By Rithika Krishna
Aug 17 (Reuters) – North American timber producers are anticipated to see a dip in current-quarter revenue after lumber demand for do-it-yourself dwelling initiatives decreased following the easing of most restrictions that stored individuals of their homes.
Lofty lumber costs, the sustained wants of dwelling builders and industrious owners in the course of the pandemic pushed their second-quarter revenue to report ranges. However the DIY market, which accounts for 20% of lumber gross sales, is leveling.
Canada’s West Fraser Timber Co Ltd WFG.TO, Canfor Corp CFP.TO and Interfor Corp IFP.TO are projected to report mixed earnings of about $803 million within the third quarter, in response to Refinitiv estimates, a few third of what they posted within the second quarter.
Nonetheless, lumber provide is anticipated to tick up as noticed mill house owners make the most of latest bumper income to construct extra mills and add staff, which is able to assist ease a protracted labor scarcity.
“Revival in provide and weak demand from renovations and the restore sector will put a lid on costs,” mentioned Samuel Burman, commodities economist at Capital Economics.
Burman expects lumber costs to hover round $500 to $600 per thousand board toes for the remainder of this yr, with provide set to rise round 6% in 2021 in comparison with pre-pandemic ranges.
Lumber futures LBc1 touched a report excessive of $1,711 per thousand board toes in Could. Nonetheless, futures contract for lumber with supply in November LBc2traded at simply $483 per thousand board toes.
In July, U.S.-based Weyerhaeuser Co WY.N mentioned it expects third-quarter earnings to be “considerably” decrease than the second. Canfor, which breezed previous market expectations within the second quarter, hinted at future demand challenges in late July.
“The second quarter was in all probability the best quarter within the historical past for the lumber producers … they by no means made cash like they did within the second quarter and so they in all probability will not earn money like that once more within the close to future,” mentioned Mark Wilde, analyst with BMO Capital Markets.
The windfall from excessive lumber costs, nevertheless, inspired Canfor and smaller rivals like privately held Tolko and Roseburg Forest Merchandise to open new noticed mills.
“The brand new provide will weigh on pricing,” mentioned George Staphos at Financial institution of America (BofA) analysis, including that some new tools and capability installations may go into 2022 and past.
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(Reporting by Rithika Krishna in Bengaluru; Modifying by Sweta Singh, Bernard Orr)
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