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 Jan 30, 2023 9:22am

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Post# 35253676

TD Notes

Trees Weekly

Lumber Capacity Reduction Catalyst for Equities
Canfor Initiatives in B.C. Expected to Lead the Way for Others

Wood-weighted equities surged last week as capacity rationalization initiatives brought investors off the sidelines. The average share-price gain for our coverage universe last week was 8.2%, led by lumber-weighted equities (+15.8%). Sector improvement outpaced broader markets; the S&P/TSX Composite climbed 1.0%, while the S&P 500 gained 2.4%. On average, share prices for our coverage universe have improved 23.5% from recent Q4/22 lows (an easy reference point; the average negative variance from Q1/22 highs is 27.5%).
Supply management initiatives have led softwood lumber prices off the recent floor. The Western SPF 2x4 (#2 & better) cash price ended last Thursday at US$415/Mfbm — up 15% w/w and 24% higher than the trough in early January. The nearest Western SPF futures contract price has climbed 37% since January 6 to US$493/Mfbm. The Southern Yellow Pine 2x4 (#2 & better) cash price increased 6% w/w (less direct exposure to B.C. supply reductions).
Canfor's permanent and indefinite sawmill rationalization initiatives in B.C. are expected to lead this round of lumber supply management. Last week, Canfor announced plans to permanently close the Chetwynd sawmill (annual capacity of 250 million board feet) and an adjacent wood pellet plant. The Houston sawmill (effective annual capacity of ~500 million board feet) will close indefinitely. Both initiatives will take effect by early Q2/23. Canfor is developing plans to construct a new wood processing facility at the Houston site that we assume will produce high-grade lumber with a smaller capacity footprint. The capacity reduction represents 27% of Canfor's B.C. lumber capacity footprint, 13% of the company's North American capacity, and >1% of North American overall capacity.
OSB prices inched higher last week. The benchmark North Central OSB price ended last week at US$235/Msf — up 2% w/w and the first weekly increase since August. Market reports mentioned mixed signals on demand indicators and less aggressive inventory restocking than was evident in lumber markets.