New record wood product prices boost shares and estimates for Canadian producers

New record wood product prices boost shares and estimates for Canadian producers
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CALGARY — New record high prices for lumber and wood panel products are boosting stock prices for Canadian producers.

West Fraser Timber Co. Ltd., Interfor Corp., Canfor Corp., CanWel Building Materials Group Ltd. and Norbord Inc. all set new 52-week high share prices Wednesday morning in trading on the Toronto Stock Exchange.

Analysts quoting industry watcher Random Lengths report that western SPF (spruce-pine-fir) lumber prices rose 5.9 per cent or US$45 between last Friday and Tuesday to a new record of US$805 per thousand board feet.

A CIBC report notes that price is 23 per cent higher than the previous nominal record price of US$655 in early June 2018 and exceeds the all-time high in November 1996 of US$480 or US$775 in today’s dollars, after adjusting for inflation.

Meanwhile, oriented strand board — a type of wod panel used in construction — rose by US$15 to a range between US$605 and US$620 per thousand square feet over the same four days.

RBC Capital Markets analyst Paul Quinn said in a report he is increasing target prices for nine forestry companies he covers, with the biggest jumps of $8 per share to $85 for West Fraser and $7 per share to $57 per share for Norbord.

He also raised his estimates for 2020 average lumber and OSB prices.

“While we recognize that current prices are partially attributable to tight inventory levels through the supply chain, we expect that record repair and remodel demand, rebounding new residential construction activity, and COVID-19 related supply challenges will be enough to keep wood product prices at still historically strong prices through the next few months,” Quinn said.

“We still see some upside to our 2021 estimates if rising new residential construction demand is enough to offset the seasonal slowdown in repair and remodel activity.”

This report by The Canadian Press was first published Aug. 19, 2020.

Companies in this story: (TSX:CFP, TSX:WFT, TSX:IFP, TSX:CWX, TSX:OSB)

The Canadian Press

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