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Investing.com — RBC Capital Markets expects a cyclical restoration in containerboard and tighter provide within the lumber market to bolster North American producers in 2025, regardless of lingering challenges from excessive rates of interest and subdued housing demand.
RBC highlighted Worldwide Paper and Smurfit WestRock (NYSE:WRK) as prime picks within the containerboard sector, citing improved pricing methods and effectivity good points.
Amongst lumber producers, RBC favours Interfor, Canfor (TSX:CFP), and West Fraser, anticipating a 15% rise in lumber costs subsequent yr as a consequence of current capability reductions.
Elevated 30-year mortgage charges, at 6.72% as of December 19, are more likely to restrict demand for wooden merchandise, with RBC forecasting solely a modest 3% uptick in single-family housing begins.
Everlasting curtailments of about 5% of North American lumber capability are anticipated to drive a tighter market, with Random Lengths Composite pricing rising to $460 per thousand board ft, up from a 2024 common of $400.
Pricing momentum is constructing, with anticipated $20 per ton will increase for linerboard and medium in January. Worldwide Paper and Smurfit WestRock, which management almost half the North American market, are specializing in worth over quantity, doubtlessly supporting margin growth.
Ongoing discussions round tariffs and commerce insurance policies might influence market dynamics, although particular coverage instructions stay unclear.
RBC additionally highlighted outperform-rated small-cap names like Clearwater Paper (NYSE:CLW) and Rayonier Superior Supplies (NYSE:RYAM) as value watching. It raised value targets for CAS and SW whereas trimming forecasts for a number of lumber names.
The brokerage’s This autumn 2024 EBITDA estimates are forward of consensus for seven shares, together with Interfor, West Fraser, and Weyerhaeuser (NYSE:WY).
