Interfor Corp T.IFP

TD Notes

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Trees Weekly

Forest Product Equities Rise in Tandem with Broader Markets Commodity Wood Products Markets Remain Sluggish

• Forest product equities pare back recent losses. The average share-price improvement for our coverage universe last week was 3.8%, which compared with gains of 3.3% for the S&P/TSX Composite and 5.3% for the S&P 500. Sector outliers included Western Forest (down 8.7%) and Cascades (down 1.2%) as investors digested weak Q3 results and tempered near-term guidance. The average decline from 52-week highs for our coverage universe is 16.8% versus declines of 9.0% for the S&P/TSX Composite and 17.2% for the S&P 500.

• North American lumber prices are generally drifting lower amid a subdued market tone. The Western SPF 2x4 (#2 & better) cash price declined 7% from last week to US$430/Mfbm, a one-year low matching levels from early-October. Tighter supplies supported modest gains in the U.S. South, with the Southern Yellow Pine 2x4 (#2 & better) cash price up 1% w/w (the current price of US $455/Mfbm remains near the lowest level since May 2020). Trade periodicals referenced slowing homebuilder demand and inconsistent economic data as weighing on sentiment.

• OSB prices remain stable. The benchmark North Central OSB price has held at US$360/Msf since early-September. Prices in other regions are also unchanged. Market reports indicate buyers sticking to near-term needs and maintaining lean inventories.

• Softwood pulp prices in China are moderating. The average net transaction price for Northern Bleached Softwood Kraft (NBSK) pulp imported into China is steady at US$933/ton but trade periodicals indicate that Canadian NBSK pulp producers have cut prices by ~US$20-$30/tonne in recent weeks (lower price offers remain within the previous industry range which averages US$933/tonne).

November 15, 2022