North American lumber stock prices holding up

May has been a difficult month for lumber prices in North America, with values dipping to the point that gains made earlier this year were effectively cancelled out. However, it is not all bad news as the stocks of leading players are holding up well.

Lumber future prices on the Chicago Mercantile Exchange were at $240.90 at the end of the day on Friday, $4.90 up on the day’s trading, but 30% down on the high of $330 achieved in late April. The strong prices in April were mainly attributed to tight supply, rather than increased demand so lumber prices took a hit this month when other commodity prices took a tumble.

Despite this situation, the prices of leading equities in the lumber industry have held up. For example, stock in West Fraser Timber Co., the top lumber producer in North America, increased in value by more than 20 per cent this year.

This is due, in part, because analysts believe the recent price volatility is a short-term issue and also because pulp prices are still at record highs.

Mr. Damas of BCMI Research said: “No doubt equity professionals believe the lumber price ‘whipsaw’ does not really describe fundamentals, either when it was at $335, nor when it hit $235.”