Trees Weekly
Inconsistent Q2/23 Earnings Results Undermine Equities North American Wood Product Price Momentum Hits Pause
Most North American forest product equities pulled back last week as investors digested inconsistent Q2/23 results. Earnings for several wood- and pulp-weighted equities were below consensus estimates, which contrasted against generally above-expected results for packaging and tissue companies. The average share-price decline across our coverage universe over the past week was 5.0%, with losses led by LPX after investors reacted negatively to conservative Siding segment guidance. Since recent highs five weeks ago, the average share-price decline for our coverage universe is 12.4%.
Lumber prices have moderated as distribution channel inventories have normalized. The Western SPF 2x4 benchmark cash price ended yesterday at US $398/Mfbm — down 4% from last Thursday and down 12% since the most recent peak in mid-July. Commentary in trade periodicals referenced a recent change in tone to a buyers' market, with demand undermined by extremely hot weather.Equities with exposure to lumber: CFP, IFP, WFG, WEF, and MERC.
OSB prices have paused following a strong run. The North Central OSB benchmark price update published last night was US$510/Msf — flat for the third straight week following a 132% rally since the start of the year. Market reports indicated a pause in activity as buyers take stock of the year-to-date price surge. Equities with exposure to OSB: LPX and WFG.
Opposing trends for recycled paper prices: ongoing gains for OCC; SOP slumps in tandem with pulp. Fastmarkets RISI reported that the August old corrugated container (OCC) price increased another US$5/ton (to US$55/ton) and is now up 83% from the cyclical low at the start of the year, driven by competition for feedstock from new containerboard capacity. The average U.S. sorted office paper (SOP) price declined another 6% in August to US$135/ton and is down 43% since Q4/22. CAS is a significant consumer of recycled fibre.