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UPDATE 1-Canadian lumber stocks jump as tariffs not as bad as feared
April 25, 2017 / 5:36 PM / 5 months ago

UPDATE 1-Canadian lumber stocks jump as tariffs not as bad as feared

(Adds investor quotes and details on lumber prices and U.S. homebuilders, updates prices)

By Fergal Smith

TORONTO, April 25 (Reuters) - Shares in Canadian lumber companies soared on Tuesday as new U.S. tariffs on softwood imports came in at the low end of what some investors were expecting in the face of protectionist rhetoric from the Trump administration.

The average 20 percent anti-subsidy duties announced late on Monday compared to a 20-30 percent range expected by RBC equity analysts.

“It is bad for British Columbia but not necessarily bad for the lumber companies,” said Norman Levine, managing director, Portfolio Management Corporation.

Levine said that in the last few years, many Canadian lumber companies bought operations in the United States as a hedge against such tariffs.

Shares in West Fraser Timber Co, which would pay the highest duty rate of the affected companies, rose 8.6 percent to C$61.22, its highest point since July 2015, while Canfor Corp stock gained 6.4 percent to C$19.34, its highest since January 2016.

A strong U.S. housing market has supported demand for Canadian exports of lumber, while lumber prices are trading at nearly their highest in 12 years.

“Supply is about to be constrained and the tariff is going to add to prices and make lumber more expensive. So if you’re selling it, you’re going to make more money,” Levine said.

“It is the home builder and the home buyer that is going to get hurt.”

News of the tariff may have added to pressure on U.S. homebuilding stocks on Tuesday, said Jay McCanless, analyst at Wedbush Securities in Nashville, after the No. 3 U.S. homebuilder, PulteGroup Inc, posted its slowest growth in quarterly orders in more than a year.

“The general fear was that with all protectionist rhetoric coming out of the States they (the Trump administration) might just swing for the fences and try for a really high rate,” said an analyst who covers forestry products who declined to be identified, citing company policy.

Still, the analyst sees West Fraser as most exposed to the prospect of duties given it has 40 pct of its Canadian capacity in Alberta, where stumping rates are lowest, a much bigger exposure than most. (Additional reporting by Alastair Sharp in Toronto and Lewis Krauskopf in New York; editing by Chizu Nomiyama and Grant McCool)

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