West Fraser Timber Co Ltd WFG

Primary Symbol: T.WFG

Forest Products Lumber & Wood Production

West Fraser Timber Co. Ltd. is a diversified wood products company. The Company is engaged in manufacturing, selling, marketing and distributing lumber, engineered wood products, including oriented strand board (OSB), laminated veneer lumber (LVL), medium-density fiberboard (MDF), plywood, particleboard, pulp, newsprint, wood chips and other residuals and renewable energy. Its products are used in home construction, repair and remodeling, industrial applications, paper, tissues, and box materials. Its segments include Lumber, North America engineered wood products (NA EWP), Pulp & Paper and Europe EWP. Its business comprises lumber mills, OSB facilities, renewable energy facilities, pulp and paper mills, plywood facilities, MDF facilities, particleboard facilities, LVL facility, treated wood facility, and veneer facility. The Company operates approximately 58 facilities in Canada, the United States, the United Kingdom and Europe. It also offers wood preservation services.

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West Fraser Timber Co Ltd

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Post by retiredcfon Feb 14, 2022 7:49am

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Post# 34425499

TD Notes

Trees Weekly

Equities Track Higher in Tandem with Commodity Momentum Lumber Prices Flying Again as Remarkable Cycle Continues

Wood-weighted equities regained lost ground last week as lumber and OSB commodity prices climbed and investors looked past inconsistent Q4/21 results. The average share-price increase of 4.8% for our coverage universe last week (+6.0% for wood-weighted names and +2.9% for pulp & paper equities) compared favourably with a 1.3% gain for the S&P/TSX Composite and a 1.8% decline for the S&P 500. In our view, investors are starting to acknowledge a growing likelihood that 2022 FCF for lumber and OSB producers will outpace consensus estimates. The average share-price decline for our coverage universe from recent peaks a month ago is still 8.6%.

Lumber markets are surging again. Cash market lumber prices started to recover last week, following remarkable momentum for futures contracts. The benchmark Western SPF 2x4 price improved 8% w/w to US$1,275/Mfbm and made up for lost ground the previous week. Until a Friday decline, the nearest Western SPF futures contract price was up limit for seven consecutive trading days and ended last week at US$1,219/Mfbm. Market reports referenced lengthening order files as buyers shift their focus to building inventory ahead of spring building season needs. We do not consider current price levels sustainable (demand destruction again seems likely), but gains since Q3/21 have significantly offset cost inflation and volume constraints.

OSB price gains start to decelerate. The benchmark North Central price of US $1,110/Msf increased 5% w/w and has improved 185% since August. Reports suggest buyer fatigue and substitution to plywood at the margin.
Pulp markets tightening and price hikes are on the table. Late last week, Domtar notified various North American and European customers of plans to increase softwood pulp prices by US$70-US$110/tonne effective March 1. The initiatives cover paper-grade and fluff grades. Pulp market momentum turned positive as shipping constraints — especially in Canada — have added tension.