Materials

Report by ERA Research

The outlook for lumber / panel producers (Canfor, West Fraser, Boise Cascade, Louisiana-Pacific) is difficult, with no obvious upside catalyst before a recovery in US housing (unlikely before late 2023). ERA expects pulp prices to move lower through 1H23. Anticipated price declines are now almost fully priced into pulp names (Mercer, International Paper). In packaging, more pain lies in store for containerboard (Westrock) and a raft downtime will be needed to combat weaker demand and offset new capacity. Boxboard will outperform (Graphic Packaging, Clearwater Paper), with both demand and prices expected to remain robust.

Report by ERA Research

ERA Forest Products Research released their latest report on ESG commitments, progress and gaps for pulp, paper, packaging and tissue companies. Within the sphere of pulp producers, Mercer and Sappi are cited as examples of companies with strong disclosure and targets. In European paper, pulp and packaging, ambitious targets appear common but data and disclosures are healthy, with firms including UPM and Billerud mentioned. In the packaging, paper and tissue industry, WestRock appears to lead the way, with Graphic Packaging also referenced as having good targets that could spur near-term action.

Materials

Report by ERA Research

Investors are underestimating further price increases - packaging markets remain exceptionally tight and global demand continues to strengthen. The US market has just seen a third containerboard price hike (August), but ERA expects another one in the coming months. WRK remains their preferred route to packaging exposure as it recovers from a cyberattack earlier this year, ramps up the gigantic new Florence linerboard machine, gains traction on boxboard increases and benefits from strong demand in Brazil. TP $62 (based on a conservative 6.5x on a 50/50 blended 2021/22 EBITDA of $3.6bn).