Record high lumber prices boost timber companies to new heights on TSX

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 between last Friday and Tuesday to a new record of $805 US per thousand board feet.

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

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

All time high

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."