Forest Products Monthly: Too Much, Too Soon? Reconciling Recent Equity Surge

Research evidence excerpt

Forest Products Monthly: Too Much, Too Soon? Reconciling Recent Equity Surge

TD SECURITIES INC. - CANADA SECTOR NOTE

June 22, 2026

■Paper & Forest Products Forest Products Monthly: Too Much, Too

Soon? Reconciling Recent Equity Surge

Sean Steuart, CFA^ THE TD COWEN INSIGHT

416 308 3399

Forest product and packaging equities have surged this month, led by small-cap lumber

sean.steuart@tdsecurities.com

producers and companies with relatively high leverage. Investors have rotated into the sector

Kasia Trzaski Kopytek, CFA, CPA, CA^ in advance of incremental capacity cuts and a cyclical recovery taking hold. Sector valuations

416 983 4058 remain below long-term norms, but, in some cases, we believe recent gains have leapfrogged

kasia.trzaski@tdsecurities.com

mid-term FCF potential.

Share prices of most of our forest products and packaging coverage set have climbed over

the past month. The average share-price improvement from the May 2026 lows is 17%, led by

smaller-cap lumber equities (IFP and WEF are up >40%). Most equities are still below the Q1/26

highs, but recent share-price strength is notable, especially in the face of typical seasonal

headwinds (more often than not, the forest product sector underperforms broader equity

markets during May-October). Aside from general market strength tied to optimism around a

Middle East peace deal, we believe forest product equities have benefited from rotation away

from outperforming basic materials/energy sectors and into this group.

Lumber prices have recovered to modest EBITDA-positive levels for most regions. The

Random Lengths Framing Lumber Composite (RLFLC) price is up 38% since early December

2025. The pace of permanent/indefinite sawmill closures has lagged expectations, but