Investing.com — RBC Capital Markets expects a cyclical recovery in containerboard and tighter supply in the lumber market to support North American producers through 2025, despite continued challenges from high interest rates and subdued housing demand.
RBC highlighted International Paper and Smurfit WestRock (NYSE:) as top picks in the containerboard sector, citing improved pricing strategies and efficiency gains.
Among lumber producers, RBC favors Interfor, Canfor (TSX:) and West Fraser, and expects a 15% increase in lumber prices next year due to recent capacity cuts.
Increased 30-year mortgage rates, at 6.72% as of Dec. 19, will likely limit demand for wood products, with RBC predicting a modest 3% increase in new single-family homes.
Permanent curtailments of about 5% of North American lumber capacity are expected to lead to a tighter market, with Random Lengths Composite prices rising to $460 per thousand board feet, compared to an average of $400 in 2024.
Price momentum is increasing, with expected increases of $20 per tonne for linerboard and medium in January. International Paper and Smurfit WestRock, which control nearly half the North American market, are focusing on value over volume, which may support margin expansion.
Ongoing debates over tariffs and trade policy could impact market dynamics, although specific policy directions remain unclear.
RBC also highlighted outperform-rated small-cap names such as Clearwater Paper (NYSE:) and Rayonier advanced materials (NYSE:) as worth watching. It increased price targets for CAS and SW, while lowering forecasts for several lumber brands.
The brokerage’s EBITDA estimates for Q4 2024 exceed consensus for seven stocks, including Interfor, West Fraser and Weyerhaeuser (NYSE:).