Investing.com – RBC Capital Markets expects a cyclical rebound in container boards and tightening supply in the lumber market to support North American producers in 2025, despite persistent challenges from rising interest rates and lower housing demand.
RBC highlighted International Paper and Smurfit WestRock (NYSE:) as top picks in the container pallet segment, citing improved pricing strategies and efficiency gains.
Among lumber producers, RBC favors Interfor, Canfor (TSX:) and West Fraser, and expects a 15% rise in lumber prices next year due to recent production capacity cuts.
Higher 30-year mortgage rates, at 6.72% as of December 19, are likely to limit demand for wood products, with RBC predicting only a modest 3% increase in single-family housing starts.
A permanent reduction of about 5% of North American timber capacity is expected to tighten the market, with prices for random length composites rising to $460 per thousand board feet, up from a 2024 average of $400.
Price momentum is building, with increases of $20 per ton expected for inland and intermediate slabs in January. International Paper and Smurfit WestRock, which control nearly half of the North American market, are focusing more on value than volume, which could support margin expansion.
Ongoing discussions about tariffs and trade policies could influence market dynamics, although specific policy directions remain unclear.
RBC also highlighted outperforming small-cap names such as Clearwater Paper (NYSE:) and… Advanced Rayonair materials (NYSE:) is worth a look. It raised price targets for CAS and SW while trimming forecasts for several timber names.
The brokerage's fourth-quarter 2024 EBITDA estimates are ahead of consensus for seven stocks, including Interfor, West Fraser, Weyerhaeuser (New York Stock Exchange:).
