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But demand was actually stronger than normal because people were stuck in their homes, many had received stimulus cheques and decided to embark on home renovation projects, said Wilde and other analysts.
An estimated 65 per cent of Canada’s lumber ends up in the U.S., where it is used for housing, where the property market has experienced its strongest year in more than a decade, Wilde said.
“So all of a sudden we get this better than expected demand, and there’s no inventory out there,” he said.
As a result of wildfires in the West, many mills are also shutting down or reducing operating levels as workers flee from danger, according to several analysts. That could help keep prices longer for several more weeks, although Wilde and other all expect a decline in the coming months.
Still he predicted that the prices will remain elevated, and that most lumber companies will report record quarters through 2020 and enter 2021 “with significantly improved balance sheets.”
“Most lumber equities have rallied sharply since March/April, but remain below our … targets,” Wilde wrote in mid-September.
His price target for Canfor Corp. is $29 per share, from its current level of around $15.75 as of Thursday afternoon; Interfor Corp.’s stock-price target is set at $22 per share and currently trades at $15.65; and West Fraser Timber Co. Ltd. is targeted at $82 per share though it currently trades at $62.92.
Similarly, CIBC World Market Inc.’s Hamir Patel has picked West Fraser, Canfor and Interfor as outperformers.
