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Lumber confidence remains high despite recent price tumble
25/06/2010
Muted rises in the stock prices of Canadian lumber companies are suggesting increasing long-term confidence in timber investments, despite the wild price fluctuations of the commodity this year.
Canadian foresters are currently enduring a plunging lumber price, with the latest blow coming as new-home sales in the U.S. market fall to an all-time low. On Wednesday the US Commerce Department reported its smallest new-home sales number, 300,000 in May, far below forecasts of around 400,000.
Stock of the West Fraser timber company, however, was still up more than 20 per cent for the year – the 11th-best performance among the S&P/TSX composite index's 222 members – and it was not the only company to experience a rise.
Analyst Chris Damas of BCMI Research, said the activity this year was typical of the nature of the long-term investment, but one that is certain to see a rise in the long-run.
“If you forgot lumber was volatile I guess the last six months is a good reminder,” he said. Investors envisage a market with much tighter supply over the next half-decade because of the forests killed by pine beetles in British Columbia and less acreage available for harvest in Ontario and Quebec. They say this will easily buoy and sustain prices when demand stabilises in the United States.
Canadian foresters are currently enduring a plunging lumber price, with the latest blow coming as new-home sales in the U.S. market fall to an all-time low. On Wednesday the US Commerce Department reported its smallest new-home sales number, 300,000 in May, far below forecasts of around 400,000.
Stock of the West Fraser timber company, however, was still up more than 20 per cent for the year – the 11th-best performance among the S&P/TSX composite index's 222 members – and it was not the only company to experience a rise.
Analyst Chris Damas of BCMI Research, said the activity this year was typical of the nature of the long-term investment, but one that is certain to see a rise in the long-run.
“If you forgot lumber was volatile I guess the last six months is a good reminder,” he said. Investors envisage a market with much tighter supply over the next half-decade because of the forests killed by pine beetles in British Columbia and less acreage available for harvest in Ontario and Quebec. They say this will easily buoy and sustain prices when demand stabilises in the United States.
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