Investing.com — RBC Capital Markets expects a cyclical recovery in containerboard and tight supply in the lumber market to boost North American producers in 2025, despite lingering challenges from high interest rates and subdued real estate demand.
RBC singled out 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, expecting lumber prices to rise 15% next year due to recent capacity cuts.
Higher 30-year mortgage rates, at 6.72% as of Dec. 19, are likely to limit demand for wood products, with RBC forecasting only a modest 3% increase in single-family home starts.
Continued constraints of about 5% of North American lumber capacity are expected to drive a tighter market, with Random Lengths Composite prices rising to $460 per thousand board feet, up from an average of $400 in 2024.
Price momentum is building, with an expected increase of $20 per tonne for linerboard and medium in January. International Paper and Smurfit WestRock, which control nearly half of the North American market, are focusing on value over volume, potentially supporting margin expansion.
Ongoing discussions over tariffs and trade policy could affect market dynamics, although specific policy directions remain unclear.
RBC also highlighted better-rated small-cap names such as Clearwater Paper (NYSE: ) and Rayonier advanced materials (NYSE: ) as worth watching. He raised price targets for CAS and SW while cutting forecasts for several lumber names.
The brokerage’s Q4 2024 EBITDA estimates are ahead of consensus for seven stocks, including Interfor, West Fraser and Weyerhaeuser (NYSE:).
