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Canadian timber rallies after lumber depression
10/05/2010
The Canadian timber market is taking stock of a potential turn-around in fortunes, after a three-year slump known as the "lumber depression".
Share price gains in a number of leading companies have lead experts to monitor the sudden change very closely.
Shares in Canfor Corp and West Fraser Timber Co.’s have more than doubled to about $10 and $40, respectively. Fortress Paper Ltd shares are up almost 400 per cent to about $22. Domtar Corp’s shares have risen more than 650 per cent to around $70 and Canfor Pulp Income Fund is trading more than 11 times higher than May 2009.
Since 2007 the industry has experienced one if its worst ever lows.
Contributing factors included the collapse of the US housing bubble, a negative capital return from the nation's forest, paper and packaging industry in 2008 and low demand driving a third of building material suppliers out of business in 2009.
Low inventory levels, however, and growth in demand in recent months mean spruce/pine/fir lumber is currently trading at US$320 per thousand board feet - over 50% more than the end of 2009 – which has boosted equities of Canadian forestry companies.
Financial analyst, Daryl Swetlishoff, said it looked good for long-term investments, but it remained to be seen how the current high prices would work out.
He said, “The big question in the building material space is: Are today’s high prices sustainable? And have the stocks gotten ahead of themselves?”
Share price gains in a number of leading companies have lead experts to monitor the sudden change very closely.
Shares in Canfor Corp and West Fraser Timber Co.’s have more than doubled to about $10 and $40, respectively. Fortress Paper Ltd shares are up almost 400 per cent to about $22. Domtar Corp’s shares have risen more than 650 per cent to around $70 and Canfor Pulp Income Fund is trading more than 11 times higher than May 2009.
Since 2007 the industry has experienced one if its worst ever lows.
Contributing factors included the collapse of the US housing bubble, a negative capital return from the nation's forest, paper and packaging industry in 2008 and low demand driving a third of building material suppliers out of business in 2009.
Low inventory levels, however, and growth in demand in recent months mean spruce/pine/fir lumber is currently trading at US$320 per thousand board feet - over 50% more than the end of 2009 – which has boosted equities of Canadian forestry companies.
Financial analyst, Daryl Swetlishoff, said it looked good for long-term investments, but it remained to be seen how the current high prices would work out.
He said, “The big question in the building material space is: Are today’s high prices sustainable? And have the stocks gotten ahead of themselves?”
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