Lumber Stocks Rise on Analysts' Price Increase Forecasts

On Monday, lumber and paper stocks saw notable gains as analysts from TD Cowen and Truist highlighted the impact of rising commodity prices and the sector's push for price increases over the coming year.

Shares of companies in the sector rose; West Fraser Timber Co. Ltd. increased by 4.5%, UFP Industries, Inc. by 5.7%, Weyerhaeuser Company by 5.3%, Louisiana-Pacific Corporation by 5.4%, and Interfor Corporation impressively by 6.3%.

Analysts pointed out that composite prices for lumber and oriented strand board (OSB) have increased significantly by 25-28% from their recent lows. This increase was accompanied by announcements from major producers regarding plans to raise corrugated cardboard prices effective January 1, 2025.

According to a note from a TD Cowen analyst, these producers have come together to propose a price increase of between $70 and $90 per ton.

Cascades Inc., which has a stake in the corrugated cardboard market, also saw its shares rise, reaching a peak of 4.3% on Monday. The company is among those expected to benefit from the proposed price increases.

Another factor supporting the positive momentum in the market was noted by a Truist Securities analyst who indicated that OSB pricing has strengthened. This situation is attributed to manufacturers pulling products from the market, leading to long-term order books and low volumes.

In light of these dynamics, it was noted that companies like Louisiana-Pacific and Weyerhaeuser could see an upward potential of $35 million to $40 million in their fourth-quarter guidance, suggesting that the year could conclude stronger than expected for these companies.