end-market demand, especially in China (consumer of ~40% of global market pulp) remains a headwind. Equities with exposure to market pulp: CFX/CFP, MERC, and WFG.