Trees Weekly
Lumber Prices Moving in Opposite Directions Across Regions Pockets of Weakness for OSB Markets
Forest product equity momentum remains negative in the midst of summer doldrums. The average share-price decline across our coverage universe over the past week was 1.3%, led by CFX (-6.0%) and LPX (-5.4%). Sector losses last week compared with declines of 2.9% for the S&P/TSX Composite and 2.1% for the S&P 500. Since recent highs less than two months ago, the average share-price decline for our coverage universe is 14.3%.
Lumber price momentum is inconsistent across grades and regions. The Western SPF 2x4 benchmark cash price ended last Thursday at US$405/Mfbm — up 5% w/w, but was a positive outlier. The aggregate composite price declined 1% w/w, led by the U.S. South (regional composite down 3% w/w). Market reports referenced oppressive heat in the South, which undermined jobsite activity, but noted a general uptick in order activity towards the end of the week. Equities with exposure to lumber: CFP, IFP, WFG, WEF, and MERC.
OSB prices show some weakness in Canada. The North Central OSB benchmark price held steady at US$510/Msf — consistent for four consecutive weeks following a 132% rally since the start of the year. Prices in Canada declined US$10-US $20/Msf w/w — the first regional price drop registered since late-March. Anecdotal commentary noted sluggish buying, given sustained mortgage rate pressure.Equities with exposure to OSB: LPX and WFG.
Pulp markets are nearing an apparent inflection point as better pricing in China contrasts against further erosion in North America. Preliminary August prices provided by RISI Fastmarkets shows an ~US$10/tonne decline for northern bleached softwood kraft (NBSK) pulp spot prices in North America to a range of US$620-US $660/tonne. The list price decline was more pronounced as the gap versus spot narrowed. Effective net NBSK prices in China have improved to US$668/tonne — up 3% over the past six weeks. Equities with exposure to market pulp: CFX/CFP, MERC, and WFG.