On Monday, lumber and paper stocks experienced notable gains as analysts from TD Cowen and Truist highlighted the impact of rising commodity prices and the industry's move to implement price increases in the coming year.
Companies within the sector saw their shares climb, with West Fraser Timber Co. Ltd (TSX:WFG). rising by 4.5%, UFP Industries, Inc. by 5.7%, Weyerhaeuser Company (NYSE:WY) by 5.3%, Louisiana-Pacific (NYSE:LPX) Corporation by 5.4%, and Interfor Corporation by an impressive 6.3%.
Analysts pointed out that lumber and oriented strand board (OSB) composite prices have seen a significant uptick, jumping 25-28% from their recent lows. This increase has been accompanied by announcements from major producers about their plans to raise containerboard prices starting January 1, 2025.
According to a note from a TD Cowen analyst, these producers have come together to propose price hikes in the range of $70 to $90 per ton.
Cascades Inc (TSX:CAS)., a company with a stake in the containerboard market, also saw its shares increase, reaching a peak of 4.3% on Monday. The company is among those expected to benefit from the proposed price increases.
Further supporting the positive momentum in the market, a Truist Securities analyst noted that OSB pricing has been gaining strength. This is due to prolonged mill order files and low volumes, as mills have been pulling products from the market.
With these dynamics at play, there is a potential for a $35 million to $40 million upside to the fourth-quarter guidance for companies like Louisiana-Pacific and Weyerhaeuser, suggesting a stronger than anticipated end to the year for these firms.
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