RBC Capital Markets Outlook for 2025

RBC Capital Markets anticipates a cyclical recovery in containerboard and tighter lumber supply will support North American producers in 2025, despite ongoing hurdles from high interest rates and low housing demand.

Containerboard Sector

RBC identified International Paper and Smurfit WestRock (NYSE:WRK) as leading picks in containerboard, noting their effective pricing strategies and efficiency improvements.

Lumber Producers

For lumber, RBC favors Interfor, Canfor (TSX:CFP), and West Fraser, predicting a 15% increase in lumber prices next year due to recent production cuts.

Impact of Mortgage Rates

With 30-year mortgage rates at 6.72% as of December 19, demand for wood products is expected to be limited. RBC forecasts only a modest 3% increase in single-family housing starts.

Market Dynamics

Permanent curtailments of around 5% of North American lumber capacity are predicted to create a tighter market, pushing Random Lengths Composite pricing to $460 per thousand board feet, up from an average of $400 in 2024.

Pricing Trends

There is growing pricing momentum, with expected $20 per ton increases for linerboard and medium in January. International Paper and Smurfit WestRock, controlling nearly half the North American market, are emphasizing value over volume, which could enhance margins.

Tariffs and Trade Policies

Ongoing tariff and trade policy discussions could influence market conditions, though specific outcomes remain uncertain.

Small-Cap Stocks

RBC highlighted outperform-rated small-cap stocks such as Clearwater Paper (NYSE:CLW) and Rayonier Advanced Materials (NYSE:RYAM) as valuable investments. The firm raised price targets for CAS and SW, while adjusting forecasts for several lumber firms.

Consensus Estimates

RBC’s Q4 2024 EBITDA estimates exceed consensus for seven companies, including Interfor, West Fraser, and Weyerhaeuser (NYSE:WY).