West Fraser Timber Co Ltd T.WFG

TD Notes

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Trees Weekly

Lumber Prices in U.S. South Climbing; WP Markets Otherwise Quiet Potential WRK/SKG Merger Could Create Global Packaging Leader

Forest product equities stumbled last week. Share prices across our coverage universe declined 4.9%, on average, over the past week. Losses skewed towards wood-product-weighted equities (average drop of 6.7%) as affordability headwinds regain attention. Sector declines last week outpaced the S&P/TSX Composite (-2.3%) and the S&P 500 (-1.3%). Since recent Q2/23 highs, the average share-price decline for our coverage universe is 17.1%.

Lumber prices steady in Canada; rising in U.S. South. The Western SPF 2x4 benchmark cash price ended last Thursday at US$418/Mfbm — down modestly w/ w. The Southern Yellow Pine composite price increased 2% w/w, led by high-grade 2x4 dimension (up another 7-8% w/w). Market reports referenced renewed post- Labour Day buying, but noted extreme heat undermining job-site activity. Equities with exposure to lumber: CFP, IFP, WFG, WEF, and MERC.

OSB prices are moderating across most regions. The North Central OSB benchmark price held steady last week at US$510/Msf — stable for seven straight weeks. Prices in the U.S. South and Canada declined US$5-US$15/Msf (1-2%) w/w. Anecdotal commentary noted “low” dealer and distributor inventories, but indicated eroding order files. Equities with exposure to OSB: LPX and WFG.

A potential merger between WestRock (WRK-N, not covered) and Smurfit Kappa Group (SKG-L, not covered) would create a global paper packaging leader. Last week, management from both companies confirmed talks towards a potential merger. The combined company would have aggregate packaging paper and board capacity of 22.2 million tonnes (an estimated 6% of global capacity) and operations across 42 countries. Equities with exposure to packaging: CAS (hosting an investor day on September 14).

TD Securities is hosting its annual Forest Products Forum on September 26 in Toronto. Investors can view the agenda and register here.